Chapter 3 - Competitor Analysis

In conducting a competitor analysis, which of the following is not relevant: a. Accounting methodologies b. Market share c. Image d. Positioning strategy e. Objectives and commitments

Answer: Accounting methodologies. Competitor analysis consists of an analysis of a competitor's: image and positioning; objectives and commitment; current and past strategies; organization and culture; exit barriers; strengths and weaknesses; size, growth and profitability,

A strategic group is a customer segment that is strategically important to the business.

Answer: False. A strategic group is a group of firms that over time pursue similar competitive strategies, have similar characteristics, and have similar assets and competencies.

According to the book, mobility barriers are barriers inhibiting the movement of a person from one social class to another.

Answer: False. Each strategic group has mobility barriers that inhibit or prevent businesses from moving from one strategic group to another.

The competitive strength grid lists the product-markets served by each competitor and identifies for each product market the strengths of each competitor.

Answer: False. The competitive strength grid is a scale of the major competitors based on assets and competencies. It serves to summarize the position of the competition with respect to assets and competencies.

The value chain analysis is based upon the cost-benefit of the product as perceived by the customer.

Answer: False. The value chain is a tool to identify the value-add components of competitor. A business's value chain consists of two types of value-creating activities that should be considered in assessing a competitor - support activities and primary activities.

The eight dimensions of competitor analysis include: current and past strategies; cost structure; exit barriers; objectives and commitment; size, growth and profitability; ______ and ______, ________, and ________; and _____ and _________.

Answer: Image and positioning, organization and culture, strengths and weaknesses. See page 65-68 for a discussion on understanding competitor analysis.

Potential market entrants might use all but one of the following to enter a market: a. Market expansion b. Market penetration c. Product expansion d. Backward/forward integration e. Export assets or competencies

Answer: Market penetration. A company practicing market penetration is already in the market (market penetration involves increasing customer usage in an existing market).

Nintendo did not try to compete with Sony's in terms of high tech digital graphics.

Answer: True

One of the benefits of competitor analysis is that an understanding of the current strategy and the strengths and weaknesses of a competitor can suggest opportunities and threats that will merit a response.

Answer: True.

The competitor analysis in almost all cases will benefit from considering both direct and indirect competitors.

Answer: True. By explicitly considering indirect competitors, the strategic horizon is expanded, and the analysis more realistically mirrors what the customer sees.

One way to identify competitors is to group competitors according to the degree they compete for a buyer's choice.

Answer: True. There are two ways to group competitors; one based on the customer's perspective and the other is based on competitor's strategies.

In addition to current competitors, it is important to consider potential market entrants such as firms that might engage in all but one of the following: a. Retaliatory or defensive strategies b. Market expansion c. Forward integration d. Low-cost strategies e. Backward integration

Answer: d Low-cost strategies. Potential market entrants might engage in the following: market expansion, product expansion, backward integration, forward integration, the export of assets, and competencies or retaliatory or defensive strategies.

Exit barriers are crucial to a firm's ability to exercise an exit alternative. Which of the following is not an exit barrier? a. Managerial pride b. Government or social barriers c. Specialized assets d. High market growth rate e. Fixed costs

Answer: d is the answer. High growth markets in most cases would not be an exit barrier. Exit barriers include: specialized assets, fixed costs, relationships with other business units, government or social barriers, and managerial pride. See page 49 for a discussion on exit barriers.

In completing a checklist on competitor assets and competencies, some of the areas to be considered include all but one of the following: a. Company culture b. Innovation c. Manufacturing d. Management e. Strategic programming

Answer: e) Strategic programming. Analysis of a competitor's strengths and weaknesses include: innovation, manufacturing, finance-access to capital, management, marketing, and customer base.

Some of the benefits of strategic groups include all but one of the following: a. Makes the process of competitor analysis more manageable. b. Refines the strategic investment decision. c. Includes a set of mobility barriers. d. They will be affected by and react to industry developments in similar ways. e. They produce strategic options.

Answer: e) they produce strategic options. Strategic groups do not themselves produce strategic options because strategic groups are tools used by the strategist to group similar competitors for analysis purposes.