Chapter 5 Strat management

In the context of competitive rivalry, what is an actor's reputation? a. The perceived level of quality customer's associate with the firm's goods or service b. A positive or negative quality attributed to one's rival based on previous competitive behavior c. The willingness of capital markets to invest more in a firm based on past performance d. The degree of loyalty both internal and external stakeholders demonstrate to the firm

A positive or negative quality attributed to one's rival based on previous competitive behavior

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? a. Ahrens will not respond aggressively since this is a strategic move and not a tactical action. b. As the market leader, Ahrens has little to fear from an attack by Hilliard and will not expend organizational slack on a major response. c. Ahrens will respond aggressively because of the high multimarket contact between Hilliard and Ahrens. d. Ahrens will respond after a long delay as the nutrition supplement industry is a slow-cycle industry.

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 widespread rumor that Mega-Toy, Inc., the market leader in the broad children's toy market, has decided to target educational toys. Which of the following statements is MOST likely true? a. The owners of Bubble-Up are unconcerned about Mega-Toy's entry to the market because of the resource dissimilarity between the firms. b. Bubble-Up's greater organizational slack will allow it to aggressively attack Mega-Toy. c. Bubble-Up's smaller size may make it more flexible in introducing innovations than Mega-Toy. d. Competitive rivalry will not increase for Bubble-Up because Mega-Toy is not dependent on the educational toy market.

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

Which of the following organizations has the highest market dependence? Chain of rapid-service oil change shops Manufacturer of chemicals for the international pharmaceutical industry Regional department store having 26 locations in the Northwest Company that specializes in making replacement tiles for the space shuttle

Company that specializes in making replacement tiles for the space shuttle

The ability of Disney to maintain its competitive advantage through proprietary rights to its characters would be severely weakened if: a. theme parks with alternative cartoon characters were built in large numbers. b. numerous lawsuits against copyright thieves tainted the reputation of the company. c. Disney attempted to move beyond its traditional industry. d. Disney's cartoon characters became widely perceived as old-fashioned and unappealing.

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

Which of the following steps, if taken by Walmart, would be characterized as a strategic rather than tactical action? a. Aggressive pricing to ensure it is a price leader b. Aggressively pricing toys and electronics during the holiday season c. Aggressively pricing school-related items in the back-to-school season d. Entering a new foreign market

Entering a new foreign market

Which of the following is an example of a strategic action? A "two movies for the price of one" campaign by Redbox Use of product coupons by a local grocer Entry into the European market by Home Depot Fare increases by Southwest Airlines

Entry into the European market by Home Depot

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

False

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

False

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

False

By definition, to be engaged in multimarket competitions, two or more firms must compete against each other in more than one product area and in multiple geographic markets.

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.

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.

False

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

False

Quality begins in marketing an organization where employees must create a perceived value of quality

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.

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

Walmart 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.

False

Which of the following statements is false? First movers tend to take higher risks than second and later movers. First movers tend to have significantly higher revenues than second movers. First movers have lower survival rates than second and late movers. First movers tend to have more organizational slack than later movers.

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 High market commonality; low resource similarity Low market commonality; high resource similarity Low market commonality; low resource similarity

High market commonality; high resource similarity

Which of the following is true of a firm that has high market dependence? Its competitive advantages are more sustainable It is likely to respond strongly to attacks threatening its market position. Its position helps protect it from attacks by competitors. It will respond quickly to any threat to its position.

It is likely to respond strongly to attacks threatening its market position

__________ relates to the gains or losses a firm expects to experience if it attacks a rival or responds to an attack by a rival. Motivation Awareness Responsiveness Ability

Motivation

Which of the following is an example of a tactical action? a. Walmart's launch of Sam's Club stores b. Continental Airlines' exit from a hub airport in Denver c. Netflix beginning to offer music in addition to movies d. Dell's launch of a new line of high performance, custom-made PCs

Netflix beginning to offer music in addition to movies

While no firm, or company wants a product to break, that does happen. In customer feedback surveys, ChirOpt customers have indicated that when they have a product that breaks, they are pleased with both the ease and the speed of the repair. This reflects success in which product quality dimension? a. Performance b. Consistency c. Durability d. Serviceability

Serviceability

Which pair of firms has the LEAST resource similarity? a. Small, family-owned Italian restaurant; Olive Garden b. Target; Walmart c. HP; Dell d. FedEx; UPS

Small, family-owned Italian restaurant; Olive Garden

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

True

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.

True

Awareness tends to be greatest when firms have highly similar resources and compete in multiple 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 the companies have market commonality.

True

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

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

True

Firms that are typically late movers usually have little organizational slack

True

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

True

In a slow-cycle market, such as that experienced in the pharmaceutical industry, a firm is most vulnerable to a counterattack when a drug's patent expires

True

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

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 that remain flexible and act like small firms (i.e., are able to launch a variety of actions) will be more successful against rivals

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, introduce 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's is waiting to see whether MyTools' new line is a success. Mighty Mike's could be classified as a second mover

True

Patent laws and regulatory requirements in the United States requiring FDA (Food and Drug Administration) approval to launch new products shield pharmaceutical companies' positions

True

Product quality dimensions in which customers commonly express an interest include performance, features, conformance, and aesthetics

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.

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

The set of both competitive actions and responses that a firm takes to build or defend its competitive advantages and to improve its position in the market makes up competitive behavior.

True

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

True

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

True

When two firms' tangible and intangible resources compare favorably in terms of both type and amount, they are said to have resource similarity

True

Without quality, the firm's products a. can compete effectively on the basis of low price. b. lack credibility among customers. c. must be exported to developing countries, because they are not competitive in the United States or developed countries. d. are associated with predatory competition.

are associated with predatory competition

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, Rapid-Built and ModMod: are direct mutually acknowledged competitors. have high resource similarity. have high market commonality. are probably not engaged in intense competitive rivalry.

are probably not engaged in intense competitive rivalry

A second mover: a. is typically ineffective in its response to a first mover. b. attempts to provide a product with greater customer value than the first mover's product. c. usually incurs higher expenses than the first mover since it must engage in reverse engineering. d. typically has a higher survival rate than first movers which typically take greater risks.

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: a. realizes that he must understand competitors in order to predict their competitive actions and responses. b. understands that he is the market leader in his niche and thus has a sustainable competitive advantage. c. believes that he has placed his firm in a slow-cycle industry where concerns about protecting unique competencies dominate concerns about market share. d. realizes that his firm has such lower resources than other competitors that his chain is "competitively invisible" to them.

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

Competitive rivalry has more effect on a firm's __________ strategies than the firm's other strategies a. business-level b. corporate-level c. acquisition d. international

business-level

All competitive advantages do not accrue to large-sized firms. A major advantage of smaller firms is that they: a. are more likely to have organizational slack. b. can launch competitive actions more quickly. c. have more loyal and diverse workforces. d. can wait for larger firms to make mistakes in introducing innovative products.

can wait for larger firms to make mistakes in introducing innovative products.

Which of the following industries can be LEAST described as a slow-cycle market? a. Freight railroads b. Pharmaceuticals c. Cell phone providers d. Private ownership of highways and bridges

cell phone providers

Multimarket competition occurs when firms: a. sell different products to the same customer. b. have a high level of awareness of their competitors' strategic intent. c. simultaneously enter into an attack strategy. d. compete against each other in several geographic or product markets. ANSWER:

compete against each other in several geographic or product markets.

In general, firms are more aware of competitors that have similar resources and that: have low market dependence. are late movers. have low market commonality. compete against the firm in multiple markets.

compete against the firm in multiple markets.

In customer feedback surveys, RTC Corp customers have indicated that they have a similar experience each time they interact with the company. This reflects success in which service quality dimension? a. Consistency b. Courtesy c. Accuracy d. Performance

consistency

Intensified rivalry within an industry results in a. increased hiring across the industry. b. increased total revenues across the industry. c. decreased average profitability across the industry. d. increased entries into the industry.

decreased average profitability across the industry.

Firms with few competitive resources than the acting firm are more likely to: not respond to competitive actions. respond quickly to competitive actions. delay responding to competitive actions. respond to strategic actions, but not to tactical actions.

delay responding to competitive actions

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

false

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

false

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

false

A company in a __________ industry is LEAST likely to make heavy use of patents and copyrights. slow-cycle medium-cycle standard-cycle fast-cycle

fast-cycle

__________ markets are often described as volatile and innovative. a. Slow-cycle b. Fast-cycle c. Standard-cycle d. Sheltered

fast-cycle

Reverse engineering is characteristic of: first movers. fast-cycle markets. market leaders. price predators.

fast-cycle markets

First movers are a. entrepreneurs who lead in the establishment of new industries. b. firms that are first to exit a declining industry. c. firms that take an initial competitive action. d. individuals who move frequently as employment opportunities change in a locale.

firms that take an initial competitive action

The chief disadvantage of being a first mover is the: high degree of risk. high level of competition in the new marketplace. inability to earn above-average returns unless the production process is very efficient. difficulty of obtaining new customers.

high degree of risk

Firms with __________ market commonality and __________ resource similarity are direct and mutually acknowledged competitors. low; high low; low high; high high; low

high; high

Quality affects competitive rivalry because a competitor whose products suffer from poor quality likely will __________ until __________. a. initiate more competitive actions; the firm returns to profitability b. initiate fewer competitive actions; the quality problems are corrected c. initiate more competitive actions; the quality problems are corrected d. advertise more; customers believe the quality has improved

initiate fewer competitive actions; the quality problems are corrected

A firm is likely to respond to an attack by a competitor in all of the following situations EXCEPT when the attack: a. is by a competitor known for risky or complex competitive behavior. b. makes the firm's market position less defensible. c. damages the firm's ability to use its capabilities. d. improves the competitor's market position.

is by a competitor known for risky or complex competitive behavior.

A firm that is LEAST likely to launch competitive actions is one that has: a. organizational slack. b. advanced research and development. c. recently improved the quality of its products. d. large size.

large size

In general, compared with firms that compete in only one market, among firms that face one another in multiple markets there is: similar competitive rivalry. less competitive rivalry. more competitive rivalry. no competitive rivalry.

less competitive rivalry

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

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, which of the following would Akamai likely do? a. Raise its prices b. Do nothing since it is the market leader c. Exit the industry d. Lower its prices

lower its prices

Both __________ and __________ affect the awareness and motivation of a firm to undertake actions and responses first-mover advantages; corporate size market commonality; resource similarity management capabilities; competitive analysis speed of management decisions; management actions

market commonality; resource similarity

Competitors are more likely to respond to strategic or tactical actions when they are taken by: a. differentiators. b. larger companies. c. first movers. d. market leaders.

market leaders

Quality is: a. meeting or exceeding customer expectations in the goods and/or services offered. b. only a major factor in the production of luxury goods, such as BMW cars. c. an assured way to gain competitive advantage. d. a viable trade-off with product cost in gaining a competitive advantage.

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

Competitive dynamics refers to the a. circumstances in which competitors are aware of the degree of their mutual interdependence resulting from market commonality and resource similarity. b. set of competitive actions and competitive responses the firm takes to build or defend its competitive advantages and to improve its market position. c. ongoing actions and responses among all firms competing within a market for advantageous positions. d. ongoing set of competitive actions and competitive responses between competitors as they maneuver for advantageous market position.

ongoing actions and responses among all firms competing within a market for advantageous positions.

Goods or services in standard-cycle markets reflect: organizations that serve a mass market. numerous first-mover advantages. an inability to sustain a competitive advantage except for brief periods of time. competitive advantages that are shielded from imitation.

organizations that serve a mass market.

Walt Disney's focus on __________ is typical of a slow-cycle market. a. innovation b. total quality c. proprietary rights d. economies of scale

proprietary rights

In order to compete effectively, standard-cycle firms need all of the following EXCEPT: large market share. customer loyalty through brand name. careful control of operations to preserve consistency for customers. rapid and continuous product introductions.

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. b. respond with fierce attacks because of resource dissimilarity. c. respond aggressively because of high market dependence. d. take no competitive response because of the lack of mutual interdependence among the nurseries.

respond aggressively because of high market dependence

Late movers are those firms that: a. respond to a competitive action a significant amount of time after the first mover's action and the second mover's response. b. respond to a first mover's competitive action often through imitation or a move designed to counter the effects of the action. c. take an initial competitive action (either strategic or tactical). d. typically achieve higher-than-average returns because they can imitate the most efficient actor.

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. a. slow-cycle b. medium-cycle c. standard-cycle d. fast-cycle

slow-cycle

Lawsuits over patent and copyright infringements are more common and intense in: a. fast-cycle markets because the market is innovation-driven. b. standard-cycle markets because the firm's brand name is such an important competitive advantage. c. slow-cycle markets because of the desire to shelter the company from imitation of its competitive advantage. d. standard-cycle markets because innovation is rare, which gives the innovating firm a significant competitive advantage.

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

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 __________. a. rapid; were nimble and flexible b. slow; lacked the ability to line up resources c. slow; did not perceive gains associated with responding to Walmart's attack d. rapid; had the resources and flexibility to compete against Walmart

slow; lacked the ability to line up resources

An organization's loyalty to its own product would be a competitive disadvantage in a(n) __________ market. a. slow-cycle b. standard cycle c. intermediate-cycle d. fast-cycle

standard cycle

Economies of scale are critical to success in what type of market? a. Slow-cycle b. Standard-cycle c. Fast-cycle d. Volatile-cycle

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. a. standard-cycle b. fast-cycle c. slow-cycle d. intermediate-cycle

standard-cycle

The flat-panel television market where prices have come down and competition has become more stable is best characterized as: a. standard-cycle. b. fast-cycle. c. slow-cycle. d. competitive rivalry.

standard-cycle

Because Coca-Cola, Nestlé, 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): a. slow-cycle market. b. standard-cycle market. c. fast-cycle market. d. intermediate-cycle market.

standard-cycle market

Competition between candy makers (e.g., Hershey, Mars, Cadbury, Nestlé, and Godiva) where firms compete in package design (including package downsizing) and ease of availability is characteristic of a(n): slow-cycle market. standard-cycle market. fast-cycle market. intermediate-cycle market.

standard-cycle market

Consumer goods producers are innovating in terms of healthy products. This type of incremental innovation is typical of: a. fast-cycle markets. b. standard-cycle markets. c. incremental-cycle markets. d. slow-cycle markets.

standard-cycle markets

A competitive action can be one of two types, either __________ or __________. a. aggressive; defensive b. quality-based; cost-based c. strategic; tactical d. market-based; resource-based

strategic; tactical

On the whole, there are more competitive responses to: a. strategic actions than to tactical actions. b. tactical actions than to strategic actions. c. buyer pressures than to supplier pressures. d. the demands of the top management team than to industry structural pressures.

tactical actions than to strategic actions.

Companies in fast-cycle markets need to profit quickly from an innovative product for all of the following reasons EXCEPT: the technology used is not proprietary. the prices of component parts tend to rise rapidly. product prices fall quickly in fast-cycle markets. counterattacks from rivals come quickly.

the prices of component parts tend to rise rapidly