Economic factors in a firm's external environment, such as inflation, unemployment, interest rates, and GDP growth, are largely macroeconomic because they pertain to the overall economy and its broader trends, rather than localized or industry-specific factors.

Michael Porter developed the five forces model to help firms do which of the following?

- gain and sustain a competitive advantage

- determine the profit potential of different industries

The most rigorous means of investigating the profit potential within a specific industry is to conduct is an industry analysis; which provides the following:

· The level of profitability that can be expected for the average firm in the industry

· A rigorous way of identifying the industry's profit potential

· Insight into a firm's strategic position within an industry

Which of the following helps determine competitive industry structure?

- height of entry barriers

- size and number of competitors

- firms' degree of pricing power

A perfectly competitive industry is characterized by low entry barriers, allowing many firms to enter the market freely, and many small firms, none of which have significant market power.

The Intensity of rivalry among competitors is determined by:

- Competitive industry structure

- Industry growth

- Strategic commitments

- Exit barriers

The competitive industry structure refers to:

- the number and size of its competitors

- The firm’s degree of pricing power

- The type of product or service

- Height of entry barriers

The types are:

- Perfect competition

- Oligopoly

o a few large firms

o high barriers to entry

o differentiated products

- Monopolistic competition

o Obstacles to entry

o the ability to raise prices for a unique product

o a differentiated product

- Monopoly

Explicit coordination, such as price fixing, is illegal in the United States because it involves direct agreements between firms to manipulate market conditions. However, tacit coordination, such as "an unspoken understanding" where firms align their actions without direct communication, is not illegal because it is more subtle and harder to regulate under antitrust laws.

Risk of New Entrants:

Economies of Scale – as firms expand output, unit costs fall

Absolute Cost Advantage – relative to new entrants

Brand Loyalty

Customer switching cost for buyers

Government regulations

Core Competencies are generated by Resources and Capabilities

- Types of Resources: Tangible and Intangible

- Tangible: Financial, Organizational, and Physical

- Intangible: HR, Innovation, Reputational, Knowledge

Resources: Cash, Buildings, Intellectual Property, etc.

VRIO framework is a tool used to identify resources and capabilities that can lead to a sustained competitive advantage. It evaluates resources based on whether they are:

Valuable: Does the resource create value for the organization?
Rare: Is the resource scarce relative to competitors?
Inimitable: Is the resource difficult for competitors to replicate?
Organized: Is the company structured to utilize the resources effectively?

Which of the following can help a firm extend its competitive advantage?

- path dependence

- intellectual property protection

- better expectations of future resource value

Resource Heterogeneity and resource Immobility are the key assumptions behind the resource-based model of the firm.

Path Dependence: describes a process in which the options one faces in the current situation are limited by decisions made in the past.

Time Compression diseconomies = attempting to get a good outcome in less time tends to be ineffective

isolating mechanisms are considered to be barriers to imitation

Social complexity describes a situation in which different social and business systems interact with each other.

Resource Flows are the firm's level of investments to maintain or build a resource.

Casual Ambiguity describes a situation where the cause and effect of a phenomenon are not readily apparent.

Value Chain describes the internal activities a firm engages in when transforming inputs into outputs.

Resource Stocks are the firm's current level of intangible resources.

Core Competencies are more valuable than Capabilities

Economies of Scope: the savings that come from producing two or more different outputs at a lower cost than producing each output individually.

Which two of the following variables can managers primarily manipulate in order to answer the question, "How should we compete?"

1. Cost

2. Value

What are the three most important value drivers that managers can use to create a competitive advantage?

· customer service

· product features

· complement

Potential Economic Value: How to compete on a business level is defined by the value and cost of the variable

Which of the following are examples of ways that a large retail firm can increase the perceived value of its offerings by focusing on customer service?

- offering a "no questions asked" return policy

- maintaining a domestic call center that is open 24 hours per day

Two important features that managers can adjust in an effort to improve the firm's strategic position:

- product features

- customer service

A cost leader can achieve a competitive advantage by reducing costs below those of competitors while maintaining a similar value

Input Factors:

- Raw Materials

- Labor

- Capital

- Information technology services

In terms of productivity, which of the following is true of learning curves? They are volatile.

Economies of Scale: decreases in cost per unit as output increases

How to compete on a business level is defined by the value and cost of the variable. together, they define the economic value created.

Components of Cost-Leadership Strategy:

- Lowest costs in the industry

- Acceptable value

Learning Curves go down in terms of productivity

Which of the following competitive forces can result in the erosion of margins for both differentiation and cost-leadership business strategies?

- Threat of entry

- Power of buyers

- Power of suppliers

A producer of consumer headphones that successfully differentiates its products with patented noise-canceling technology and celebrity endorsements will enjoy which of the following benefits?

- The ability to charge a premium price

- Less intense competition from imitators

Cost Leadership Strategy: achieving the lowest costs in the industry while maintaining a level of value that is acceptable to customers.

Which statement describes the long tail?

A large amount of revenue derived from a small number of units among almost unlimited choices

4 Steps of the Innovation Process:

1. Idea

2. Invention

3. Innovation

4. Imitation

The industry life cycle identifies how industries tend to develop and change over time.

Multiple choice question.

A business model in which companies can obtain a large part of their revenues by selling a small number of units from among almost unlimited choice is referred to as the long tail.

Increases in the value of a product or service that result from a corresponding increase in the number of users are known as network effects.

Shakeout in business refers to a phase in an industry’s life cycle where weaker competitors are eliminated due to increased competition, market saturation, or changing consumer preferences

Successfully transitioning from one stage of the industry life cycle to the next is referred to as crossing the chasm

Which term is used for the customer segment in the introductory stage of the industry life cycle? Technology Enthusiasts.

What question is asked along the horizontal axis of the markets-and-technology framework? Does the innovation build on existing technologies or create new ones?

Which of the following are characteristics of the early majority?

- They weigh benefits and costs carefully

- They have a strong sense of practicality

Types of Innovation

- Disruptive

- Architectural: Using known components, based on existing technologies, in a new configuration to create a new market; a new product in which existing technologies are used in a novel way to create new markets

- Incremental: The type of innovation that focuses on improving an existing product by using existing technology and targeting existing markets

- Radical

Blue Ocean Strategy: a business approach that focuses on creating an entirely new market space, making competition irrelevant rather than competing in an existing market (a "Red Ocean").

A successful blue ocean strategy requires strategists to reconcile the trade-offs between differentiation and cost-leadership

Implementing a blue ocean strategy requires making competition irrelevant and creating a new market space, otherwise known as value innovation

In terms of business strategy, blue oceans represent which of the following?

Multiple select question.

increased demand
untapped market space

The business structure that is linear and has producers at one end and consumers at the other is known as a pipeline

An enterprise that creates value by matching external producers and consumers in a way that creates value for all participants and that depends on the infrastructure that the platform manages is a platform business

Which of the following are advantages of platform businesses compared to pipeline businesses?

· They scale efficiently by eliminating gatekeepers.

· They benefit from community feedback.

· They unlock new sources of value creation and supply.

Which of the following statements about platform businesses is true?

They can grow faster than pipeline businesses.

What are the components of a patent application?

· Description of invention

· Claims

· Introduction

The initial application to the U.S. Patent and Trademark Office providing evidence of first to market is known as a provisional patent application

A feature of a trademark is that it is able to last indefinitely as long as it continues to perform its indicated function

Identify the requirements for filing of a trademark registration.

· A drawing of the mark

· Completion of a written form

· Five specimens that demonstrate the actual use of the mark

In the context of trade secrets, documents that are prepared by an employer and signed by an employee in order for the company to protect valuable assets ranging from product information to clients, marketing ideas, and unique strategies are known as non-compete agreements

Why did the U.S. Patent and Trademark Office (USPTO) establish the Office of International Patent Cooperation? To reduce the ambiguity of International Patenting (IP) rights while decreasing costs

It is advisable for an entrepreneur to first file a provisional patent application to establish a date of the formation of an invention