1) For a firm that operates in an industry where competition is high, which of the following

practices will result in inferior performance ?

∑ choosing a distinct but different strategic position in the industry
∑ working toward increasing the difference between value creation and cost
∑ trying to be everything to everybody by combining different competitive strategies
∑ focusing on creating value for customers rather than destroying rivals

2) Which of the following statements about strategy is not true ?

∑ Grandiose statements of desire, on their own, are not strategy.
∑ Strategy is as much about deciding what not to do, as it is about deciding what to do.
∑ Strategy is about creating superior value, while containing the cost to create it.
∑ Operational effectiveness and competitive benchmarking should be treated as strategy.

3) Visionary companies are able to outperform their competitors because

∑ their vision statements are more product-oriented.
∑ they provide more aspirational visions.
∑ their visions are exclusively financial.
∑ they isolate internal stakeholders in defining their visions.

4) To be effective, firms need to

∑ back up their visions with strategic commitments that are costly and difficult to reverse.
∑ increase their strategic flexibility by developing product-oriented vision statements.
∑ isolate top managers from the organizational values.
∑ pursue visions that are exclusively financial and not aspirational.

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5) Read this Passage & Answer the following Questions 5, 6 & 7 based on this.
Christiansen first received a U.S. patent for a “toy building brick” in 1961 and has successfully
defended against imitators ever since. That original design of a rectangular plastic piece with eight
“primary projections” is virtually unchanged in nearly six decades. Suddenly, children—and, yes,
adults too—could unleash their imaginations in assembling Lego bricks in countless configurations.
Toys are often sold through non-specialized retailers but they tend to allocate them limited shelf
space. In recent years, toy makers have begun to sell their products online. Meanwhile, according
to recent surveys, children have also moved online and have been spending considerably more
time on videos and online games.

Q 5. Lego may have begun to sell its bricks online most likely because: Lego may have
begun to sell its bricks online most likely because:
∑ Limited shelf space can increase the bargaining power of non-specialized retailers
∑ Competitor Mattel has chosen to sell online even though it lacks IT capabilities
∑ A toy is just $10 but an online order of $85 is needed to justify shipping costs
∑ Lego’s brick design is easier to simulate online when compared to Mattel’s design

6) Refer Para in Q.5 for this question.

‘Lego enjoys 25% margins while its rival Mattel known for its iconic Barbie doll has less than
20% margins’. What can we conclude from the above ?
∑ Porter’s Five Forces are weaker in the case of Lego than in the case of Mattel
∑ Within an industry, there can be considerable variation in margins among firms
∑ It’s easier for new entrants to copy a Mattel’s Barbie doll than a Lego brick
∑ Online retail can be more profitable than selling through non-specialized retailers

7) Refer Para in Q.5 for this question.

Recent research has indeed shown that early exposure to toy bricks can improve creativity in
children. Which among the following is likely to happen as a result ?

∑ Non-specialized retailers bargain for higher margins to put Lego on their shelves
∑ Lego can continue to sustain its competitive advantage by selling its plastic bricks
∑ Lego needs to go online to sustain its product sales and retain its margins
∑ Legal protection for Lego’s brick patents shall be lowered in light of these findings

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8) Read this Passage & Answer the following Questions 8, 9 & 10 based on this paragraph.

With 54% of global market share and €2 billion of annual sales, Nutella, the Ferrero-owned brand has
long been king of chocolate spreads. A single plant in Canada produces as many as 600,000 jars of
Nutella and accounts for a fourth of the company’s output. With only five main ingredients—roasted
hazelnuts, chocolate, milk, oil, and sugar—variations on the spread are easy to make at home with just
a food processor. Almond and walnut based chocolate spreads have also been introduced by
competitors over the years. Yet, Nutella remains the most popular brand and has come a long way
since its introduction in post-world war II years that witnessed a shortage of cocoa. Turkey accounts for
two-thirds of the world’s hazelnut production and the nut is imported in bulk by a small number of
chocolate producers. And, palm oil comes from the tropical rainforests of Indonesia. In recent years,
the use of palm oil in Nutella has raised both health concerns and environmental concerns.

Q 8. What best explains the high market share that Nutella enjoys over the years ?

∑ The ease of making Nutella, variations of which can be made even at home
∑ Increased production of almonds and peanuts, leading to other nut based spreads
∑ Resumption of operations after week long employee strikes at its plant in Canada
∑ Difficult for entrants to scale up operations and bring down costs in a few years

9) Refer Para in Q.8 for this question.

Q 9. Which among the following is a source of Nutella’s competitive advantage ?

∑ Customers switching to more healthy forms of spread owing to recent concerns
∑ Nutella being used most often with bread, whose prices have increased recently
∑ Robotic processors help restaurants make chocolate spreads in-house at low costs
∑ Nutella’s contracts with suppliers for a third of the world’s hazelnuts at low prices

10) Refer Para in Q.8 for this question.

Q 10. Which among the following is not likely to sustain Nutella’s competitive advantage ?
∑ Using alternative oils that taste the same but do not pose a threat to rainforests
∑ Showing hazelnut spreads are better than other nut spreads in sticking to bread
∑ Sharing recipes from individuals that have used Nutella in their preparations
∑ Inviting restaurant owners to its plants to popularize its spread making processes

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11) Read this Passage & Answer the following Questions 11, 12 & 13 based on this Paragraph.
Ever since the first alternating current plant was built to scale at Niagara in 1895, production in the utility
industry has invariably been about centralization and economies of scale, leading to monopolies. In
spite of electricity being bought and sold as a commodity with little to differentiate on, the huge set up
costs and scale involved have long deterred new entrants. However, rooftop solar has enabled
consumers to produce at least part of the required power themselves, increasing their bargaining power.
Contracts with suppliers to secure large quantities of cheap oil and coal enable utilities to continue for
now but environmentalists are fighting hard to secure incentives for solar and remove regulations that
favour legacy utilities. When the last of the regulatory hurdles that have allowed these monopolies to
thrive over a century get dismantled, the utility industry as we knew it would have completely
transformed. More power to consumers!

Q 11. Which among the following can reduce profitability of the utility industry ?
∑ Very little differentiation among incumbents, reducing electricity to a commodity
∑ Difficult for new entrants to invest huge amounts and scale up operations
∑ Substitution with rooftop solar requires dismantling of archaic purchase laws
∑ Large scale contracts for oil and coal may reduce bargaining power of suppliers

12) Refer Para in Q.11 for this question.

Which among the following is true about industry transformation ?

∑ In reality, industry transformation is due to customers, technology, or regulation
∑ In practice, industry transformation occurs only if it tends to favour consumers
∑ Invariably, industry transformation is slower when it involves environmentalists
∑ Geographically, industry transformation occurs far away from the end consumer

13) Refer Para in Q.11 for this question.

“In spite of electricity being bought and sold as a commodity with little to differentiate on, the
huge set up costs and scale involved have long deterred new entrants”. What does the sentence
imply ?

∑ It’s usually easy to scale up whenever there is differentiation among products

∑ Even if one of the five forces is weak, it’s easy for entrants to replace incumbents
∑ If a force is favourable to incumbents, it doesn’t mean that they have advantage
∑ It’s usually easier for entrants if the target industry deals with a commodity

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14) Read this Passage & Answer following Questions 14 & 15 based on this Paragraph.

According to the text, only 20% variation in firm profitability is explained by the industry but as much as
55% variation is explained by firm strategy within an industry. The rest 25% is explained by other effects
such as business cycle.

Q 14. Which among the following is false given the above statements ?

∑ Both Salt A and Salt B have the same 2% profit margins even though firm B is family owned.
∑ Paint A has 20% profit margins but Paint B has just 2% margins even though both firms have
similar cost structures.
∑ Coffee industry has 10% profit margins while tea industry has only 3% profit margins even
though the two are substitutes.
∑ Ratio of variation in firm profitability within an industry to the variation in profitability across
industries is at least 2.75.

15) Refer Para in Q.14 for this question.

What can we conclude from the above statements ?

∑ Industry analysis is not useful in explaining firm profitability since firms within an industry often
tend to have different strategies
∑ Difference in profit margins between firms competing in an industry are temporary advantages
that cannot be sustained
∑ Firms can improve their profitability only by switching industries whenever the business cycle
changes
∑ Both industry analysis and firm analysis are useful even though they together explain only 75%
of the variation

16) Which among the following is true regarding the tenets of stakeholder strategy ?
∑ Firms should put shareholder value first as it is essential to sustaining competitive advantage
within high growth industries
∑ Firms should worry less about local communities since they have started selling to distant cities
or even other countries
∑ Firms should worry less about walkouts and strikes since employees are just one among
several stakeholders they need to deal with
∑ Firms should try to understand relationships among stakeholders even though they can be quite
complex

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17) Which among the following is false regarding the limitations of Porter’s framework ?
∑ It is a static framework and fails to explain industry dynamics over time such as in the area of
semiconductors that may lead to changes in profitability
∑ It assumes that firm competition is stable and does not take mergers and fragmentation such
as in banking into account
∑ Industry boundaries in the framework are less relevant when unrelated industries such as social
networking and news media start converging
∑ It cannot explain the high bargaining power of certain suppliers such as those that supply oil to
airlines

18) Which among the following is true regarding the Porter’s five forces framework ?
∑ It is not necessary to analyse individual forces within the framework as forces are often closely
related to each other
∑ Analysing a single force is often sufficient since different forces within an industry often work in
the same direction
∑ The framework is applicable only to those industries where the competition among incumbents
is quite high
∑ The framework is valid even when one force reduces industry profitability and another force
increases profitability

19) Which among the following is false regarding the PESTEL factors ?
∑ Individual pharma firms can shape political factors that affect their businesses through non-
market strategies such as lobbying and contributions
∑ Individual IT firms can influence economic factors such as the country’s level of unemployment
by recruiting more into their own firm
∑ Individual beverage firms may be influenced by sociocultural factors to introduce low calorie
product options even if it entails changes in their operations
∑ Some ridesharing firms may see changes in their technological environment such as rise in ICT
as threats while others may see them as opportunities

20) Which among the following is false regarding the threat of substitutes ?
∑ Customers using travel aggregator websites are more likely to switch airlines than those that
use dedicated airline websites for their bookings
∑ Banks that bundle their savings account and demat services may end up decreasing the
switching costs of their consumers
∑ Customers may switch to robotic roti makers that perform better than electric roti makers even
if they are priced higher
∑ Number portability can reduce the profitability of mobile companies by bringing down customer
switching costs

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21) Which among the following is false regarding the strategic role of complements ?
∑ Complements adds value to the original product when used in tandem
∑ Complements increase the demand for the primary product
∑ Complements may be offered by the same firm or different firms
∑ Complements decrease the switching costs of customers

22) Which of the following statements is true about why companies use strategic group models
?
∑ they reveal product differences between firms in the same industry
∑ they reveal potential areas of industry convergence between firms in different industries
∑ they reveal common threads between firms in different industries
∑ they reveal performance differences between clusters of firms in the same industry

23) A new company named Far Reach Inc. entered the radio retail business. In response, two
incumbent radio retailers, Smooth Waves and Clear Signal, lowered the cost of their travel alarm
radios and long-distance radios. Also, they spent more money to improve these radios. By doing
this, Smooth Waves and Clear Signal
∑ decreased industry exit barriers.
∑ increased industry exit barriers.
∑ decreased industry profit potential.
∑ increased industry profit potential.

24) Which among these is not a step in industry analysis:

∑ declare the industry as attractive or unattractive.
∑ identify the underlying drivers of the five forces.
∑ identify the key players in each of the five forces.
∑ define the relevant industry.

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25) With the emergence of smartphones, users no longer have to carry a separate music player, a
video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone
is loaded with a variety of applications to satisfy all the customer needs that different industries or
products individually satisfied earlier. As a result, the smartphone industry has been posing a threat
to a lot of other unrelated industries.

What is this phenomenon best known as?

∑ industry convergence
∑ backward integration
∑ product differentiation
∑ customer myopia

26) Which of the following statements with regard to industry structures is true ?
∑ They are stable over time, not dynamic.
∑ Having a large number of competitors generally equates to higher industry profitability.
∑ A consolidated industry tends to be more profitable than a fragmented one.
∑ Having few but large competitors increases the threat of strong competitive forces such as
supplier or buyer power.

27) Which of the following describes a situation in which firms acquire resources at a low cost,
laying the foundation for a competitive advantage later ?
∑ better expectations of future resource value
∑ path dependence limiting current decisions
∑ causal ambiguity
∑ social complexity

28) According to the VRIO framework, a firm can gain a competitive advantage if it has resources
that are _____ and captured by an organized firm.
∑ varied, refined, costly to introduce
∑ valuable, refined, costly to introduce
∑ valuable, rare, costly to imitate
∑ varied, rare, costly to imitate

29) Which of the following statements correctly describes resource heterogeneity ?

∑ Bundles of resources, capabilities, and competencies differ temporarily across firms.
∑ Bundles of resources, capabilities, and competencies are mostly the same across firms.
∑ Bundles of resources, capabilities, and competencies differ across firms.
∑ Bundles of resources, capabilities and competencies are all the same across firms.

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30) Which of the following is a drawback of the SWOT analysis ?
∑ The SWOT analysis takes into account only the internal environment of a firm, ignoring the
equally important external environment.
∑ This framework is only applicable to the manufacturing industries; it is ineffective when applied
to the service firms.
∑ A problem with this framework is that a strength can also be a weakness, and that an
opportunity can also simultaneously be a threat.
∑ A drawback of this framework is that it allows managers to merely evaluate a firm's current
situation, and not its future prospects.

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