Chapter 13

Question 1

Strategy:

Answer 1

Objectives and a set of actions to achieve those objectives

Question 2

Competitive dynamics:

Answer 2

The actions and responses undertaken by competing firms

Question 3

Perfect competition:

Answer 3

A market with many small buyers and sellers

Question 4

Dominant firms:

Answer 4

Firms with the market power to significantly influence the rules of the game in its
industry

Question 5

Monopsony:

Answer 5

A market with only one buyer

Question 6

Monopoly:

Answer 6

A market with only one seller

Question 7

Oligopoly:

Answer 7

A market structure with only a handful of competing firms

Question 8

Co-opetition:

Answer 8

Simultaneously rivalry and cooperation between two firms

Question 9

Attack:

Answer 9

An initial set of actions to gain competitive advantage

Question 10

Counterattack:

Answer 10

A set of actions in response to an attack

Question 11

AMC framework:

Answer 11

A conceptual framework of awareness, motivation, capability indicating when
firms are likely to attack and counterattack each other

Question 12

Competitor intelligence:

Answer 12

The process of analyzing rival’s resources and strategies to be able to
predict their future actions

Question 13

Collusion:

Answer 13

Collective attempts between competing firms to reduce competition

Question 14

Explicit collusion:

Answer 14

Firms directly negotiate output, fix pricing or division of markets

Question 15

Cartel:

Answer 15

An entity that engages in output- or price-fixing, involving multiple competitors

Question 16

Tacit collusion:

Answer 16

Firms indirectly coordinate actions by signalling their intention to reduce output
or maintain pricing above competitive levels

Question 17

Prisenors’ dilemma:

Answer 17

In game theory, a type of game in which the outcome depends on two
parties deciding whether to cooperate or to deficit

Question 18

Game theory:

Answer 18

A theory on how agents interact strategically to win

Question 19

Repeated game:

Answer 19

A game plays over several periods of time

Question 20

Tit-for-tat:

Answer 20

A strategy of matching the competitors’ move being either aggressive or
accommodative

Question 21

Concentration ratio:

Answer 21

The percentage of total industry sales accounted for by the top 4, 8 or 20
firms

Question 22

Price leader:

Answer 22

A firm that has a dominant market share and sets ‘acceptable’ prices and margins
in the industry

Question 23

Barriers to entry:

Answer 23

Costs or other obstacles that prevent new competitors from easily entering an
industry or market segment

Question 24

Cross-market retaliation:

Answer 24

The ability of a firm to expand in a competitor’s market if the
competitor attacks in its original market

Question 25

Market commonality:

Answer 25

The overlap between two rivals’ markets

Question 26

Mutual forbearance:

Answer 26

Behaviour of rivals respecting each other’s spheres of influence in certain markets, leading to tacit collusion

Question 27

Signalling:

Answer 27

Firms sending each other indirect messages about their intentions

Question 28

Anti-trust policy:

Answer 28

US term for competition policy

Question 29

EU Competition Commissioner:

Answer 29

The person in the EU Commission responsible for competition policy

Question 30

Collusive price setting:

Answer 30

Price setting colluding firms at a higher than competitive level

Question 31

Leniency programs:

Answer 31

Programmes that give immunity to members of a cartel that first report the cartel to the authorities

Question 32

Market division collusion:

Answer 32

A collusion too divide markets among competitors

Question 33

Anti-competitive practices (by a dominant firm):

Answer 33

Business practices by a dominating firm that make it more difficult for competitors to enter or survive

Question 34

Predatory pricing:

Answer 34

An attempt to dominate a market by setting prices below costs and intending to raise prices to cover losses in the long run after eliminating rivals

Question 35

Dumping:

Answer 35

An exporter selling bowl cost abroad and planning to raise prices after eliminating local rivals

Question 36

Patent race:

Answer 36

A competition of R&D units where the first one to patent a new technology gets to dominate a market

Question 37

Survival strategies:

Answer 37

A strategy designed to ensure survival by ensuring liquidity and positive cash flow

Question 38

Economic forecasting:

Answer 38

A technique using econometric models to predict the likely future value of key economic variables

Question 39

Scenario planning:

Answer 39

A technique generating multiple scenarios of possible future states of the industry

Question 40

Contingency plans:

Answer 40

Plans devised for specific situations when things could go wrong

Question 41

Blue ocean strategy:

Answer 41

A strategy of attack that avoids direct confrontations with incumbents

Question 42

Defender strategy:

Answer 42

This strategy centres on leveraging local assets in areas in which MNEs are weak

Question 43

Extender strategy:

Answer 43

This strategy centres on leveraging home-grown competencies abroad

Question 44

Industries primed for collusion tend to have:

Answer 44

(1) a smaller number of rivals, (2) a price leader, (3)homogeneous products, (4) high entry barriers and (5) high market commonality.