Question 1

Analyzed in terms of Porter's five forces model, online music file sharing services represent a threat to the music industry in the form of a substitute product.

Accepted Answer

Online music file sharing services can be considered a substitute product for the music industry, as they provide an alternative way for consumers to access and listen to music without purchasing physical copies or digital downloads through traditional music channels. This represents a threat to the music industry, as it can result in lost revenue and market share.

Question 2

Volkswagen Auto Group of America markets both the VW and Audi nameplates in the United States.The VW brand has been hampered by perceptions of hit-and-miss quality.

Accepted Answer

This statement is true. Volkswagen has struggled with quality perception issues in the United States, particularly in the wake of its diesel emissions scandal in 2015.

Question 3

Maytag has been called "the Rolls-Royce of washers and dryers," and it can be said that it
has achieved a competitive advantage by means of differentiation.

Accepted Answer

The statement correctly identifies that Maytag has achieved a competitive advantage through differentiation.

Question 4

The essence of marketing strategy is successfully relating the strengths of an organization to its environment.

Accepted Answer

Marketing strategy aims to align a company's strengths with the existing and emerging opportunities in its environment to achieve its business objectives. Therefore, the statement is True.

Question 5

Michael Porter's five forces model and Rugman and D'Cruz's flagship model are both based on the concept of corporate individualism.

Accepted Answer

Michael Porter's five forces model focuses on industry structure and competitive forces, while Rugman and D'Cruz's flagship model centers on networks and relationships among firms, not on corporate individualism.

Question 6

Competition in an industry tends to drive rates of return on invested capital up towards the level of "perfect competition."

Accepted Answer

Competition in an industry tends to put pressure on rates of return and drive them down towards the level of perfect competition, not up. In perfect competition, there are many buyers and sellers, products are homogeneous, and no one company has market power to influence prices. This level of competition results in lower profits for companies as they are forced to compete on price and other factors.

Question 7

In Michael Porter's model, "buyers" refers to manufacturers (e.g., GM)and retailers (e.g.Wal-Mart), rather than consumers.

Accepted Answer

In Porter's model, the term "buyers" refers to the companies that purchase goods or services from suppliers, such as manufacturers and retailers. It is not referring to the ultimate end-consumers who purchase the products from these companies.

Question 8

Rugman and D'Cruz's development of the flagship model was influenced by their study of Japanese keiretsu.

Accepted Answer

Rugman and D'Cruz's development of the flagship model was indeed influenced by their study of Japanese keiretsu.

Question 9

A useful way of gaining insight into competitors is through industry analysis.

Accepted Answer

Industry analysis involves researching and analyzing the competitive landscape, which can provide valuable information about the strengths, weaknesses, opportunities, and threats of competitors in the industry. This can help businesses to develop effective strategies and gain a competitive advantage.

Question 10

"Switching costs" are one of the barriers to entry in Porter's five forces model.

Accepted Answer

Switching costs refer to the costs a customer incurs when switching from one product or service to another, and they create a barrier to entry for new competitors in that market. Thus, switching costs are recognized as a barrier to entry in Porter's five forces model.

Question 11

Michael Porter's four generic strategies for achieving competitive advantage are product differentiation, price leadership, promotion power, and distribution efficiency.

Accepted Answer

Michael Porter's four generic strategies for achieving competitive advantage are cost leadership, differentiation, cost focus, and differentiation focus, not the options listed.

Question 12

According to the generic strategy framework, cost leadership is a sustainable source of competitive advantage if barriers exist that prevent competitors from achieving the same low costs.

Accepted Answer

Cost leadership can be a sustainable source of competitive advantage if there are barriers to entry that prevent competitors from achieving the same low costs. These barriers could include economies of scale, proprietary technology or access to low-cost inputs. Without such barriers, competitors could easily replicate the cost structure, eroding the cost leader's advantage.

Question 13

If suppliers have enough leverage over industry firms, they can raise prices high enough to significantly influence the profitability of their organizational customers.

Accepted Answer

If suppliers have a high degree of power and control over the supply chain, they can increase prices or limit availability of key inputs, which can have a significant impact on the profitability of their customers. This is why supplier power is an important factor to consider when assessing industry competitiveness and profitability.

Question 14

Michael Porter's generic strategy framework is derived from the basic types of competitive advantage and the scope of the target market served.

Accepted Answer

Michael Porter's generic strategy framework is indeed derived from the basic types of competitive advantage and the scope of the target market served. The three generic strategies are cost leadership, differentiation, and focus. These strategies are based on achieving either a lower cost position than competitors, offering a unique product or service that is valued by customers, or focusing on a specific market segment or niche.

Question 15

Rivalry among firms refers to all the actions taken by firms in the industry to improve their positions and gain advantage over each other.

Accepted Answer

Rivalry among firms is defined as the competition and actions taken by firms to improve their market position and gain an advantage over their rivals in the same industry.

Question 16

Product differentiation and brand loyalty "raise the bar" for would-be industry entrants who would be required to make substantial investments in research or advertising.

Accepted Answer

Product differentiation and brand loyalty create a barrier to entry in the market, making it more difficult for new competitors to enter without investing in significant research or advertising efforts.

Question 17

Cost leadership advantage is based on a firm's position as the industry's low-cost leader in a broad market.

Accepted Answer

Cost leadership advantage entails being the industry's lowest-cost leader in a wide market, which allows the firm to offer lower prices than competitors while still earning a profit.

Question 18

Analyzed in terms of Porter's five forces model, Wal-Mart's ability to dictate terms to the music industry is one indication of the retail giant's supplier power.

Accepted Answer

In Porter's five forces model, Wal-Mart's ability to dictate terms to the music industry indicates its buyer power, not supplier power.

Question 19

Microsoft and Intel are two companies that illustrate the concept of "bargaining power of suppliers" in Porter's five forces model of industry competition.

Accepted Answer

Microsoft and Intel are better examples of companies that have significant bargaining power over their suppliers due to their large size and influence in the market, rather than illustrating the bargaining power of suppliers themselves. In Porter's model, these companies would more likely be on the buying side, demonstrating the power of buyers.

Question 20

Unique product attributes represent a barrier to industry entry known as differentiation.

Accepted Answer

Unique product attributes, also known as product differentiation, create a unique selling proposition and therefore make it more difficult for new entrants to replicate or compete against the established brands. This represents a barrier to industry entry, making option A true.

Quiz 16: Strategic Elements of Competitive Advantage