Deck 6: Competitive Position and Sources of Advantage

Question 1

Every business must manage its costs,but not every business can have a cost advantage.

Answer 1

True

Question 2

Benchmark mapping is a technique used to capture customer perceptions of competing products or services.

Answer 2

False

Question 3

Major sources of competitive advantage are cost advantage,differentiation advantage,and marketing advantage.

Answer 3

True

Question 4

An oblique strategy requires superior knowledge of both competitors and customers.

Question 5

A business implements an oblique strategy because it seeks to gain a competitive advantage with direct confrontation.

Question 6

Which of the following is true of businesses with negative customer value?

A)They produce higher levels of pre-tax return on investment.
B)They tend to gain market share.
C)Their performance benefits exceed the cost of purchase.
D)Their value propositions are average.
E)They have great difficulty in retaining customers.

Question 7

The more similar two competitors are from a customer perspective,the more likely customers are to switch from one to the other.

Question 8

Businesses with partial knowledge of customers or competitors are less likely to employ reactive strategies.

Question 9

A competitor analysis is relatively simple and most businesses are inclined to do it on a continuous basis.

Question 10

An advantage in brand or company reputation helps to support price and margins,even in business-to-business markets.

Question 11

Businesses with a marketing advantage typically have prices much lower than average prices.

Question 12

International markets are often blocked by political barriers.

Question 13

A larger unit volume allows for production and purchasing economies that lower the per-unit manufacturing cost of a product,thereby creating a scope effect.

Question 14

A scope effect refers to ________.

A)lowering the per-unit manufacturing cost of a product by increasing the volume of production
B)improving the efficiency by learning new methods of management and production
C)lowering the average unit cost of all products through extension of the product line
D)increasing revenue by increasing the scope of marketing initiatives
E)lowering the marketing costs through increasing the advertising cost efficiency of a brand extension strategy

Question 15

Which of the following is a type of differentiation advantage?

A)service advantage
B)market share advantage
C)channel advantage
D)operating cost advantage
E)product line advantage

Question 16

Which of the following is a type of marketing advantage?

A)product line advantage
B)marketing expenses
C)variable costs
D)operating expenses
E)service quality

Question 17

The more competitors an industry has,the lower will be the differentiation among those competitors,and low differentiation increases competitive rivalry.

Question 18

Competitive benchmarking is a process that was developed initially at Xerox to improve its competitive position relative to key competitors.

Question 19

Which of the following is true for businesses with above average customer value?

A)They need to spend more to acquire customers.
B)The cost of purchase equals performance benefits.
C)They produce higher levels of pre-tax return on investment.
D)The cost of purchase exceeds performance benefits.
E)They have great difficulty in retaining customers.

Question 20

In any competitive environment,reputation is the principal source of competitive advantage.

Question 21

A business that dominates markets with a relative advantage in distribution,sales coverage,or marketing communications can control (and often block)market access,creating a source of competitive advantage.Which source of competitive advantage does this create?

A)scope advantage
B)market segmentation advantage
C)marketing advantage
D)learning advantage
E)marketing cost scope advantage

Question 22

Which of the following is true of channel advantage?

A)It allows a business to control market access,but not channels in a market.
B)It is dependent on cost advantage.
C)It is dependent on differentiation advantage.
D)It is achieved through the use of reactive strategies.
E)It is a source of marketing advantage.

Question 23

Businesses that lack both customer knowledge and competitor knowledge,and make competitive moves from an internal perspective with no real market knowledge are said to be working with a(n)________ strategy.

A)oblique
B)inside-the-box
C)reactive
D)decentralization
E)disintermediation

Question 24

As a business adds products to its product line that have the same purchased materials and similar manufacturing processes,it is able to lower the average unit cost of all products,producing a ________ effect.

A)network
B)scope
C)Mohring
D)scale
E)cluster

Question 25

Calculate the total share of the three largest competitors of a firm,if the firm has a market share of 60% and relative market share of 200.

A)40%
B)30%
C)72.5%
D)20%
E)60%

Question 26

A market-based strategy that leverages a knowledge advantage with respect to both customers and competitors,and can be implemented with a nonconfrontational approach that minimizes losses,is known as a(n)________ strategy.

A)inside-the-box
B)disintermediation
C)oblique
D)mass-personalization
E)reactive

Question 27

Calculate the percentage cost of goods sold by a business if the cost advantage index of the business is 150 and the average percentage cost of goods sold by its top three competitors are 40%,50%,and 30%,respectively.

A)150
B)40
C)60
D)126
E)70

Question 28

Which of the following is true of product line advantage?

A)A business with a broad line of products has to be more focused in order to be cost effective in its marketing efforts.
B)It is important to expand a business's product line during the emerging stage of the product life cycle.
C)Businesses with narrow product lines are more profitable during the emerging and growing stages of a product life cycle.
D)A narrow line of products creates more selling opportunities for the sales force and channel partners.
E)It is a source of competitive advantage that is independent of differentiation advantage.

Question 29

Which of the following is true about customer reactive strategies?

A)It refers to overreaction to customer demands due to limited competitor knowledge.
B)It involves viewing each customer as having unique needs.
C)It refers to addressing customer complaints quickly,to avoid escalations.
D)It refers to advertising strategies aimed at encouraging positive customer reactions.
E)It involves measuring and analyzing customer reactions to marketing strategies.

Question 30

Which of the following formulas is used to calculate a company's relative market share?

A)(Company's Market Share/Company's Potential Market Share)x 100
B)(Company's Total Sales/Total Sales of the Largest Competitor)x 100
C)Company's Targeted Sales - Company's Net Sales
D)(Company's Market Share/Total Share of Three Largest Competitors)x 100
E)Total Sales of the Largest Competitor - Company's Total Sales

Question 31

Which of the following is true of variable cost advantage?

A)Scale effect occurs for a manufacturer who doubles production capacity.
B)Businesses with a substantial market share advantage generally achieve a higher unit cost.
C)As volume increases,the cost per unit generally increases.
D)A larger unit volume allows for production that lowers the per-unit manufacturing cost,thereby creating a scope effect.
E)As a business builds more of the same product,there is a greater opportunity for scale effects.

Question 32

Calculate the cost advantage index if the percentage cost of goods sold by the business is 40% and the average percentage cost of goods sold by its top three competitors are 50%,60%,and 70%,respectively.

A)20
B)40
C)57
D)67
E)80

Question 33

As a business builds more of the same product,there is a greater opportunity for ________ effects.

A)scope
B)network
C)learning
D)Mohring
E)cluster

Question 34

Brand reputation advantage is a type of ________ advantage.

A)variable cost
B)differentiation
C)channel
D)operating cost
E)marketing cost

Question 35

A larger production volume allows for production and purchasing economies that lower the unit cost of a product,thereby producing a ________ effect.

A)scale
B)scope
C)cluster
D)network
E)Mohring

Question 36

Which of the following is true about a marketing cost scope effect?

A)It refers to a reduction in the sales expenditure,to increase profit margins.
B)It refers to production process improvements that are the result of learning.
C)It refers to the use of innovative marketing strategies to increase market share.
D)It refers to cost efficiencies derived from product line extensions.
E)It refers to the cost efficiency achieved by avoiding brand extensions.

Question 37

As the sales force is given more products to sell to the same customers,a(n)________ effect is created.

A)umbrella marketing
B)network
C)learning
D)marketing cost scope
E)cluster

Question 38

Calculate the average percentage cost of goods sold for the top three competitors of a business when the cost advantage index of the business is 120 and the percentage cost of goods sold by the business is 60%.

A)120
B)53.22
C)50
D)80
E)42

Question 39

Calculate the approximate relative market share of a company whose market share is 76%,while the market shares of its three largest competitors are 13%,22%,and 26%.

A)125
B)81
C)150
D)46
E)27

Question 40

Calculate a company's market share if the company's relative market share is 60 and the market shares of its three largest competitors are 14%,8%,and 16%.

A)40.6%
B)20%
C)46%
D)22.8%
E)60%

Question 41

Name and describe the three different types of cost advantage a business can achieve to attain a competitive advantage.Be sure to explain how each type results in a competitive advantage.

Question 42

MINI-CASE
Sparks Inc. ,a firm that manufacturers low voltage halogen lamps,currently has a 40% share of a 1 million unit market.The firm has extensive customer knowledge,as well as extensive competitor knowledge.The three largest competitors of Sparks Inc.have market shares of 5%,10%,and 15%,respectively.
Mini-Case Question.Sparks Inc.uses its superior knowledge of both customers and competitors to devise a market-based strategy to achieve desired gains without sustaining excessive losses.The firm seeks to gain a competitive advantage through a nonconfrontational approach.Which of the following competitive strategies is Sparks Inc.most likely to be using?

A)a disintermediation strategy
B)an inside the box strategy
C)an oblique strategy
D)a frontal attack strategy
E)a benchmarking strategy

Question 43

Which of the following is an industry force that shapes the attractiveness of a competitive environment?

A)competitor intelligence
B)knowledge advantage
C)cost advantage
D)market share advantage
E)customer buying power

Question 44

Which of the following is true regarding an oblique strategy?

A)It is based on extensive competitor knowledge but little or no customer knowledge.
B)It leverages a knowledge advantage with respect to customers and competitors.
C)It involves making a direct attack on a competitor's position.
D)It is an overreaction to competitor moves due to limited customer knowledge.
E)It is an overreaction to customer demands due to limited customer knowledge.

Question 45

Name and describe four of the six industry forces that shape the attractiveness of a competitive environment.

Question 46

MINI-CASE
Sparks Inc. ,a firm that manufacturers low voltage halogen lamps,currently has a 40% share of a 1 million unit market.The firm has extensive customer knowledge,as well as extensive competitor knowledge.The three largest competitors of Sparks Inc.have market shares of 5%,10%,and 15%,respectively.
Mini-Case Question.The percentage cost of goods sold by Sparks Inc.is 40%.The percentage cost of goods sold by its three largest competitors is 30%,30%,and 20%.What is the cost advantage index of Sparks Inc.?

A)80
B)120
C)43
D)150
E)62

Question 47

Which of the following is true regarding a reactive strategy?

A)It is based on extensive customer and competitive knowledge.
B)It seeks to gain a competitive advantage without direct confrontation.
C)It refers to making competitive moves from an internal perspective with no real market knowledge.
D)It leverages a knowledge advantage with respect to customers and competitors.
E)It is an overreaction to competitor moves due to limited competitor knowledge.

Question 48

Without specifying the criteria for evaluating competing products,customers are asked to rate the degree to which they can differentiate two competing products.This technique of capturing customers' views about competing products or services is called ________.

A)the rotational axis analysis
B)perceptual mapping
C)the emphatic method
D)benchmarking
E)product positioning

Question 49

Which of the following is true regarding customer buying power?

A)When customer buying power is high,the cost of serving customers decreases.
B)When customer buying power is high,the market attractiveness increases.
C)When customers can easily switch from one supplier to another,the competition decreases.
D)When the purchased product or service is of limited importance to the customer,supplier dependence is much higher.
E)When customer buying power is high,they force increased competition.

Question 50

Which of the following is true regarding competitive rivalry?

A)The more competitors an industry has,the higher will be the differentiation among them.
B)High differentiation among competitors increases competitive rivalry.
C)Excess capacity within an industry can cause competitors to intensify their moves against one another.
D)Intense competitive rivalry leads to higher prices and margins.
E)Intense competitive rivalry leads to lower marketing and sales expenses for retaining customers.

Question 51

Which of the following is most likely to be a barrier to exit?

A)high advertising expenses
B)specialized assets
C)many product substitutes
D)high customer power
E)R&D expenses

Question 52

If a business is a large purchaser of a commodity product (less important to the buyer)and is in an industry in which switching costs are low,generally the supplier power ________.

A)is low
B)is high
C)is greater than customer buying power
D)is equal to customer buying power
E)is likely to increase with a decrease in switching costs

Question 53

Which of the following refers to a situation where downward price moves by one competitor force "follower moves" by other competitors in order to minimize lost profits?

A)a technology trap
B)competitive benchmarking
C)the prisoner's dilemma
D)a monopoly market
E)a free market situation

Question 54

An oblique strategy differs from a reactive strategy in that an oblique strategy ________.

A)requires minimal customer knowledge
B)requires minimal competitor knowledge
C)involves making a direct attack on a competitor's position
D)refers to making competitive moves from an internal perspective with no real market knowledge
E)seeks to gain a competitive advantage without direct confrontation

Question 55

A business identifies its key area of competitive weakness and then looks outside its industry to another company that is recognized as a world-class performer in that area in an attempt to emulate them.This process is referred to as ________.

A)ideal points mapping
B)product positioning
C)competitive benchmarking
D)perceptual mapping
E)competitive mapping

Question 56

Which of the following industry forces is most likely to give a new business a far better chance of succeeding?

A)intense rivalry among competitors
B)high customer power
C)high barriers to entry
D)high supplier power
E)many product substitutes

Question 57

Which of the following is true regarding an inside-the-box strategy?

A)It is an overreaction to customer demands due to limited competitor knowledge.
B)It leverages a knowledge advantage with respect to customers and competitors.
C)It is an overreaction to competitor moves due to limited customer knowledge.
D)It is based on minimal customer and competitor knowledge.
E)It is based on extensive competitor knowledge,but little or no customer knowledge.

Question 58

In the context of competitor analysis,which of the following formulas is used by a business to calculate the performance gap?

A)Business Performance − Competitor Performance
B)Business Performance - Total Production and Marketing Costs
C)(Market-Based Performance - Operating Performance)/ Average Competitor Performance
D)Potential Business Performance - Actual Business Performance
E)Business's Relative Performance - Average Performance of Top Three Competitors

Question 59

Global Wood Ventures Inc.is an American firm that manufactures,distributes,and exports structural plywood.The firm finds that multiple inventory management errors were causing customer dissatisfaction and reducing the firm's profits.It identified several companies,in completely different industries,that were considered to be the best in inventory management.After obtaining permission,professionals from Global Wood Ventures Inc.studied the inventory management system of One Stop Mart,a firm well known for its inventory management techniques.This knowledge helped Global Wood Ventures Inc.to develop a more error-free inventory management system.In this example,Global Wood Ventures Inc.uses which of the following strategies?

A)competitive benchmarking
B)perceptual mapping
C)disintermediation
D)competitor analysis
E)vertical integration

Question 60

MINI-CASE
Sparks Inc. ,a firm that manufacturers low voltage halogen lamps,currently has a 40% share of a 1 million unit market.The firm has extensive customer knowledge,as well as extensive competitor knowledge.The three largest competitors of Sparks Inc.have market shares of 5%,10%,and 15%,respectively.
Mini-Case Question.The current relative market share of Sparks Inc.is ________.

A)166.7
B)133.3
C)105.5
D)75.5
E)60