Chapter 6 SUPPORTING THE BUSINESS LEVEL STRATEGY: COMPETITIVE AND COOPERATIVE MOVES

False

14. Bricolage is a situation where a firm faces the same rival in more than one market.

True

15. Mutual forbearance is a situation where rivals do not act aggressively because each recognizes that the other can retaliate in multiple markets.

False

16. Executives routinely use the bricolage strategy to respond to a rival who has introduced a disruptive innovation.

True

17. A fighting brand is a lower-end brand that a firm introduces to try protect the firm's market share without damaging the firm's existing brands.

True

20. Fighting brands prevent devaluation of a firm's established brands.

True

21. The partners in a joint venture share decision making authority, control of the operation, and any profits that the joint venture earns.

False

24. A joint venture is a cooperative arrangement between two or more organizations that does not involve the creation of a new entity.

True

29. Hypercompetition is a situation that involves very rapid and unpredictable moves and countermoves that can undermine competitive advantages.

False

3. Typically, most disruptive innovations are overnight sensations.

a. blue ocean

39. A _____ strategy involves creating a new, untapped market rather than competing with rivals in an existing market. a. blue ocean b. disruptive c. foothold d. fast follower e. didactic

a. blue ocean

41. eBay's invention of online auctions is an example of the _____ strategy. a. blue ocean b. disruptive c. foothold d. hypercompetitive e. fighting brand

e. concept of bricolage.

44. TURISAS, a Finnish rock band, has created a niche for itself by combining heavy metal music with the imagery and costumes of Vikings. This is an example of the: a. blue ocean strategy. b. disruptive strategy. c. concept of fighting brands. d. foothold strategy. e. concept of bricolage.

b. Awareness

45. Which of the following is a factor that determines the likelihood of a firm responding to a competitive move? a. Differentiation b. Awareness c. Focus d. Fragmentation e. Integration

a. Capability

46. _____ is one of the three factors that determines the likelihood of a firm responding to a competitive move. a. Capability b. Differentiation c. Focus d. Fragmentation e. Integration

d. Multipoint competition

47. _____ is a situation where a firm necessarily faces the same rival in more than one market. a. Resource-based rivalry b. Global co-opetition c. Focused rivalry d. Multipoint competition e. Bricolage

d. multipoint competition.

48. Cigarette makers R.J. Reynolds (RJR) and Philip Morris square off not only in the United States but in many countries around the world. This is an example of: a. resource-based rivalry. b. global co-opetition. c. focused rivalry. d. multipoint competition. e. bricolage.

True

5. A foothold is a small position that a firm intentionally establishes within a market in which it does not yet compete.

b. mutual forbearance

51. In the late 1990s, Southwest Airlines and United Airlines competed in some but not all markets. United's announcement of plans to move into some of Southwest's other routes caused Southwest to publicly threaten retaliation. United then backed down and Southwest had no reason to attack. The result was better performance for both firms. This is an example of _____. a. resource-based rivalry b. mutual forbearance c. global co-opetition d. focused rivalry e. hypercompetition

True

6. Instead of trying to outmaneuver its competition, a firm using a blue ocean strategy tries to make the competition irrelevant.

a. strategic alliance

65. A _____ simply involves two or more firms collaborating as opposed to creating a new entity together. a. strategic alliance b. consortium c. tactical association d. cloud system e. joint venture

d. co-location

70. Auto malls that contain several different car dealerships are found in many areas. This is an example of _____. a. co-opetition b. a strategic alliance c. a joint venture d. co-location e. a consortium

False

9. Johannes Gutenberg's printing press is a classic example of the foothold strategy.

True

1. First movers must be willing to commit sufficient resources to follow through on their pioneering efforts.

False

7. Federal Express' invention of the fast-shipping business is an example of the foothold strategy.

True

27. The term co-opetition refers to a blending of competition and cooperation between two firms.

False

8. The blue ocean strategy involves using whatever materials and resources happen to be available as the inputs into a creative process.

b. bricolage

43. The printing press is a classical example of the concept of _____. a. disruptive b. bricolage c. foothold d. hypercompetitive e. fighting brand

a. strategic alliances

66. In January 2011, Merck and PAREXEL International Corporation announced a cooperative arrangement for collaboration on biotechnology efforts known as biosimilars. This arrangement did not involve creation of a new entity. Such cooperative arrangements are examples of _____. a. strategic alliances b. consortiums c. tactical associations d. cloud systems e. joint ventures

a. strategic alliance

67. In June 2011, Twitter and Yahoo! Japan entered into a cooperative arrangement that involves relevant Tweets appearing within various functions offered by Yahoo! Japan. This arrangement did not involve creation of a new entity. Such a cooperative arrangement is an example of a _____. a. strategic alliance b. consortium c. tactical association d. cloud system e. joint venture

d. co-location occurs.

68. When goods and services offered by two or more organizations under different brands are stationed very close to each other: a. hypercompetition always takes place. b. a consortium is formed. c. co-opetition occurs. d. co-location occurs. e. a joint venture is formed.

d. co-location

69. In many cities theatres and art galleries are clustered together in one neighborhood. This is an example of _____. a. co-opetition b. a strategic alliance c. a joint venture d. co-location e. a consortium

d. co-opetition

72. Ray Noorda, the founder of software firm Novell, coined the term _____. a. co-location b. frienemies c. tactical alliance d. co-opetition e. friendly fire

c. first-mover

31. A _____ advantage exists when making the initial move into a market allows a firm to establish a dominant position that other firms struggle to overcome. a. co-opetitive b. bricolage c. first-mover d. hypercompetitive e. blue ocean

e. first mover

32. Apple's creation of a user-friendly small computer in the early 1980s helped fuel a reputation for creativity and innovation that persists today. This is an example of a _____ strategy. a. co-opetitive b. foothold c. bricolage d. fighting brand e. first mover

e. first mover

33. Genentech's early development of biotechnology allowed it to overcome many of the pharmaceutical industry's traditional entry barriers (such as financial capital and distribution networks) and become a profitable firm. This is an example of a _____ strategy. a. co-opetitive b. foothold c. bricolage d. fighting brand e. first mover

False

10. The concept of bricolage stresses on firms using innovative strategies for competing in existing markets.

True

11. Executives apply the concept of bricolage when they combine ideas from existing businesses in order to create a new business.

True

12. The three factors that determine the likelihood of a firm responding to a competitive move are awareness, motivation, and capability.

True

13. If there is a long delay between a competitor's attack and a firm's response, this generally provides the attacker with an edge.

False

18. Cutting prices to match a rival's lower cost products can be effective in the long-term.

False

19. The bricolage strategy, that many executives adopt to compete against a rival, may devalue a firm's brands.

True

2. First moves that build on strategic resources such as patented technology are difficult for rivals to imitate and thus are likely to succeed.

False

22. A strategic alliance is a cooperative arrangement that involves two or more organizations each contributing to the creation of a new entity.

True

23. A strategic alliance is a cooperative arrangement between two or more organizations that does not involve the creation of a new entity.

True

25. Co-location occurs when goods and services offered under different brands are located very close to each other.

False

26. The bricolage strategy refers to a blending of competition and cooperation between two firms.

False

28. The blue ocean strategy involves blending of competition and cooperation between two firms.

False

30. Co-opetition is a situation that involves very rapid and unpredictable moves and countermoves that can undermine competitive advantages.

a. The first mover bears the costs of developing the product and educating customers.

34. Which of the following is true about the first mover strategy? a. The first mover bears the costs of developing the product and educating customers. b. Owing to its novel and unique product, a first-mover can be sure that customers will embrace its offering. c. First movers are likely to succeed even without committing resources to follow through on their pioneering efforts. d. First moves that build on strategic resources are easy for rivals to imitate. e. First movers typically enjoy an advantage over rivals for about five years.

b. disruptive

35. A _____ innovation is an innovation that conflicts with, and threatens to replace, traditional approaches to competing within an industry. a. blue ocean b. disruptive c. foothold d. first mover e. didactic

d. Disruptive innovations conflict with, and threaten to replace, traditional approaches to competing within an industry.

36. Which of the following is true about disruptive innovations? a. Most disruptive innovations are overnight sensations. b. Fast followers can easily imitate strategic resources based on disruptive innovations. c. Typically, a large group of customers embrace a disruptive innovation as it is launched. d. Disruptive innovations conflict with, and threaten to replace, traditional approaches to competing within an industry. e. Executives must have sufficient resources at hand to cope with the initial burst of demand for disruptive innovations.

d. It involves a firm intentionally establishing a small position within a market in which it does not yet compete.

37. Which of the following best describes the foothold strategy? a. It refers to the idea of creating a new, untapped market rather than competing with rivals in an existing market. b. It involves combining ideas from existing businesses in order to create a new business. c. It involves introducing a lower-end brand to protect the firm's market share without devaluating the firm's existing brands. d. It involves a firm intentionally establishing a small position within a market in which it does not yet compete. e. Such a strategy conflicts with, and threatens to replace, traditional approaches to competing within an industry.

c. foothold

38. When IKEA enters a new country, it opens just one store. This store is then used as a showcase to establish IKEA's brand. Once IKEA gains brand recognition in a country, more stores are established. This is an example of the _____ strategy. a. blue ocean b. disruptive c. foothold d. bricolage e. first mover

True

4. Executives who are deciding whether to pursue a disruptive innovation must first make sure that their firm can sustain itself during an initial period of slow growth.

a. A firm using a blue ocean strategy tries to make the competition irrelevant.

40. Which of the following best describes the blue ocean strategy? a. A firm using a blue ocean strategy tries to make the competition irrelevant. b. It involves combining ideas from existing businesses in order to create a new business. c. It involves introducing a lower-end brand to protect the firm's market share without devaluating the firm's existing brands. d. It involves a firm intentionally establishing a small position within a market in which it does not yet compete. e. Such a strategy conflicts with, and threatens to replace, traditional approaches to competing within an industry.

c. Executives apply the concept of bricolage when they combine ideas from existing businesses in order to create a new business.

42. Which of the following is true about a firm following the concept of bricolage? a. It is a small position that a firm intentionally establishes within a market in which it does not yet compete. b. It is a lower-end brand that a firm introduces to try to protect the firm's market share without devaluating the firm's existing brands. c. Executives apply the concept of bricolage when they combine ideas from existing businesses in order to create a new business. d. It refers to an innovation that conflicts with, and threatens to replace, traditional approaches to competing within an industry. e. It refers to a strategy in which a firm forms a cooperative arrangement with another firm to ward off potential competition.

d. multipoint competition.

49. Kellogg's and General Mills compete fiercely for the breakfast cereal market not only in the United States but in many countries around the world. This is an example of: a. resource-based rivalry. b. global co-opetition. c. focused rivalry. d. multipoint competition. e. bricolage.

a. It is a situation where a firm faces the same rival in more than one market.

50. Which of the following best describes multipoint competition? a. It is a situation where a firm faces the same rival in more than one market. b. It is a situation where rivals launch lower-end brands to protect devaluation of their established brands. c. It is a situation where competing firms form a cooperative arrangement to ward off third-party competition. d. It is a situation where rivals do not act aggressively because each recognizes that the other can retaliate in multiple markets. e. It is a situation where rivals form a strategic alliance without forming a new entity to deal with third-party competition.

d. It is a situation where rivals do not act aggressively because each recognizes that the other can retaliate in multiple markets.

52. Which of the following best describes mutual forbearance? a. It is a situation where a firm faces the same rival in more than one market. b. It is a situation where rivals launch lower-end brands to protect devaluation of their established brands. c. It is a situation where competing firms form a cooperative arrangement to ward off third-party competition. d. It is a situation where rivals do not act aggressively because each recognizes that the other can retaliate in multiple markets. e. It is a situation where rivals form a strategic alliance without forming a new entity to deal with third-party competition.

b. Firms engaged in co-opetition can be described as "frienemies" - part friends and part enemies.

75. Which of the following is true about co-opetition? a. The term co-opetition was coined by Bill Gates, the founder of software firm Microsoft. b. Firms engaged in co-opetition can be described as "frienemies" - part friends and part enemies. c. Firms engaged in co-opetition compete in activities located far in the value chain from customers. d. It views competition and cooperation as two separate and distinct processes. e. Firms engaged in co-opetition must cooperate in activities that occur close to customers.

e. Focusing on traditional mode of business

53. Fresh Mornings, a breakfast chain, is known for its old-style potatoes, ham, and egg sandwiches. A rival introduces a new breakfast concept with exotic fruits and sandwiches that customers can make themselves, that conflicts with the industry's current competitive practices. The owners of Fresh mornings realize that they may lose some customers to this new concept. But instead of competing by offering the new breakfast concept that the rival has introduced, they decide to stick to and to market their old-style potatoes, ham, and egg sandwiches, which they are famous for. Which of the following responses are they following? a. Forming a joint venture with another firm b. Offering lower cost products or services c. Entering a strategic alliance with a global player d. Developing better product differentiation e. Focusing on traditional mode of business

a. Focusing on traditional mode of business

54. When online trading emerged in the late 1990s, A.G. Edwards avoided online trading because personal relations with brokerage clients are central to the firm's strategy. Which of the following responses of firms to disruptive innovations does this example illustrate? a. Focusing on traditional mode of business b. Offering lower cost products or services c. Entering a strategic alliance with a global player d. Developing better product differentiation e. Matching the competitors' move

e. Matching the competitors' move

55. Which of the following responses of firms to disruptive innovations carries with it the risk of cannibalization of a firm's traditional business? a. Focusing on traditional mode of business b. Offering lower cost products or services c. Entering a strategic alliance with a global player d. Developing better product differentiation e. Matching the competitors' move

c. fighting

56. A _____ brand is a lower-end brand that a firm introduces to try protect the firm's market share without damaging the firm's existing brands. a. mass b. value c. fighting d. defender e. niche

a. Firms launch fighting brands to protect their market shares.

57. Which of the following is true about a fighting brand? a. Firms launch fighting brands to protect their market shares. b. A fighting brand is usually a higher-end brand. c. Firms fix prices of a fighting brand above the price of their established brands. d. Firms launch fighting brands during times of economic boom. e. A fighting brand leads to devaluation of a firm's established brands.

c. fighting

58. When threatened with cheaper microprocessors from firms like AMD, Intel launched Celeron for retaining the lower-end of the chip market without devaluing its existing brand, Intel. Celeron is an example of a _____ brand. a. mass b. value c. fighting d. defender e. niche

e. joint venture

59. A _____ is a cooperative arrangement that involves two or more organizations each contributing to the creation of a new entity. a. strategic alliance b. consortium c. tactical association d. cloud system e. joint venture

e. is a cooperative arrangement that involves two or more organizations each contributing to the creation of a new entity.

60. A joint venture: a. occurs when goods and services offered by two or more organizations under different brands are located very close to each other. b. is a cooperative arrangement that involves two or more organizations sharing only control of the operations. c. is a cooperative arrangement between two or more organizations that does not involve the creation of a new entity. d. refers to a blending of competition and cooperation between two firms. e. is a cooperative arrangement that involves two or more organizations each contributing to the creation of a new entity.

e. joint venture

61. The partners in a _____ share decision making authority, control of the operation, and profits earned. a. tactical alliance b. consortium c. strategic association d. cloud system e. joint venture

e. joint venture

62. Exom and Royshe are two oil and natural gas exploration and production companies. They created a new entity, CalEner, for oil exploration in California. The two parent companies remained separate. CalEner is an example of a _____. a. tactical alliance b. consortium c. strategic association d. cloud system e. joint venture

a. strategic alliance

63. A _____ is a cooperative arrangement between two or more organizations that does not involve the creation of a new entity. a. strategic alliance b. consortium c. tactical association d. cloud system e. joint venture

c. is a cooperative arrangement between two or more organizations that does not involve the creation of a new entity.

64. A strategic alliance differs from a joint venture in that a strategic alliance: a. occurs when goods and services offered by two or more organizations under different brands are located very close to each other. b. is a cooperative arrangement that involves two or more organizations sharing only control of the operations. c. is a cooperative arrangement between two or more organizations that does not involve the creation of a new entity. d. refers to a blending of competition and cooperation between two firms. e. is a cooperative arrangement that involves two or more organizations each contributing to the creation of a new entity.

a. occurs when goods and services offered by two or more organizations under different brands are stationed very close to each other.

71. Co-location differs from co-opetition in that co-location: a. occurs when goods and services offered by two or more organizations under different brands are stationed very close to each other. b. refers to a cooperative arrangement that involves two or more organizations sharing only control of the operations. c. refers to a cooperative arrangement between two or more organizations that does not involve the creation of a new entity. d. occurs when there is a blending of competition and cooperation between two closely located firms. e. refers to a cooperative arrangement that involves two or more organizations each contributing to the creation of a new entity.

d. co-opetition

73. The term _____ refers to a blending of competition and cooperation between two firms. a. co-location b. joint venture c. tactical alliance d. co-opetition e. friendly fire

d. co-opetition

74. NEC (a Japanese electronics company) has three different relationships with Hewlett-Packard Co.: customer, supplier, and competitor. Some units of each company work cooperatively with the other company, while other units are direct competitors. This is an example of _____. a. co-location b. joint survival c. a joint venture d. co-opetition e. a friendly alliance