Karla Hanover, CEO of Marshall Computers, is gloating during a board meeting. “It’s been a wonderful year, people. First, we received a tax break from the state that allows us to reduce our manufacturing costs. Second, we drove our longtime competitor, Roseland Technology, out of business. Third, we patented a new processor 30% faster than those of our rivals.” Which of the three victories Hanover cited is least likely to give the firm a lasting advantage over its competitors? A) The demise of a competitor. B) The new, faster processor. C) The tax break.
A
my reasoning being that even if they drive out the competitor, assuming there’s better profit margins now blah blah blah, new competitors will come into the industry. doesn’t say anything about massive barriers to entry, so i’m sticking with it.
I think B because the tax break and demise of a competitor is enjoyed by everyone in the industry whereas the patenting of the new processor prevents other firms from selling that processor.
Kwony, they are asking least. I would go with A too.
You’re right, i’m not reading the questions carefully enough
Team AF is too good. Your answer: C was incorrect. The correct answer was A) The demise of a competitor. Government action and technological advancements don’t generally have a lasting effect on an industry. However, such company-specific factors as a state tax break and a patented new technology can strengthen one company at the expense of others. However, the elimination of a rival could result in new competitors entering the market. As such, it is least likely to provide a lasting competitive advantage.
meh i chose B because patents expire after x number of years. i thought about new competitors entering the busienss too, but the question never said anything about how small / big / competitive the industry is so its hard to make judgements there. for e.g. if MS drives AAPL out of the OS business, then its probably unlikely for a new competitor to emerge in a loooooong time. compare this to an industry with many competitors, where’s its probably easier for new players to replace the failures.
Ughh LEAST LIKELY
Patents -> barriers to entry Tax break -> barriers to entry
TheAliMan Wrote: ------------------------------------------------------- > Patents -> barriers to entry > Tax break -> barriers to entry add long-term view to that mix and then a lot of subtlety comes into play
Haha, fair enough