Chapter 2

Question 1

Financial performance that consistently outperforms industry averages.

Answer 1

Sustainable competitive advantage

Question 2

Performing the same tasks better than rivals perform them.

Answer 2

Operational effectiveness

Question 3

A basic good that can be interchanged with nearly identical offerings by others—think milk, coal, orange juice, or to a lesser extent, Windows PCs and Android phones. The more commoditized an offering, the greater the likelihood that competition will be based on price.

Answer 3

Commodity

Question 4

Exists when savvy rivals watch a pioneer’s efforts, learn from their successes and missteps, then enter the market quickly with a comparable or superior product at a lower cost before the first mover can dominate.

Answer 4

Fast follower problem

Question 5

A technology that superimposes content, such as images and animation, on top of real-world images.

Answer 5

Augmented reality

Question 6

Performing different tasks than rivals, or the same tasks in a different way.

Answer 6

Strategic positioning

Question 7

Attempts to occupy more than one position, while failing to match the benefits of a more efficient, singularly focused rival.

Answer 7

Straddling

Question 8

Sometimes referred to as inventory turnover, stock turns, or stock turnover. It is the number of times inventory is sold or used during a given period. A higher figure means that a firm is selling products quickly.

Answer 8

Inventory turns

Question 9

The strategic thinking approach suggesting that if a firm is to maintain sustainable competitive advantage, it must control an exploitable resource, or set of resources, that have four critical characteristics. These resources must be (1) valuable, (2) rare, (3) imperfectly imitable, and (4) nonsubstitutable.

Answer 9

Resource-based view of competitive advantage

Question 10

A technology that increases the transmission capacity (and hence speed) of fiber-optic cable. Transmissions using fiber are accomplished by transmitting light inside “glass” cables. In DWDM, the light inside fiber is split into different wavelengths in a way similar to how a prism splits light into different colors.

Answer 10

Dense wave division multiplexing (DWDM)

Question 11

A way of doing business that competitors struggle to replicate and that frequently involves technology in a key enabling role.

Answer 11

Imitation-resistant value chain

Question 12

The set of activities through which a product or service is created and delivered to customers.

Answer 12

The value chain

Question 13

The symbolic embodiment of all the information connected with a product or service.

Answer 13

Brand

Question 14

Leveraging consumers to promote a product or service.

Answer 14

Viral marketing

Question 15

Advantages related to size.

Answer 15

Scale advantages

Question 16

When costs can be spread across increasing units of production or in serving multiple customers. Businesses that have favorable economies of scale (like many Internet firms) are sometimes referred to as being highly scalable.

Answer 16

Economies of scale

Question 17

The cost a consumer incurs when moving from one product to another. It can involve actual money spent (e.g., buying a new product) as well as investments in time, any data loss, and so forth.

Answer 17

Switching costs

Question 18

Also known as Metcalfe’s Law, or network externalities. When the value of a product or service increases as its number of users expands.

Answer 18

Network effects

Question 19

The path through which products or services get to customers.

Answer 19

Distribution channels

Question 20

Programming hooks, or guidelines, published by firms that tell other programs how to get a service to perform a task such as send or receive data. For example, Amazon provides APIs to let developers write their own applications and websites that can send the firm orders.

Answer 20

APIs (Application Programming Interfaces)

Question 21

Third parties that promote a product or service, typically in exchange for a cut of any sales.

Answer 21

Affiliates

Question 22

Commonly known as patent trolls, these firms make money by acquiring and asserting patents, rather than bringing products and services to market.

Answer 22

Non-practicing entities

Question 23

Also known as Industry and Competitive Analysis. A framework considering the interplay between (1) the intensity of rivalry among existing competitors, (2) the threat of new entrants, (3) the threat of substitute goods or services, (4) the bargaining power of buyers, and (5) the bargaining power of suppliers.

Answer 23

Porter’s five forces

Question 24

The degree to which complete information is available.

Answer 24

Price transparency

Question 25

A decision situation where one party has more or better information than its counterparty.

Answer 25

Information asymmetry

Question 26

As in “to go private” or “take a firm private.” Buying up a publicly traded firm’s shares. Usually done when a firm has suffered financially and when a turnaround strategy will first yield losses that would further erode share price. Firms (often called private equity, buyout, LBO, or leveraged buyout firms) that take another company private hope to improve results so that the company can be sold to another firm or they can reissue shares on public markets.1 of 1

Answer 26

Private