TextBook: Economics of Strategy, 7th Edition

David Dranove,David

Besanko,Mark Shanley,Scott Schaefer

ISBN:

978-1-119-17477-6September 2015544Pages

Adapted Homework, Ch. 11

(11 points possible)

1."An Analysis of sustainability is similar to a five forces analysis." Comment on this, focusing on the firm you've been studying for your term project. (1 point)

2.(a) How do economies of scale affect sustainability? (b) Economies of scope? (2 points: 1 point each)

3.Kellogg's and General Mills have their market dominance for over a century. Sprint and T-Mobile have both been hard hit by competition. What is different about the product/market situations in these two cases that affects sustainability? (1 point)

4.The firm you've been studying for your term project has co-specialized assets. Has this firm prospered from its co-specialized assets? Why or why not? (2 points)

6.Are the following likely to create first mover advantages? Why or why not? (2 points: 1 point each)

a. Toyota introduced the first commercially successful hybrid car.

b. T-Mobile has introduced free phone calls from international locations.

A.Each of the following parts describes a firm that was an early mover in its market.In light of the information provided, indicate whether the firm's position as an early mover is likely to be the basis of a sustainable competitive advantage, and explain why or why not. (2 points: 1 point each)

1)A bank has issued the largest number of ATM cards in a large urban area. Banks view their ability to offer ATM cards as an important part of their battle for depositors, and in this market a customer's ATM card for one bank does not work on the ATM systems of competing banks.

2)A firm has a 60% share of T3MP, a commodity chemical used to make industrial solvents. Minimum efficient scale is thought to be 50% of current market demand.Recently, a change in environmental regulation has dramatically raised the price of a substitute chemical that indirectly competes with T3MP.This undermines the market for the substitute, which is about twice the size of the market for T3MP.

B.In defending his company against allegation of anticompetitive practices, Bill Gates, claimed that if someone developed an operating system for personal computers that was superior to Microsoft's Windows 95 operating system, it would quickly become the market leader, just as Gates' DOS System became the market leader in the 1980's. Opponents countered that the market situation has changed so that even a markedly superior operating system wouldn't capture significant market share. Comment. (1 point)