Question 1

Intense rivalry involving actions and responses among similar competitors vying for the same customers in a marketplace is known as

Accepted Answer

New entry into markets, whether by start-ups or by incumbent firms, nearly always threatens existing competitors. This is true in part because nearly every market need is already being met, either directly or indirectly, by existing firms. As a result, the competitive actions of a new entrant are very likely to provoke a competitive response from companies that feel threatened. This, in turn, is likely to evoke a reaction to the response.

Question 2

Running Press launched the Miniature Editions line of books in 1993. Today it has sold over 20 million copies. Which of the following most closely represents their strategy?

Accepted Answer

If a start-up enters a market with a broad or aggressive strategy, it is likely to evoke retaliation from a more powerful competitor. Young firms can often succeed best by finding a market niche where they can get a foothold and make small advances that erode the position of existing competitors. From this position, they can build a name for themselves and grow. As the Running Press example indicates, many new ventures are successful even though their share of the market is quite small. They use a focused strategy with a very narrow scope.

Question 3

When an industry is mature, a(n) ______________ strategy is considered to be one of the most effective approaches for a new entrant.

Accepted Answer

Most start-ups enter industries that are mature, where growth in demand tends to be slow and there are often many competitors. If a start-up wants to get a piece of the action, it often has to take business away from an existing competitor. If a start-up enters a market with a broad or aggressive strategy, it is likely to evoke retaliation from a more powerful competitor. Young firms can often succeed best by finding a market niche where they can get a foothold.

Question 4

In 2005, Plum Organics entered the market with organic baby food and snack foods for children. It now has over 20 products and is listed at number 63 on the Inc. 500 list of fastest growing private companies. It used which new entry strategy in 2005?

Accepted Answer

Most new entrants use a strategy somewhere between pure imitation and pure pioneering. That is, they offer a product or service that is somewhat new and sufficiently different to create new value for customers and capture market share. Such firms are adaptive in the sense that they are aware of marketplace conditions and conceive entry strategies to capitalize on current trends.

Question 5

BCG authors Stalk and Lachenauer published a book in which they listed competitive strategy for winning against incumbent rivals. Which of the following is not one of their suggested strategies?

Accepted Answer

But competitive attacks come from many sources besides new entrants. Some of the most intense competition is among incumbent rivals intent on gaining strategic advantages. Winners in business play rough and do not apologize for it, according to Boston Consulting Group authors George Stalk, Jr. and Rob Lachenauer in their book Hardball: Are You Playing to Play or Playing to Win. Their five strategies are: devastate profit sanctuaries of rivals, plagiarize with pride, deceive the competition, unleash massive and overwhelming force, and raise costs of competitors.

Question 6

In competitive dynamics, new entrants may be force to change their strategies or develop new ones to _______ competitive challenges by _____________.

Accepted Answer

New entrants may be forced to change their strategies or develop new ones to survive competitive challenges by incumbent rivals.

Question 7

Smell-O-Vision designed an invention to pump odors into movie theatres. It flopped, in spite of its innovativeness. What kind of new entry strategy was the company using to penetrate the market?

Accepted Answer

Smell-O-Vision, an invention designed to pump odors into movie theatres from the projection room at pre-established moments in a film. It was tried only once (for the film Scent of a Mystery) before it was declared a major flop. It definitely was innovation, but it was hardly a good idea at the time. New entrants with a radical new product or highly innovative service may change the way business is conducted in an industry. This kind of breakthrough of creating new ways to solve old problems or meeting customer needs in a unique new way is referred to as a pioneering new entry.

Question 8

Which of the following is not one of the reasons a company might launch new competitive actions?

Accepted Answer

There are several reasons why companies launch new competitive actions, including improving market position, capitalizing on growing demand, expanding production capacity, providing an innovative new solution, or obtaining first mover advantages.

Question 9

New ventures may find it difficult to use differentiation strategies successfully because they lack _____________ and __________.

Accepted Answer

There are several factors that make it more difficult for new ventures to be successful as differentiators. For one thing, the strategy is generally thought to be expensive to enact. Differentiation is often associated with strong brand identity, and establishing a brand is usually considered to be expensive because of the cost of advertising and promotion, paid endorsements, exceptional customer service, etc. Differentiation successes are sometimes built on superior innovation or use of technology.

Question 10

According to the text, which of the following does not make it difficult for entrepreneurial firms to effectively pursue a strategy of differentiation?

Accepted Answer

There are several factors that make it more difficult for new ventures to be successful as differentiators. For one thing, the strategy is generally thought to be expensive to enact. Differentiation is often associated with strong brand identity, and establishing a brand is usually considered to be expensive because of the cost of advertising and promotion, paid endorsements, exceptional customer service, etc. Differentiation successes are sometimes built on superior innovation or use of technology.

Question 11

Entrepreneurial firms that pursue a low-cost leadership strategy use all of the following to achieve lower costs except

Accepted Answer

Compared to large firms, new ventures often have simple organizational structures that make decision making both easier and faster. The smaller size also helps young firms change more quickly when upgrades in technology or feedback from the marketplace indicate that improvements are needed.

Question 12

Which of the following is not a factor that makes it more difficult for new ventures to be successful as differentiators?

Accepted Answer

There are several factors that make it more difficult for new ventures to be successful as differentiators. For one thing, the strategy is generally thought to be expensive to enact. Differentiation is often associated with strong brand identity, and establishing a brand is usually considered to be expensive because of the cost of advertising and promotion, paid endorsements, exceptional customer service, etc. Differentiation successes are sometimes built on superior innovation or use of technology. These are also factors where it may be challenging for young firms to excel relative to established competitors.

Question 13

Square provides a means for small businesses to process credit and debit card sales without signing up for a traditional credit card arrangement of monthly fees and minimum charges. It used which new entry strategy to enter the market initially?

Accepted Answer

Whereas pioneers are often inventors or tinkerers with new technology, imitators usually have a strong marketing orientation. They look for opportunities to capitalize on proven market successes. An imitative new entry strategy is used by entrepreneurs who see products or business concepts that have been successful in one market niche or physical locale and introduce the same basic product or service in another segment of the market. While Square has quickly established itself in the market, it now faces strong competition from major competitors, including Intuit and PayPal.

Question 14

Tuft and Needle makes mattresses, according to Strategy Spotlight 8.5 in the textbook. Which generic strategy most closely represents theirs?

Accepted Answer

Strategy Spotlight 8.5 highlights the success of Tuft and Needle. They researched the industry, discussed mattress manufacturing with component suppliers, and dissected mattresses they bought. What they realized was that the expensive mattress Marino purchased cost only about 300 USD to manufacture, including materials and labor. Considering all of the markups across the supply chain, they realized big-brand mattresses are priced up to 1,000 percent of their actual cost. Their response was to build a cheaper mattress. Their company, Tuft and Needle, sells mattresses through its own website and on Amazon for a fraction of the cost of a brand-name mattress at a furniture store.

Question 15

Amazon is an example of a company that used the differentiation strategy to enter the market. The differentiation features included

Accepted Answer

Amazon set out to use Internet technology to revolutionize the way books are sold. As a bookseller, Amazon founder Jeff Bezos set out to use Internet technology to revolutionize the way books are sold. Bezos was not doing anything that had not been done before. But the two key differentiating features of doing it on the Internet and offering extraordinary customer service have made Amazon a differentiated success.

Question 16

Competitors with similar offers find that a new entrant is threatening because

Accepted Answer

New entry into markets, whether by start-ups or by incumbent firms, nearly always threatens existing competitors. This is true in part because nearly every market need is already being met, either directly or indirectly, by existing firms. As a result, the competitive actions of a new entrant are very likely to provoke a competitive response from companies that feel threatened. This, in turn, is likely to evoke a reaction to the response.

Question 17

One of the ways entrepreneurs achieve success is by using resources more efficiently. This is an example of how entrepreneurs use a(n) ______________ strategy.

Accepted Answer

One of the ways entrepreneurial firms achieve success is by doing more with less. By holding down costs or making more efficient use of resources than larger competitors, new ventures are often able to offer lower prices and still be profitable. Thus, under the right circumstances, a low-cost leader strategy is a viable alternative for some new ventures.

Question 18

Unilever has taken a dominant position (65 percent market share) in the Vietnamese laundry detergent market by employing an investment and marketing campaign that decimated the market position of the local, incumbent competitors. According to the Stalk and Lachenauer book, this is an example of ________________ strategy.

Accepted Answer

While many hardball strategies are subtle and indirect, this one is not. This is a full-frontal attack where by a firm commits significant resources to a major campaign to weaken rival positions in certain markets. Firms must be sure they have the mass and stamina required to win before they declare war against a rival.

Question 19

Aircraft makers Boeing and Airbus have a high degree of ______________ because they make very similar products and have many buyers in common.

Accepted Answer

Market commonality is whether or not competitors are vying for the same customers and how many markets they share in common. For example, aircraft manufacturers Boeing and Airbus have a high degree of market commonality because they make very similar products and have many buyers in common.

Question 20

Tom Monahan, a business creativity coach, says that every new idea is merely a spin of an old idea. A company that enters the market by offering a product or service that is somewhat new and sufficiently different in order to create value for customers by capitalizing on current trends is using which new entry strategy?

Accepted Answer