Deck 5: Competitive Rivalry and Competitive Dynamics

Question 1

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

Answer 1

False

Question 2

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 the companies have market commonality.

Answer 2

True

Question 3

By definition, to be engaged in multimarket competitions, two or more firms must compete against each other in more than one product area and in multiple geographic markets.

Answer 3

False

Question 4

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 5

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 6

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

Question 7

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

Question 8

Walmart 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 9

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 10

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

Question 11

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

Question 12

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

Question 13

Extensive market commonality guarantees intense competition in an industry.

Question 14

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

Question 15

The set of both competitive actions and responses that a firm takes to build or defend its competitive advantages and to improve its position in the market makes up competitive behavior.

Question 16

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

Question 17

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

Question 18

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 19

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

Question 20

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 21

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 22

When two firms' tangible and intangible resources compare favorably in terms of both type and amount, they are said to have resource similarity.

Question 23

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 24

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

Question 25

To be a first mover, the firm must have readily available resources to significantly invest in R&D as well as to rapidly and successfully produce and market a stream of innovative products.

Question 26

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 27

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

Question 28

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's is waiting to see whether MyTools' new line is a success.Mighty Mike's could be classified as a second mover.

Question 29

Patent laws and regulatory requirements in the United States requiring FDA (Food and Drug Administration) approval to launch new products shield pharmaceutical companies' positions.

Question 30

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 31

Large firms with significant slack resources (i.e., are able to launch a greater number of competitive actions) but that 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

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 33

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 34

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 35

Competitive rivalry has more effect on a firm's __________ strategies than the firm's other strategies.

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

Question 36

Product quality dimensions in which customers commonly express an interest include performance, features, conformance, and aesthetics.

Question 37

In a slow-cycle market, such as that experienced in the pharmaceutical industry, a firm is most vulnerable to a counterattack when a drug's patent expires.

Question 38

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

Question 39

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

Question 40

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 41

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, 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 42

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 43

Which of the following is true of a firm that has high market dependence?

A) Its competitive advantages are more sustainable
B) It is likely to respond strongly to attacks threatening its market position.
C) Its position helps protect it from attacks by competitors.
D) It will respond quickly to any threat to its position.

Question 44

In general, firms are more aware of competitors that have similar resources and that:

A) have low market dependence.
B) are late movers.
C) have low market commonality.
D) compete against the firm in multiple markets.

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 line up resources
C) slow; did not perceive gains associated with responding to Walmart's attack
D) rapid; had the resources and flexibility to compete against Walmart

Question 46

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 47

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 48

Firms with few competitive resources than the acting firm 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 49

__________ 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 50

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 51

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

A) more; more
B) less; more
C) less; less
D) more; less

Question 52

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 53

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 54

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 55

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) ongoing actions and responses among all firms competing within a market for advantageous positions.
D) ongoing set of competitive actions and competitive responses between competitors as they maneuver for advantageous market position.

Question 56

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 57

In general, compared with firms that compete in only one market, among firms that 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 58

Which of the following steps, if taken by Walmart, would be characterized as a strategic rather than tactical action?

A) Aggressive pricing to ensure it is 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 59

__________ relates to the gains or losses a firm expects to experience if it attacks a rival or responds to an attack by a rival.

A) Motivation
B) Awareness
C) Responsiveness
D) Ability

Question 60

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 61

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 62

Competitors are more likely to respond to strategic or tactical actions when they are taken by:

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

Question 63

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 64

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 65

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, which of the following would Akamai likely do?

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

Question 66

Which of the following organizations has the highest market dependence?

A) Chain of rapid-service oil change shops
B) Manufacturer of chemicals for the international pharmaceutical industry
C) Regional department store having 26 locations in the Northwest
D) Company that specializes in making replacement tiles for the space shuttle

Question 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.

Question 68

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 69

In customer feedback surveys, RTC Corp customers have indicated that they have a similar experience each time they interact with the company.This reflects success in which service quality dimension?

A) Consistency
B) Courtesy
C) Accuracy
D) Performance

Question 70

While no firm, or company wants a product to break, that does happen.In customer feedback surveys, ChirOpt customers have indicated that when they have a product that breaks, they are pleased with both the ease and the speed of the repair.This reflects success in which product quality dimension?

A) Performance
B) Consistency
C) Durability
D) Serviceability

Question 71

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 has improved

Question 72

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 73

In the context of competitive rivalry, what is an actor's reputation?

A) The perceived level of quality customer's associate with the firm's goods or service
B) A positive or negative quality attributed to one's rival based on previous competitive behavior
C) The willingness of capital markets to invest more in a firm based on past performance
D) The degree of loyalty both internal and external stakeholders demonstrate to the firm

Question 74

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 widespread rumor that Mega-Toy, Inc., the market leader in the broad children's toy market, has decided to target educational toys.Which of the following 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 75

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

A) is by a competitor known for risky or complex competitive behavior.
B) makes the firm's market position less defensible.
C) damages the firm's ability to use its capabilities.
D) improves the competitor's market position.

Question 76

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 77

A second mover:

A) is typically ineffective in its response to a 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 78

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 79

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 80

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.