Deck 5: Competitive Rivalry and Competitive Dynamics

Question 1

The drivers of competitive behavior are awareness of the competitor, motivation to take action or respond, and the organization's ability in terms of resources and flexibility.

Answer 1

True

Question 2

Expanding geographic scope in the global economy allows competitive rivalry to ease because of the larger potential customer base.

Answer 2

False

Question 3

A competitive action is a strategic or tactical action taken by a firm to gain or defend a competitive advantage.

Answer 3

True

Question 4

Because Netflix uses only online and mail-based facilities, they have low market commonality with Blockbuster.

Question 5

Multimarket competition refers exclusively to situations in which firms compete against each other simultaneously in several geographic markets.

Question 6

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

Question 7

The relationship of Burger King and McDonald's is an example of multimarket competition where market commonality exists.

Question 8

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

Question 9

Two firms that have similar resources, but do not share markets would not be direct and mutually acknowledged competitors.

Question 10

The description of firms' strategic actions as dynamic in nature suggests that actions taken by one firm cause responses from competitors.

Question 11

Extensive market commonality guarantees intense competition in an industry.

Question 12

It is much easier for a competitor to implement strategic actions than tactical actions.

Question 13

Wal-Mart has recently opened a store in Alsatia, Missouri. Several local small retailers have decided that choosing not to respond to Wal-Mart'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 14

The availability of daily newspapers on the Internet is an example of increased market commonality between traditional newsstands and newspaper publishers.

Question 15

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

Question 16

HP and Dell are mutually interdependent organizations.

Question 17

Intensified rivalry within an industry results in decreased average profitability for the firms within it.

Question 18

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

Question 19

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

Question 20

Bayou Belle Water markets water drawn only from a single artesian well in Southern Louisiana. It has a loyal following in its region. Since 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

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

Question 22

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

Question 23

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 24

The benefits of being a first mover are most substantial in fast cycle markets.

Question 25

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 26

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 27

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 28

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

Question 29

A firm can expect that every launch of a successful new product will be followed by a counterattack by competitors, even in a slow-cycle market.

Question 30

The probability of a competitive response to a competitive action is based partly on the reputation of the competitor.

Question 31

The best predictor of a competitor's action is the amount of organizational slack it holds.

Question 32

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 33

Large firms with significant market power who act like small firms (making strategic decisions and implementing them with speed) and are innovative, are typically strong competitors and are likely to earn above-average returns.

Question 34

Mighty Mike's, a manufacturer of power tools for the home hobbyist, has seen its main competitor, MyTools, bring out 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 MyTool's new line is a success. Mighty Mike could be classified as a second mover.

Question 35

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

Question 36

Quality begins at the bottom of the organization where employees must create values for quality that permeate the entire organization.

Question 37

Firms in a slow-cycle market are shielded from imitators for long periods of time.

Question 38

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

Question 39

Kodak has recently entered the inkjet printer market. While this is an established market, Kodak's use of a new ink technology makes them a first mover.

Question 40

Product quality is a universal theme and is a necessary, but not a sufficient, condition for competitive success.

Question 41

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 42

Netflix pioneered the online movie rental business. For eight years, Netflix experienced rapid growth. Blockbuster, the established leader in the retail rental portion of the market, eventually launched their own online rental program. All of the following increased the likelihood of a response by Blockbuster EXCEPT

A) the strategic actions initiated by Netflix threatened Blockbusters core business.
B) the growing size of Netflix increased its likelihood of initiating a first-mover attack.
C) Blockbuster's dependence on the rental market as the primary source for its revenues.
D) Netflix's reputation as the market leader in the online market.

Question 43

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) the slower
C) the larger
D) more tactical

Question 44

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 45

Which of the following is an example of a tactical action?

A) Wal-Mart's launch of Sam's Club stores.
B) Continental Airlines exit from a hub airport in Denver.
C) Netflix beginning to offer music DVDs in addition to movies.
D) Dell's launch of a new line of high performance, custom-made PCs.

Question 46

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 47

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

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

Question 48

Dell has been the longtime leader in the custom built, direct to consumer segment of the PC business. HP recently surpassed Dell as market share leader. In response, Dell has begun experimenting with opening retail stores to counter HP's presence in consumer electronics stores such as Best Buy. Which statement accurately reflects this situation?

A) Because Dell is a $56 billion company, opening a few retail stores is a tactical action.
B) HP's decision to focus its attention in markets where Dell was absent means HP was a late mover.
C) While Dell offers built-to-order computers and HP focuses on sales of pre-built machines through retail distribution, the firms are direct competitors.
D) Because Dell has not previously operated its own stores, it is a first mover in retail PC sales.

Question 49

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 50

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 51

Hilliard Neutraceuticals 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 52

____ 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 53

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 54

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 55

____ 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 56

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 57

Which pair of firms has the LEAST resource similarity?

A) McDonalds and Microsoft
B) Target and Wal-Mart
C) HP and Dell
D) FedEx and UPS

Question 58

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 59

Which of the following is an example of a strategic action?

A) a "two movies for the price of one" campaign by Blockbuster Video
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 60

Which pair of firms has the greatest market commonality?

A) HP and Dell
B) HP and Microsoft
C) Dell and Microsoft
D) Microsoft and Lenovo

Question 61

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 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

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 64

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 65

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 66

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 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 67

Which PC maker has historically benefited the most from its reputation?

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

Question 68

Product quality has long been a hallmark for Daimler-Benz. What company action has been attributed, at least in part, to eroding this image?

A) Their entrance into the subcompact market.
B) Their launch of an SUV using a platform from BMW.
C) Their acquisition of Chrysler.
D) Their layoff of workers following a 60 day strike in 2007.

Question 69

Which of the following is the most strategic action by Wal-Mart?

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) Their decision to begin selling gasoline

Question 70

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 71

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 U.S. or developed countries.
D) are associated with predatory competition.

Question 72

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

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.

Question 73

Late movers are those firms that

A) wait to act for a long period of time after the second movers have responded.
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 74

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 75

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 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

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 78

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 79

Ninety percent of Wm. Wrigley Company's total revenue comes from chewing gum. This is an example of

A) market commonality.
B) standard-cycle markets.
C) economies of scale.
D) market dependence.

Question 80

Which of the following is TRUE of Wal-Mart?

A) Wal-Mart has an unusual amount of flexibility for a large firm.
B) Wal-Mart'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) Wal-Mart's advantage lies in its ability to "think big."