Chapter 1

Question 1

What does the I/O Model of Above Average Returns explain?

Answer 1

External environments’ dominant influence on the choice of strategy & actions associated with it.

Question 2

What are determination factors of profitability potential?

Answer 2

Economies of scale
Barriers to market entry
Diversification
Product differentiation
Degree of concentration of firms in an industry
Market frictions

Question 3

What are the five forces?

Answer 3

Supplier Power
Buyer Power
Competitive Rivalry
Product substitutes
Potential entrants

Question 4

How can you achieve Above Average Returns?

Answer 4

Producing standardized products with lower costs
Producing differentiated products with higher costs

Question 5

When do capabilities have competitive advantage potential?

Answer 5

When they are valuable, rare, costly to imitate and not easily substitutable

Question 6

When do resources have competitive advantage potential?

Answer 6

When they allow the firm to take advantage of opportunities/neutralize threats.

Question 7

What are the three different types of Stakeholders?

Answer 7

Capital Market (shareholders & major suppliers)
Product Market (Primary customers, suppliers, unions, & host communities)
Organizational (employees)