Deck 5: Competitive Rivalry and Competitive Dynamics

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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.

Answer 3

True

Question 4

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

Question 5

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.

Question 6

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

Question 7

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 8

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

Question 9

Extensive market commonality guarantees intense competition in an industry.

Question 10

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.

Question 11

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

Question 12

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

Question 13

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 14

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

Question 15

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

Question 16

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

Question 17

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 18

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

Question 19

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

Question 20

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

Question 21

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.

Question 22

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

Question 23

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 24

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.

Question 25

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 26

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

Question 27

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 28

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 29

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 30

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

Question 31

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 32

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 33

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 34

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 35

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

Question 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.

Question 37

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 38

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 39

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

Question 40

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

Question 41

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 42

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 43

____ 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 44

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 45

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

Question 46

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

Question 47

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 48

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 49

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 50

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 51

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 52

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

Question 53

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

Question 54

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
C) Entry into the European market by Home Depot
D) Fare increases by Southwest Airlines

Question 55

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 56

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

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

Question 57

____ 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 58

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 59

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 60

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 61

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.

Question 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.

Question 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.

Question 64

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.

Question 65

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.

Question 66

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.

Question 67

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

A) differentiators.
B) larger companies.
C) first movers.
D) market leaders.

Question 68

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.

Question 69

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

A) Compaq
B) IBM
C) HP
D) Dell

Question 70

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 had improved

Question 71

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.

Question 72

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.

Question 73

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

Question 74

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?

A) Raise its prices
B) Do nothing since it is the market leader
C) Exit the industry
D) Lower its prices

Question 75

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.

Question 76

Which of the following is TRUE of Southwest Airlines?

A) Southwest has an unusually low amount of flexibility for a large firm.
B) Southwest's success is largely due to the fact it has little market commonality with other airlines.
C) Decision-making responsibility is centered at its Dallas headquarters, which allows the firm to respond quickly to competitive attacks.
D) Southwest's advantage lies in its ability to "think small."

Question 77

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.

Question 78

Which of the following statements is FALSE?

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.

Question 79

Which of the following is TRUE of Walmart?

A) Walmart has an unusual amount of flexibility for a large firm.
B) Walmart's success is largely due to the fact it has little market commonality with other industry firms.
C) Decision-making responsibility is centered at its Arkansas headquarters, which allows the firm to respond quickly to competitive attacks.
D) Walmart's advantage lies in its ability to "think big."

Question 80

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

A) the attack is by a price predator.
B) the attack makes the firm's market position less defensible.
C) the attack damages the firm's ability to use its capabilities.
D) the attack improves the competitor's market position.