Strategy Chapter 5

the prices of component parts tends to rise rapidly.

. cycle markets need to profit quickly from an innovative product for all of the following reasons EXCEPT

attempts to provide a product with greater customer value than the first mover's product.

A second mover

True

Two firms, such as Fed Ex and UPS that have similar resources and common markets would be direct and mutually acknowledged competitors.

False

Two firms, such as a small local, family-owned Italian restaurant and Olive Garden share few markets and have little similarity in resources, but are nonetheless direct and mutually acknowledged competitors.

False

Under the framework of competitive action and response, "ability" refers to an attacking or responding firm's knowledge of the competitive market characteristics.

False

Unlike fast-cycle markets, the struggle for market share in standard-cycle markets is moderate.

True

Firms with high market commonality and highly similar resources are direct and mutually acknowledged competitors.

firms that take an initial competitive action.

First movers are

False

First movers can gain a sustained competitive advantage when they reduce their costs through reverse engineering.

organizations that serve a mass market.

Goods or services in standard-cycle markets reflect

Disney's cartoon characters became widely perceived as old-fashioned and unappealing.

. The ability of Disney to maintain its competitive advantage through proprietary rights to its characters would be severely weakened if

False

"Competitive dynamics" indicates that firms and their strategic actions are independent.

fast-cycle

A company in a _________ industry is LEAST likely to make heavy use of patents and copyrights.

strategic; tactical

A competitive action can be one of two types, either ________ or ________ .

True

A firm can predict that a competitor whose products suffer from poor quality is likely to be less aggressive in its competitive actions until those quality problems are corrected.

the attack is by a price predator.

A firm is likely to respond to an attack by a competitor in all of the following situations EXCEPT when

large size.

A firm that is LEAST likely to launch competitive actions is one that has

False

A firm with a reputation as a price predator (an actor that frequently reduces prices to gain or maintain market share) generates few responses to its pricing tactical actions.

True

A strategy's success is determined not only by the firm's initial competitive actions but also by how well it anticipates competitors' responses to them and by how well the firm anticipates and responds to its competitors initial actions.

False

A tactical competitive action involves a significant commitment of specific and distinctive organizational resources.

lower its prices

Akamai Technologies is a dominant player in the content delivery network (CDN) market. Akamai is not very diversified (i.e., is dependent on the CDN market). If rival CDN providers such as Limelight Networks and Level 3 Communications lower their basic CDN service prices, what would be Akamai's likely response?

can launch competitive actions more quickly.

All competitive advantages do not accrue to large-sized firms. A major advantage of smaller firms is that they

True

An organization with high profitability, such as Walmart, will be able to develop high organizational slack.

fast-cycle

An organization's loyalty to its own product is a competitive disadvantage in a(n) __________ market.

True

Awareness tends to be greatest when firms have highly similar resources and compete in multiple markets.

False

Bayou Belle Water markets water drawn only from a single artesian well in Southern Louisiana. It has a loyal following in its region. Since Bayou Belle markets the water, just as Coca-Cola, Nestle, and PepsiCo do, Bayou Belle has high resource similarity with these international firms.

standard-cycle market.

Because Coca-Cola, Nestle, and PepsiCo all sell a product (bottled water) that is essentially the same and all three giant companies are engaged in battles for market share using incremental changes in their products and seeking loyalty to brand names, it is most likely that the bottled water market is a(n)

False

Boeing's decision to commit the resources required to build the super-efficient 787 midsized jetliner is an example of a tactical action.

market commonality; resource similarity

Both ________ and ___________ affect the awareness and motivation of a firm to undertake actions and responses.

Bubble-Up's smaller size may make it more flexible in introducing innovations than Mega-Toy.

Bubble-Up, Inc., is a small manufacturer of educational toys for children under age 10. It has co-existed with three other competitors in the educational toy industry for over 20 years, each of them maintaining a stable market share. There is a wide-spread rumor that Mega-Toy, Inc., the market leader in the broad children's toy market, has decided to target educational toys. Which of these statements is most likely TRUE?

True

Carl has just graduated with a management degree. He has a good understanding of his personal strengths and weaknesses and knows he would fit best in a stable organizational environment. In his job search, Carl should target firms in slow-cycle markets.

True

Coca Cola and PepsiCo compete across a number of products (e.g., soft drinks, bottled water) and geographic markets (U.S. and foreign markets) indicating that both companies have market commonality.

standard-cycle market.

Competition between candy makers (e.g., Hershey, Mars, Cadbury, Nestle, and Godiva) where firms package design (including package downsizing) and ease of availability is characteristic of a(n)

total set of actions and responses taken by all firms competing within a market.

Competitive dynamics refers to the

Business Level

Competitive rivalry has the most effect on the firm's strategies than the firm's other strategies.

False

Competitive rivalry is the contest to be the first mover in an international market.

True

Competitive rivalry is the set of competitive actions and responses that occur among firms as they maneuver for an advantageous market position.

market leaders.

Competitors are more likely to respond to competitive actions that are taken by

standard-cycle markets.

Consumer goods producers are innovating in terms of healthy products. This type of incremental innovation is typical of

True

Disney is an example of a firm in a slow-cycle market because its animated characters are shielded from imitation by copyrights and trademarks.

False

Even if the effects of a competitor's strategic action on the focal firm are significant (e.g., loss of market share), little response is likely from that firm.

False

Extensive market commonality guarantees intense competition in an industry.

True

Fast-cycle markets are characterized by "generational products," which start out with a substantial technological advance in the performance of a product category followed by incremental technological advances as new generations of products are introduced.

False

Firms are likely to imitate the actions of a competitor that is noted for risky, complex, and unpredictable behavior because this is a way to imitate unobservable core competencies.

True

Firms operating in the same market, offering similar products and targeting similar customers are competitors.

True

Firms that are typically late movers usually have little organizational slack.

. high; high

Firms with _________ market commonality and ____________ resource similarity are direct and mutually acknowledged

delay responding to competitive actions.

Firms with few competitive resources are more likely to

Ahrens will respond aggressively because of the high multimarket contact between Hilliard and Ahrens.

Hilliard Pharmaceuticals and Ahrens Vitamins, Inc., have high market commonality, both geographically and in the market segments in which they compete. Hilliard, the number two firm in the industry, has undertaken a major strategic attack upon Ahrens, the market leader. Which of the following statements is most likely to be TRUE?

less competitive rivalry.

In general, compared with firms which compete in only one market, among firms which face one another in multiple markets there is

compete against the firm in multiple markets.

In general, firms are more aware of competitors who have similar resources and who

True

In general, strategic actions elicit fewer competitive responses than do tactical actions.

rapid and continuous product introductions.

In order to compete effectively, standard-cycle firms need all of the following EXCEPT

decreased average profitability across the industry.

Intensified rivalry within an industry results in

True

It is more likely that locally owned, one-location cafes in a small town will respond more rapidly to tactical actions by each other than they will to strategic actions by the Burger King franchise that has recently moved to their town.

True

Large firms with significant slack resources (i.e., are able to launch a greater number of competitive actions) but who remain flexible and act like small firms (i.e., are able to launch a variety of actions) will be more successful against rivals.

respond to a competitive action a significant amount of time after the first mover's action and the second mover's response.

Late movers are those firms that

slow-cycle markets, because of the ability to shelter the company from imitation of its competitive advantage.

Lawsuits over patent and copyright infringements are more common and intense in

respond aggressively because of high market dependence.

Lobelia's Nursery and Garden Resource Center has long provided high-quality, typical types of seasonal bedding plants to customers in the Mobile, Alabama, metropolitan area. It has traditionally competed with the other plant nurseries within a 50-mile radius of Mobile. Recently, Lobelia has opened a branch in Fairfax, Virginia. Lobelia's research shows that most Fairfax nurseries have only one location. Lobelia can expect the local Fairfax nurseries to

True

Market commonality is concerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each.

True

Mighty Mike's, a manufacturer of power tools for the home hobbyist, has seen its main competitor, MyTools, bring out a line of power tools that are smaller sized, lighter weight, and suitable for women and older hobbyists who have weaker hands than the typical male workshop hobbyist. Mighty Mike is waiting to see whether MyTool's new line is a success. Mighty Mike could be classified as a second mover.

Compete against each other in several geographic or product markets

Multimarket competition occurs when firms

tactical actions than to strategic actions.

On the whole there are more competitive responses to

True

Patent laws and regulatory requirements such as required FDA (Food and Drug Administration) approval to launch new products shield pharmaceutical companies' positions in this slow-cycle market.

initiate fewer competitive actions; the quality problems are corrected.

Quality affects competitive rivalry because a competitor whose products suffer from poor quality likely will _____________ until

False

Quality begins at the bottom of the organization where employees must create values for quality that permeate the entire organization.

meeting or exceeding customer expectations in the goods and/or services offered.

Quality is

are probably not engaged in intense competitive rivalry.

Rapid-Built Homes specializes in low-cost prefabricated, modular homes that can be erected in a matter of days anywhere in the country. Rapid-Built focuses on entire subdivisions of homes developed by real estate speculators. ModernModular Homes (ModMod) specializes in modular homes designed by architects, which can be built anywhere in the country. The buyers usually build the home themselves from kits on their own lots. ModMod sells fewer than 100 house kits per year. ModMod is run by two professors of architecture as a sideline business. According to the "Framework of Competitive Analysis," we can say that Rapid-Built and ModMod

True

Research suggests that a firm with greater multimarket contact is less likely to initiate an attack, but more likely to respond aggressively when attacked.

less; more

Research suggests that a firm with greater multimarket contact is likely to respond aggressively when attacked.

fast-cycle markets.

Reverse engineering is characteristic of

slow-cycle

Sustained competitive advantage is most achievable in a ____________ market.

believes he has placed his firm in a slow-cycle industry where concerns about protecting unique competencies dominate concerns about market share.

The CEO of the Wholesome Food retail grocery chain, which specializes in organic and natural produce and meat, has stated, "The key to success is to find your niche and focus on it, regardless of what anyone else does." The CEO

high degree of risk.

The chief disadvantage of being a first mover is the

standard-cycle

The competitive actions and responses in _________ markets are designed to seek large market shares, to gain customer loyalty through brand names, and to carefully control the firm's operations in order to consistently provide the same positive experience for customers.

standard-cycle.

The flat-panel television market where prices have come down and competition has become more stable is best characterized as

slower

The larger the resources of a firm taking a competitive action compared with the resources of the other firms in the industry, the_______ the response will be of these other firms.

True

The more dependent a firm is on its market, the more aggressively it will defend it from another competitor.

False

The need for quality products and services is so high that quality alone can assure a firm that it will achieve strategic competitiveness and earn above-average returns.

True

The satellite dish at Faye's weekend home has malfunctioned. When she calls to have the dish repaired, the service representative tells her that the dish is obsolete and that parts for it are no longer made. Faye must replace the old dish with a new dish. This is an example of lack of firm loyalty to a product in a fast-cycle market.

True

To be a first mover, the firm must have readily available resources to invest in R&D as well as to rapidly and successfully produce and market a stream of innovative products.

standard; fast

Traditionally, the music industry signed multi-year contracts with artists and sold copyright protected music through established distribution channels. A shift to the digital format and the rise of Internet technology has resulted in the sharing of music over peer-to-peer networks, a practice the industry called "piracy." In recent years, the music industry has seen a rapid decline in the number of CDs sold. At the same time, the ownership of the distribution rights of musical content under copyright laws remains clear. Attempts at innovation by individual record labels to offer music as direct downloads to consumer are quickly copied by other labels. Based on these factors, the best assessment is that the music industry has shifted from a to a cycle market.

False

Walmart has recently opened a store in Alsatia, Missouri. Several local small retailers have decided that choosing not to respond to Walmart's competitive actions is a viable long-term option, because although the companies have high market commonality they have little resource similarity. These small retailers are correct in their decision.

slow; lacked the ability to marshal resources.

Walmart initially used a focused cost-leadership strategy to compete only in small communities by using sophisticated logistics systems and efficient purchasing practices to gain a competitive advantage. The response of local competitors was ___________ because they

False

Walmart's aggressive pricing strategy is a strategic action that plays a major role in how it competes.

proprietary rights

Walt Disney's focus on _________ is typical of a slow-cycle market.

IBM

Which company below committed significant resources to enter the information services market and, given its success, was imitated by other competitors?

cell phone provider

Which industry can be LEAST described as a slow-cycle market?

Southwest's advantage lies in its ability to "think small."

Which of the following is TRUE of Southwest Airlines?

Walmart has an unusual amount of flexibility for a large firm.

Which of the following is TRUE of Walmart?

Entry into the European market by Home Depot

Which of the following is an example of a strategic action?

Netflix beginning to offer music DVDs in addition to movies

Which of the following is an example of a tactical action?

Entering a new foreign market

Which of the following is the most strategic action by Walmart?

First movers have lower survival rates than second and late movers.

Which of the following statements is FALSE?

a company that specializes in making replacement tiles for the space shuttle

Which organization has the highest market dependence?

small, family-owned Italian restaurant; Olive Garden

Which pair of firms has the LEAST resource similarity?

lack credibility among customers.

Without quality, the firm's products

High market commonality; high resource similarity

________ and _________ competition. describe the situation in which organizations are direct competitors and are fully aware of the

Fast-cycle

_________ markets are often described as volatile and innovative.

Motivation

_________ relates to the gains or losses a firm will experience if it attacks a rival or responds to an attack by a rival.