Chapter 5

First movers are:

firms that take an initial competitive action.

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?

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

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?

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

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

Disney's cartoon characters became widely perceived as old-fashioned and unappealing86. Lawsuits over patent and copyright infringements are more common and intense in~slow-cycle markets, because of the ability to shelter the company from imitation of its competitive advantage.

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

Entering a new foreign market

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

Entry into the European market by Home Depot

_________ markets are often described as volatile and innovative.

Fast-cycle

Which of the following statements is FALSE?

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

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

High market commonality; high resource similarity

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

IBM

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

Motivation

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

Netflix beginning to offer music DVDs in addition to movies

Which of the following is TRUE of Southwest Airlines?

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

Which of the following is TRUE of Walmart?

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

Which organization has the highest market dependence?

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

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

are probably not engaged in intense competitive rivalry.

A second mover

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

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:

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

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

business-level

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

can launch competitive actions more quickly.

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

cell phone provider

Multimarket competition occurs when firms

compete against each other in several geographic or product markets.

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

compete against the firm in multiple markets.

Intensified rivalry within an industry results in

decreased average profitability across the industry.

Firms with few competitive resources are more likely to:

delay responding to competitive actions.

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

fast-cycle

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

fast-cycle

Reverse engineering is characteristic of

fast-cycle markets.

The chief disadvantage of being a first mover is the:

high degree of risk.

Firm ______ market commonality and ______ resource similarity are direct competitors and mutually acknowledged.

high; high

Quality affects competitive rivalry because a competitor whose products suffer from poor quality likely will_____________ until ____________.

initiate fewer competitive actions; the quality problems are corrected.

Without quality, the firm's products:

lack credibility among customers.

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

large size.

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

less competitive rivalry.

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

less; more

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?

lower its prices

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

market commonality; resource similarity

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

market leaders.

Quality is:

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

Goods or services in standard-cycle markets reflect

organizations that serve a mass market.

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

proprietary rights

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

rapid and continuous product introductions.

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 a. be unmotivated to respond because their market position is not threatened by a new competitor from out-of-town.

respond aggressively because of high market dependence.

Late movers are those firms that

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

Sustained competitive advantage is most achievable in a market.

slow-cycle

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 ________

slow; lacked the ability to marshal resources.

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.

slower

Which pair of firms has the LEAST resource similarity?

small, family-owned Italian restaurant; Olive Garden

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

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

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)

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)

standard-cycle market.

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

standard-cycle.

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.

standard; fast

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

strategic; tactical

On the whole there are more competitive responses to:

tactical actions than to strategic actions.

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

the attack is by a price predator.

Companies in fast-cycle markets need to profit quickly from an innovative product for all of the following reasons EXCEPT:

the prices of component parts tends to rise rapidly.

Competitive dynamics refers to the

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