Chapter 16

Walmart refuses to stock CDs bearing parental advisory stickers for explicit lyrics or violent imagery. Recording artists who want their recordings available at Walmart have the option of altering lyrics and song titles or deleting offending tracks. Likewise, artists are sometimes asked to change album cover art if Walmart deems it offensive. Considering the elements of the five forces model this is an example of: A) buyer power. B) supplier power. C) threat of new entrants. D) threat of substitute products. E) access to distribution channels.

A) buyer power.

An approach to competitive advantage that exploits weaknesses in competitors' narrow-focus strategies is called a ________ strategy. A) loose bricks B) collaboration C) layers of advantage D) supplier power E) generic

A) loose bricks

Dell's factories can assemble a complete PC in 3 minutes. With a build-to-order strategy at the heart of its business model, Dell's sales staff maintains close ties with customers. This approach represents which aspect of the Porter's five forces model? A) rivalry among competitors B) bargaining power of buyers C) threat of substitute products D) threat of new entrants E) bargaining power of suppliers

A) rivalry among competitors

When company management decides that it is unwilling to follow the "conventional wisdom" and instead finds a new way to gain competitive advantage, it might be said to be: A) searching for loose bricks. B) changing the rules of engagement. C) collaborating. D) building layers of advantage. E) innovating.

B) changing the rules of engagement.

Mitsubishi Heavy Industries Ltd. and other Japanese companies manufacture airplanes under license to U.S. firms and also work as subcontractors for aircraft parts and systems. This type of effort is known as: A) searching for loose bricks. B) collaborating. C) building of layers of advantage. D) changing the rules of engagement. E) innovating.

B) collaborating.

Gillette markets its flagship MACH3 razor in more than 100 countries around the world. The MACH3 is available virtually everywhere that consumers shop for personal-care products; because of its advanced 3-blade design, the MACH3 typically costs more than other wet-shaving systems. Which generic strategy is evident in Gillette's global marketing effort of MACH3? A) cost leadership B) differentiation C) cost focus D) focused differentiation E) consumer focus

B) differentiation

Maytag has been called "the Rolls-Royce of washers and dryers." Maytag markets Neptune, a high-tech machine, at a substantially higher than regular washer price. This is an example of: A) cost leadership. B) differentiation. C) cost focus. D) focused differentiation. E) consumer focus.

B) differentiation.

Intel's focus on designing complex, expensive microprocessors for PCs enabled competitors to develop cheaper chip sets for non-PC electronics devices. In the strategic intent model of competitive advantage, this is an example of: A) building layers of advantage. B) loose bricks. C) changing the rules of engagement. D) collaborating. E) none of the above

B) loose bricks.

The country with the highest number of companies with Global Competitive Advantage is: A) the United Kingdom. B) the United States. C) Japan. D) France. E) Germany.

B) the United States.

According to Porter, the nature of the interaction between potential industry entrants, buyers, substitute products, suppliers, and rival firms determines: A) whether or not the government will launch an antitrust investigation. B) the industry's profit potential in terms of long-run return on invested capital. C) whether a country can generate a balance of payments surplus. D) whether a country can create a comparative advantage in the production of differentiated products. E) whether a country can generate income by innovation.

B) the industry's profit potential in terms of long-run return on invested capital.

According to the hypercompetition model of competitive advantage, which of the following allows the firm to create an entirely new product or market? A) know-how advantage B) timing advantage C) outflanking D) switching costs E) countermoves

B) timing advantage

Building layers of advantage, searching for loose bricks, changing the rules of competitive engagement, and collaborating are elements of Hamel and Prahalad's framework for: A) quality advantage. B) positioning. C) competitive innovation. D) marketing management. E) innovation leadership.

C) competitive innovation.

Several factors can create intense rivalry among firms. These factors include all of the following factors except: A) firms focus on market share at the expense of others. B) firms feel pressure due to fixed costs and produce at full capacity. C) lack of differentiation in products and services. D) upward pressure on prices and profitability. E) absence of switching costs for customers.

D) upward pressure on prices and profitability.

"Hypercompetition" refers to companies that are successful and find sustainable competitive advantages.

False

In Michael Porter's model, "buyers" refers to manufacturers (e.g., GM) and retailers (e.g. Walmart), rather than consumers.

True

Intel's focus on designing complex, expensive microprocessors for PCs enabled competitors to develop cheaper chip sets for non-PC electronics devices. In the strategic intent model of competitive advantage, this is an example of "loose bricks."

True

Intel's loose brick was its narrow focus on complex microprocessors for PCs.

True

Maytag has been called "the Rolls-Royce of washers and dryers," and it can be said that it has achieved a competitive advantage by means of differentiation.

True

Microsoft and Intel are two companies that illustrate the concept of "bargaining power of suppliers" in Porter's five forces model of industry competition.

True

The development of the MP3 file format for music was accompanied by the increased popularity of peer-to-peer (p-to-p) file swapping among music fans.

True

The strong rivalry in the U.S. market between Dell, Gateway, Hewlett-Packard, Apple, and other computer companies has helped make the United States a world leader in personal computers.

True

Analyzed in terms of Porter's five forces model, Walmart's ability to dictate terms to the music industry is one indication of the retail giant's supplier power.

False

Unique product attributes represent a barrier to industry entry known as differentiation.

True

Rugman and D'Cruz have developed an alternative framework to Porter's five forces model. The framework, based on business networks, is called: A) the differentiation model. B) strategic intent. C) the flagship model. D) the hypercompetition model. E) the Rugman & D'Cruz model.

C) the flagship model.

Chance events play a role in shaping the competitive environment. Chance events are occurrences which include all but one of the following: A) major technological breakthroughs. B) wars and their aftermath. C) oil crisis. D) currency fluctuations. E) annual business meeting.

E) annual business meeting.

Which of the following is not one of the four arenas in which dynamic strategic interactions are played out in hypercompetitive industries? A) cost/quality B) timing and know-how C) entry barriers D) deep pockets E) buyer and supplier power

E) buyer and supplier power

"Factor conditions" refers to a country's endowment with resources which may have been created or inherited.

True

Rivalry among firms refers to all the actions taken by firms in the industry to improve their positions and gain advantage over each other.

True

Rugman and D'Cruz cite Benetton as an example of a flagship firm that excels at building partnerships.

True

Francisco Martínez is CFO of Comercial Mexicana SA, a retail chain in Mexico. Commenting on Walmart's entry into Mexico, Mr. Martínez notes, "I buy 20,000 plastic toys, and Walmart buys 20 million. Who do you think gets them cheaper?" Which strategic principles are evident in this comment? A) Walmart's buyer power and cost leadership B) Walmart's barriers to entry and differentiation C) Walmart's loose bricks and switching costs D) Walmart's focused differentiation and supplier power E) Walmart's discount policies for customers

A) Walmart's buyer power and cost leadership

In the tech world, about 90% of the world's nearly one billion PCs run on Microsoft's operating systems and 80% use Intel's microprocessors. This represents which aspect of the Porter's five forces model? A) bargaining power of suppliers B) bargaining power of buyers C) threat of substitute products D) rivalry among competitors E) threat of new entrants

A) bargaining power of suppliers

Suppose you are a sales representative for Advanced Micro Devices (AMD) in Japan. You are trying to convince Toshiba to buy your company's superfast Opteron microprocessor for its new laptop computer. Toshiba's representative seems interested, but finally does not place an order. Confidentially, the representative tells you that he is afraid that Intel will withhold shipments of its Pentium 4 if he does business with AMD. Thinking about Intel's role in this scenario, which of the following elements of the five forces model is evident here? A) barriers to entry B) bargaining power of suppliers C) bargaining power of buyers D) threat of substitute products E) threat of new entrants

A) barriers to entry

The key to maintaining competitive advantage, according to Dr. W.E. Deming as well as your textbook authors, is: A) being committed to constant improvement. B) being first to market with all products. C) outsourcing key components. D) challenging all market leaders. E) stressing low-price advantage in all areas.

A) being committed to constant improvement.

Volkswagen strategy to become the world's number one automaker by 2018 included all of the following except: A) build a U.S. plant, in Westmoreland, Pennsylvania. B) assemble cars at the plant in Chattanooga, Tennessee. C) increase production of Passat sedans in the United States. D) overtake Toyota to become the number one automaker. E) overtake GM to become the number one automaker.

A) build a U.S. plant, in Westmoreland, Pennsylvania.

Jaguar produced so few cars that it couldn't get volume discounts from components suppliers. Jaguar managers sometimes could not even determine the "fair" price for a particular part. In terms of Porter's competitive forces framework, Jaguar's strategic disadvantage stemmed from low: A) buyer power. B) supplier power. C) threat of new entrants. D) threat of substitute products. E) access to distribution channels.

A) buyer power.

In the 1950s, Sony licensed the technology for the transistor from Bell Labs and proceeded to become the world's leading manufacturer of portable radios. Which strategy was Sony using to gain competitive advantage? A) collaboration B) layers of advantage C) changing the rules D) loose bricks E) engagement

A) collaboration

According to strategy expert Richard D'Aveni, the actions taken by Swatch in the global watch industry illustrate hypercompetitive dynamic maneuvering in which arena? A) cost/quality B) timing and know-how C) entry barriers D) deep pockets E) Olympics

A) cost/quality

In the global watch industry, the success of the Swatch brand resulted in a manufacturing renaissance for Switzerland. In the strategic framework known as hypercompetition, Swatch's success is an example of interactions in which arena? A) cost/quality B) timing and know how C) entry barriers D) deep pockets E) sporting events

A) cost/quality

According to Michael Porter's research on the competitive advantage of nations, human, physical, knowledge, capital, and infrastructure resources are all components of a country's: A) factor conditions. B) demand conditions. C) strategy, structure, and rivalry. D) related and supporting industries. E) global conditions.

A) factor conditions.

Intel's loose brick was: A) it's narrow focus on complex microprocessors for PCs. B) demand for non-PC products. C) getting into the Smartphone market. D) unbeatable in computer market. E) developing new chips incorporating 3D technology.

A) it's narrow focus on complex microprocessors for PCs.

Factors which determine suppliers' ability to gain leverage over industry firms include all of the following except: A) large numbers and relatively few in number. B) suppliers' products or services are important to user firms. C) suppliers' products or services are highly differentiated. D) alternative products do not threaten suppliers' business. E) buyers preferences are highly differentiated.

A) large numbers and relatively few in number.

Which of the following is not identified by Porter as one of the possible types of barriers to entry in an industry? A) loose bricks B) switching costs C) economies of scale D) product differentiation E) access to distribution channels

A) loose bricks

Building layers of advantage, searching for loose bricks, changing the rules of competitive engagement, and collaborating are elements of the competitive advantage framework developed by: A) W.E. Deming. B) Hamel and Prahalad. C) Porter. D) Drucker. E) D'Aveni.

B) Hamel and Prahalad.

Intel achieved success by using "Intel Inside" advertising campaign and logo that appears on many brands of PCs. This is an example of barrier to entry classified as: A) new capacity. B) product differentiation. C) competitor response. D) new approaches to customer needs. E) distribution channels.

B) product differentiation.

Taiwan's Acer prospered by following founder Stan Shih's strategy of approaching the world computer market from the periphery. By the time Acer was ready to target the United States in earnest, it was already the number one PC brand in key countries in Latin America, Southeast Asia, and the Middle East. This is an example of which component of competitive innovation? A) collaboration B) layers of advantage C) loose bricks D) generic E) supplier power

C) loose bricks

Del Vecchio, the Italian entrepreneur's business principles include all but one of the following: A) "Made in Italy" is important. B) Must cut costs to keep production at home. C) Invest in automation. D) Hire qualified personnel. E) Invest in Robots, not workers.

D) Hire qualified personnel.

Which of the following is not identified by Porter as one of the five forces that explains competition in an industry? A) threat of new entrants B) threat of substitute products or services C) bargaining power of suppliers D) bargaining power of competitors E) the competitive rivalry among current members

D) bargaining power of competitors

Porter's four generic strategies for achieving competitive advantage are: A) price determination, cost leadership, product differentiation, distribution savings. B) cost leadership, product differentiation, cost challenger, product challenger. C) price leadership, product differentiation, price challenger, cost differentiation. D) cost leadership, product differentiation, cost focus, focused differentiation. E) cost leadership, product differentiation, consumer differentiation, focused differentiation.

D) cost leadership, product differentiation, cost focus, focused differentiation.

Which of the following generic strategies best captures the way Harley-Davidson has achieved competitive advantage in the global motorcycle industry? A) cost leadership B) differentiation C) cost focus D) focused differentiation E) cost differentiation

D) focused differentiation

Germany's Mittelstand companies have been extremely successful pursuing: A) cost leadership. B) differentiation. C) cost focus. D) focused differentiation. E) cost differentiation.

D) focused differentiation.

Hundreds of small companies such as Martin-Logan and Mark Levinson compete in the high-end audiophile segment of the consumer electronics industry. If analyzed in terms of Porter's generic strategies framework, such companies might be said to be pursuing competitive advantage via: A) cost leadership. B) differentiation. C) cost focus. D) focused differentiation. E) consumer differentiation.

D) focused differentiation.

The ________ framework was developed by Professor Richard D'Aveni to describe a business environment in which no form of competitive advantage can be sustained for long because of escalating and accelerating competitive forces. A) five forces model B) generic strategies C) strategic intent D) hypercompetition E) factor conditions

D) hypercompetition

In the terminology of the strategic intent framework for competitive advantage, a firm that establishes advantages in a number of different areas has: A) attribute diversity. B) marketing breadth. C) comparative advantage. D) layers of advantage. E) a "double diamond."

D) layers of advantage.

When managers at Matsushita realized that cost advantages in TV production were often fleeting, they added quality and reliability advantages, thus establishing: A) loose bricks. B) a "double diamond." C) attribute diversity. D) layers of advantage. E) buyer power.

D) layers of advantage.

According to Michael Porter's research on the competitive advantage of nations, Switzerland's large synthetic dye industry and the success of the Swiss pharmaceuticals can be explained in terms of: A) factor conditions. B) demand conditions. C) strategy, structure, and rivalry. D) related and supporting industries. E) formation of the European Union.

D) related and supporting industries.

The flagship model is evident in the strategies of all but one of the following businesses: A) Ford. B) Volkswagen. C) IKEA. D) Benetton. E) Microsoft.

E) Microsoft.

The automobile industry has become fiercely competitive on a global basis. The initial success of foreign automakers in the United States was due to all of the following reasons except: A) reluctance of U.S. manufacturers to design high-quality cars. B) inability of U.S. manufacturers to manufacture high-quality cars. C) reluctance of U.S. manufacturers to make inexpensive small cars. D) bigger cars meant bigger profits for U.S. manufacturers. E) U.S. manufacturers did not realize drivers' preferences.

E) U.S. manufacturers did not realize drivers' preferences.

The rivalry between Dell, Hewlett-Packard, Gateway, Compaq, and Apple forces all the players to undertake all of the following except: A) develop new products. B) improve existing products. C) lower costs and prices. D) develop new technologies. E) change the rules of engagement.

E) change the rules of engagement.

The visionary strategy of the Chief Executive Officer of Volkswagen which included switching the German plants entirely to the new model, failed due to all but one of the following reasons: A) resistance on the part of German unions. B) confusion among American dealers about where it was made. C) investment of billions of dollars in Skoda autoworks in Czechoslovakia. D) investment in SEAT in Spain. E) continued demand for Beetle model in the United States.

E) continued demand for Beetle model in the United States.

New entrants to an industry bring all of the following except: A) new capacity. B) desire to gain market share. C) desire to gain market position. D) new approaches to customer needs. E) decline in per-unit product costs.

E) decline in per-unit product costs.

Which of the following is not an element of Rugman and D'Cruz's flagship model? A) key suppliers B) key customers C) key consumers D) selected competitors E) focused differentiation

E) focused differentiation

Caterpillar's attention was focused elsewhere when Komatsu made its first international entry into the Eastern European Market. Based on the strategic intent framework, this is an example of: A) changing the rules. B) collaborating. C) comparative advantage. D) layers of advantage. E) loose bricks.

E) loose bricks.

The characteristics of home demand for a firm's products or services include all but one of the following: A) the composition of home demand. B) the size of the home demand. C) pattern of the growth of the home demand. D) means by which the home demand pushes or pulls foreign markets. E) the size of the competitors share of the home demand.

E) the size of the competitors share of the home demand.

A firm that has the skills to be a "first mover" and arrive first in the market has achieved a know-how advantage.

False

Competition in an industry tends to drive rates of return on invested capital up towards the level of "perfect competition."

False

In the case of Volkswagen, dealers are its key consumers while individual car buyers are its key consumers.

False

It is the number of domestic rivals, intensity of the completion as well as the quality of the competitors that make the difference

False

Michael Porter's five forces model and Rugman and D'Cruz's flagship model are both based on the concept of corporate individualism.

False

Michael Porter's four generic strategies for achieving competitive advantage are product differentiation, price leadership, promotion power, and distribution efficiency.

False

The "layers of advantage" approach to global competitive innovation is based on using know-how developed by other companies.

False

According to D'Aveni, in today's business environment, short product life cycles, short product design cycles, new technologies, and globalization undermine market stability; thereby an acceleration of competitive forces takes place.

Trie

"Switching costs" are one of the barriers to entry in Porter's five forces model.

True

A useful way of gaining insight into competitors is through industry analysis.

True

Analyzed in terms of Porter's five forces model, online music file sharing services represent a threat to the music industry in the form of a substitute product.

True

Apple's success with iPhone prompted Samsung and others to enter the market. This is an example of the "perfect competition."

True

Hypercompetition" is a term that describes a business environment of escalating rivalry characterized by rapid product innovation and short product life cycles.

True

Michael Porter's generic strategy framework is derived from the basic types of competitive advantage and the scope of the target market served.

True

Product differentiation and brand loyalty "raise the bar" for would-be industry entrants who would be required to make substantial investments in research or advertising.

True

Research by Morgan Stanley indicates that the United States is home to more companies with global competitive advantage than any other country.

True

The Swatch Group is the world's second largest watchmaker. This shows that in the low-cost segment, brands compete on price and value.

True