Chapter 05 Competitive Rivalry and Competitive Dynamics PDF

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Chapter 05: Competitive Rivalry and Competitive Dynamics True / False 1. Firms operating in the same market, offering similar products and targeting similar customers are competitors. a. True b. Fals e ANSWER: True 2. Competitive rivalry is the contest to be the first mover in an international market. a. True b. Fals e ANSWER: Fals e 3. Competitive rivalry is the set of competitive actions and responses that occur among firms as they maneuver for an advantageous market position. a. True b. Fals e ANSWER: True 4. "Competitive dynamics" indicates that firms and their strategic actions are independent. a. True b. Fals e ANSWER: Fals e 5. 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. a. True b. Fals e ANSWER: True 6. Firms with high market commonality and highly similar resources are direct and mutually acknowledged competitors. a. True b. Fals e ANSWER: True 7. 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. a. True Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Competitive Rivalry and Competitive Dynamics b. Fals e ANSWER: True 8. 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. a. True b. Fals e ANSWER: True 9. Research suggests that a firm with greater multimarket contact is less likely to initiate an attack, but more likely to respond aggressively when attacked. a. True b. Fals e ANSWER: True 10. Extensive market commonality guarantees intense competition in an industry. a. True b. Fals e ANSWER: Fals e 11. 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. a. True b. Fals e ANSWER: Fals e 12. Two firms, such as Fed Ex and UPS that have similar resources and common markets would be direct and mutually acknowledged competitors. a. True b. Fals e ANSWER: True 13. 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. a. True b. Fals e Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Competitive Rivalry and Competitive Dynamics ANSWER: Fals e 14. Awareness tends to be greatest when firms have highly similar resources and compete in multiple markets. a. True b. Fals e ANSWER: True 15. Under the framework of competitive action and response, "ability" refers to an attacking or responding firm's knowledge of the competitive market characteristics. a. True b. Fals e ANSWER: Fals e 16. 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. a. True b. Fals e ANSWER: Fals e 17. A tactical competitive action involves a significant commitment of specific and distinctive organizational resources. a. True b. Fals e ANSWER: Fals e 18. Boeing's decision to commit the resources required to build the super-efficient 787 midsized jetliner is an example of a tactical action. a. True b. Fals e ANSWER: Fals e 19. Walmart's aggressive pricing strategy is a strategic action that plays a major role in how it competes. a. True b. Fals e ANSWER: Fals Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Competitive Rivalry and Competitive Dynamics e 20. First movers can gain a sustained competitive advantage when they reduce their costs through reverse engineering. a. True b. Fals e ANSWER: Fals e 21. 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. a. True b. Fals e ANSWER: True 22. An organization with high profitability, such as Walmart, will be able to develop high organizational slack. a. True b. Fals e ANSWER: True 23. 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 is waiting to see whether MyTools' new line is a success. Mighty Mike could be classified as a second mover. a. True b. Fals e ANSWER: True 24. Firms that are typically late movers usually have little organizational slack. a. True b. Fals e ANSWER: True 25. 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. a. True b. Fals e ANSWER: True 26. 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. Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Competitive Rivalry and Competitive Dynamics a. True b. Fals e ANSWER: Fals e 27. Quality begins in marketing an organization where employees must create a perceived value of quality. a. True b. Fals e ANSWER: Fals e 28. 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. a. True b. Fals e ANSWER: True 29. In general, strategic actions elicit fewer competitive responses than do tactical actions. a. True b. Fals e ANSWER: True 30. 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. a. True b. Fals e ANSWER: Fals e 31. 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. a. True b. Fals e ANSWER: True 32. 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. a. True b. Fals e Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Competitive Rivalry and Competitive Dynamics ANSWER: Fals e 33. 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. a. True b. Fals e ANSWER: Fals e 34. The more dependent a firm is on its market, the more aggressively it will defend it from another competitor. a. True b. Fals e ANSWER: True 35. Disney is an example of a firm in a slow-cycle market because its animated characters are shielded from imitation by copyrights and trademarks. a. True b. Fals e ANSWER: True 36. 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. a. True b. Fals e ANSWER: True 37. 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. a. True b. Fals e ANSWER: True 38. 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. a. True b. Fals e ANSWER: True Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Competitive Rivalry and Competitive Dynamics 39. 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. a. True b. Fals e ANSWER: True 40. Unlike fast-cycle markets, the struggle for market share in standard-cycle markets is moderate. a. True b. Fals e ANSWER: Fals e Multiple Choice 41. Competitive rivalry has the most effect on a firm's ____ strategies than the firm's other strategies. a. business-level b. corporatelevel c. acquisition d. international ANSWER: a 42. 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: d 43. 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. total set of actions and responses taken by all firms competing within a market. d.ongoing set of competitive actions and competitive responses between competitors as they maneuver for advantageous market position. ANSWER: c 44. Intensified rivalry within an industry results in: Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Competitive Rivalry and Competitive Dynamics 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. ANSWER: c 45. 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 slowcycle industry. ANSWER: c 46. In general, compared with firms which compete in only one market, among firms which face one another in multiple markets there is: a. similar competitive rivalry. b. less competitive rivalry. c. more competitive rivalry. d. no competitive rivalry. ANSWER: b 47. Research suggests that a firm with greater multimarket contact is _______ likely to initiate and attack, and _____ likely to respond aggressively when attacked. a. more; more b. less; more c. less; less d. more; less ANSWER: b 48. 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 ANSWER: a Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Competitive Rivalry and Competitive Dynamics 49. 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 a. are direct mutually acknowledged competitors. b. have high resource similarity. c. have high market commonality. d. are probably not engaged in intense competitive rivalry. ANSWER: d 50. Firms with ______ market commonality and _____ resource similarity are direct and mutually acknowledged competitors. a. low; high b. low; low c. high; high d. high; low ANSWER: c 51. In general, firms are more aware of competitors who have similar resources and who: a. have low market dependence. b. are late movers. c. have low market commonality. d. compete against the firm in multiple markets. ANSWER: d 52. ____ and ____ describe the situation in which organizations are direct competitors and are fully aware of the competition. a. High market commonality; high resource similarity b. High market commonality; low resource similarity c. Low market commonality; high resource similarity d. Low market commonality; low resource similarity ANSWER: a 53. Firms with few competitive resources are more likely to: a. not respond to competitive actions. b. respond quickly to competitive actions. c. delay responding to competitive actions. d. respond to strategic actions, but not to tactical actions. ANSWER: c Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Competitive Rivalry and Competitive Dynamics 54. ____ relates to the gains or losses a firm will experience if it attacks a rival or responds to an attack by a rival. a. Motivation b. Awareness c. Responsiveness d. Ability ANSWER: a 55. Both ____ and ____ affect the awareness and motivation of a firm to undertake actions and responses. a. first-mover advantages; corporate size b. market commonality; resource similarity c. management capabilities; competitive analysis d. speed of management decisions; management actions ANSWER: b 56. 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. a. more fragmented b. slower c. larger d. more tactical ANSWER: b 57. 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 marshal resources c. rapid; perceived gains from responding to Walmart's attack d. rapid; had the resources and flexibility compete against Walmart ANSWER: b 58. 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; resourcebased ANSWER: c 59. Which of the following is an example of a strategic action? a. A "two movies for the price of one" campaign by Redbox b. Use of product coupons by a local grocer Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Competitive Rivalry and Competitive Dynamics c. Entry into the European market by Home Depot d. Fare increases by Southwest Airlines ANSWER: c 60. 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 ANSWER: c 61. Which of the following is the most strategic action by Walmart? a. Aggressive pricing to ensure they are 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 ANSWER: d 62. 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. ANSWER: b 63. 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. ANSWER: c 64. The chief disadvantage of being a first mover is the: a. high degree of risk. b. high level of competition in the new marketplace. c. inability to earn above-average returns unless the production process is very efficient. d. difficulty of obtaining new customers. ANSWER: a 65. Which of the following statements is FALSE? Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Competitive Rivalry and Competitive Dynamics a. First movers tend to take higher risks than second and later movers. b. First movers tend to have significantly higher revenues than second movers. c. First movers have lower survival rates than second and late movers. d. First movers tend to have more organizational slack than later movers. ANSWER: c 66. A second mover: a. is typically ineffective in its response to the 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. ANSWER: b 67. 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. ANSWER: a 68. 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 one of these 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. ANSWER: c 69. A firm that is LEAST l...