Question

1. Which of the following statements best explains why luck will always play role in achieving competitive advantage?

Building a competitive advantage is about taking actions to achieve a goal in the future.

Building a competitive advantage depends upon creating new innovations.

Building a competitive advantage usually requires competitors to make a mistake.

Building a competitive advantage requires working through an organization.

2. If a CEO's compensation is almost entirely based on stock options, will it align the CEO's interests with those of the shareholders?

Yes, because of both only get paid with increases in shareholder value.

No, because of the different absolute size of incentives.

No, because of different time frames.

3. Which of the following is the most important decision for firms when trying to maintain a competitive advantage?

Selecting price of products.

Selecting competitors to match.

Selecting employees to hire.

Selecting opportunities not to pursue.

Answer 1

1. Building new competitive advantage depends upon creating new innovations

An innovation is something which always comes with a probablity of success and failure and therefore a luck factor is associated with it and if it works then the organization may achieve a competitive advantage over others.

2. Yes, because of both only get paid with increases in shareholder value.

In such cases the interests of the CEO are aligned with that of shareholders because they make more profit if the share value is more and the reverse is also true.

3. Selecting competitors to match

A competitive advantage is based on competition and the advantage an organization possess over it's competitors in any of the business aspect which gives them an upper hand over their competitors. Therefore the organization most importantly needs to understand the competitors who needs to be targeted for the same.