Deck 5: Competitive Rivalry and Competitive Dynamics

Question 1

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

Answer 1

True

Question 2

Two firms that have similar resources, but do not share markets would not be direct and mutually acknowledged competitors.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

Intensified rivalry within an industry results in decreased average profitability for the firms within it.

Question 5

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.

Question 6

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

Question 7

Competitive rivalry often increases during recessions and some selected businesses in particular industries experience heightened demand.

Question 8

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.

Question 9

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.

Question 10

The drivers of competitive behavior are awareness of the competitor, motivation to take action or respond, and the organization's ability in terms of resources and flexibility.

Question 11

A Nielsen survey revealed that pasta, candy, and beer were relatively immune from the negative effects of a recession.

Question 12

Extensive market commonality guarantees intense competition in an industry.

Question 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.

Question 14

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

Question 15

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.

Question 16

Competitive dynamics refers to the total set of actions and responses taken by all firms competing within a market.

Question 17

Movie studios and theaters, and videogame developers and distributors are examples of businesses that do poorly during recessionary times.

Question 18

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

Question 19

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

Question 20

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

Question 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.

Question 22

A competitive action is a strategic or tactical action taken by a firm to gain or defend a competitive advantage or improve its market position.

Question 23

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

Question 24

The benefits of being a first mover are most substantial in fast cycle markets.

Question 25

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

Question 26

Wal-Mart has recently opened a store in Alsatia, Missouri. Several local small retailers have decided that choosing not to respond to Wal-Mart'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.

Question 27

According to the Strategic Focus about Wal-Mart, Target has been successful by positioning itself as an upscale discounter to avoid direct competition with Wal-Mart.

Question 28

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

Question 29

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.

Question 30

Without available resources (such as financial capital and people), the firm lacks the ability to attack a competitor or respond to its actions.

Question 31

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

Question 32

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

Question 33

Often, successful imitation of the first mover's innovations allows the second mover to avoid the mistakes and major investments of the first mover.

Question 34

A lack of awareness leads to a reduction in competition.

Question 35

It is much easier for a competitor to implement strategic actions than tactical actions.

Question 36

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

Question 37

Among the drivers of competitive actions and responses, motivation refers to the perceived gains that will result from a firm which initiates an attack. If a firm perceives that its position will improve, it is more likely to attack.

Question 38

As discussed in the Chapter 5 Strategic Focus, Wal-Mart's aggressive pricing strategy is a strategic action that plays a major role in its success.

Question 39

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

Question 40

According to the Strategic Focus about Wal-Mart, the only way that Wal-Mart's competitors can survive is to further reduce their low-cost position.

Question 41

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

Question 42

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.

Question 43

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.

Question 44

Competitors are more likely to respond to strategic or tactical actions when they are taken by a market leader.

Question 45

In general, small firms are more likely than large firms to launch competitive actions and tend to do it more quickly.

Question 46

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.

Question 47

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.

Question 48

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

Question 49

Large firms are likely to initiate more competitive actions along with more strategic actions during a given period.

Question 50

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

Question 51

Quality is a universal theme and is a necessary, but not a sufficient, condition for competitive success.

Question 52

Quality affects the degree of rivalry in that firms lacking quality are likely to me more aggressive in their competitive actions until the quality problems are corrected.

Question 53

A firm can expect that every launch of a successful new product will be followed by a counterattack by competitors, even in a slow-cycle market.

Question 54

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.

Question 55

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.

Question 56

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.

Question 57

Firms in a slow-cycle market are shielded from imitators for long periods of time.

Question 58

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.

Question 59

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

Question 60

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.

Question 61

Which pair of firms has the LEAST resource similarity?

A) Small, family-owned Italian restaurant; Olive Garden
B) Target; Wal-Mart
C) HP; Dell
D) FedEx; UPS

Question 62

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.

Question 63

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.

Question 64

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.

Question 65

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

A) business-level
B) corporate-level
C) acquisition
D) international

Question 66

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.

Question 67

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

Question 68

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.

Question 69

____ 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

Question 70

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.

Question 71

All of the following are examples of businesses discussed in the Chapter 5 Opening Case that have done well during recessionary times EXCEPT

A) Health care products and pharmaceuticals
B) Automobiles
C) Candy manufacturers
D) Movie studios and theaters

Question 72

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

Question 73

____ 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

Question 74

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.

Question 75

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.

Question 76

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.

Question 77

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

Question 78

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

Question 79

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

Question 80

In the Chapter Strategic Focus, Hershey responded to premium product introductions by competitors such as Godiva and Cadbury with a premium line of its own, Bliss chocolates. These are examples of actions and responses in a standard-cycle market.