Name: The Management of Strategy Concepts International Edition 10th Edition by R. Duane Ireland - Test Bank
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Complete Test Bank With Answers

Sample Questions Posted Below

Chapter 5—Competitive Rivalry and Dynamics

TRUE/FALSE

1. 2. 3. 4. 5. 6. Canon’s desktop copiers couldn’t collate, enlarge, or do grayscale replication and as such failed as a

disruptive innovation (Chapter 5 Opening Case).

ANS: F PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

Canon’s desktop copier was a disruptive innovation for the then larger photocopier industry dominated

by Xerox (Chapter 5 Opening Case).

ANS: T PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

Because of the demanding technology development required, disruptive innovations such as the

iPhone are usually confined to a single industry where it can focus on competing against a few rivals

(Chapter 5 Opening Case).

ANS: F PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

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

competitors.

ANS: T PTS: 1 DIF: Easy OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Knowledge

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

ANS: F PTS: 1 DIF: Easy OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Strategic & systems skills | Bloom: Knowledge

Competitive rivalry is the set of competitive actions and responses that occur among firms as they

maneuver for an advantageous market position.

ANS: T PTS: 1 DIF: Easy OBJ: Knowledge

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.7. 8. NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Strategic & systems skills | Bloom: Knowledge

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

ANS: F PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Strategic & systems skills | Bloom: Comprehension

Competitive dynamics refers to the total set of actions and responses taken by all firms competing

within a market.

9. 10. 11. 12. ANS: T PTS: 1 DIF: Easy OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Strategic & systems skills | Bloom: Knowledge

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.

ANS: T PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Comprehension

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

ANS: T PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Comprehension

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

acknowledged competitors.

ANS: T PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Knowledge

According to the Chapter 5 Strategic Focus, the global automobile producing industry has high market

commonality but low resource similarity.

ANS: F PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Application

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.13. 14. 15. 16. 17. 18. The global automobile producing industry has high market commonality and high resource similarity,

and are aware, motivated, and have the ability to compete for market share in each segment and

country they have entered (Chapter 5 Strategic Focus).

ANS: T PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Application

Toyota’s hybrid power train (e.g., the Prius) has been dominant for a number of years but rivals such as

Porche, Chrysler, Hyundai and GM have all developed competing hybrid systems. The developments

aimed at improving fuel efficiency illustrate competitive rivalry or “actions and responses” by firms in

the global automobile industry (Chapter 5 Strategic Focus).

ANS: T PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Application

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.

ANS: T PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Knowledge

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 both companies have market

commonality.

ANS: T PTS: 1 DIF: Easy OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Application

Research suggests that a firm with greater multimarket contact is less likely to initiate an attack, but

more likely to respond aggressively when attacked.

ANS: T PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Comprehension

Extensive market commonality guarantees intense competition in an industry.

ANS: F PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Comprehension

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.19. 20. 21. 22. 23. 24. 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.

ANS: F PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing

strategy & innovation | Bloom: Application

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

acknowledged competitors.

ANS: T PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Comprehension

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

and mutually acknowledged competitors.

ANS: T PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Comprehension

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.

ANS: F PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Application

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.

ANS: T PTS: 1 DIF: Easy OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing decision-making processes | Bloom: Knowledge

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

markets.

ANS: T PTS: 1 DIF: Easy OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing decision-making processes | Bloom: Knowledge

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.25. 26. 27. 28. 29. A lack of awareness leads to a reduction in competition.

ANS: F PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing decision-making processes | Bloom: Comprehension

Without available resources (such as financial capital and people), the firm lacks the ability to attack a

competitor or respond to its actions.

ANS: T PTS: 1 DIF: Easy OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing decision-making processes | Bloom: Knowledge

Under the framework of competitive action and response, “ability” refers to an attacking or responding

firm’s knowledge of the competitive market characteristics.

ANS: F PTS: 1 DIF: Easy OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing decision-making processes | Bloom: Knowledge

Among the drivers of competitive actions and responses, motivation refers to the perceived gains that

will result from a firm which initiates an attack. If a firm perceives that its position will improve, it is

more likely to attack.

ANS: T PTS: 1 DIF: Easy OBJ: Comprehension

NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing the

task environment | Bloom: Comprehension

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.

30. ANS: F PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing the

task environment | Bloom: Comprehension

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

advantage or improve its market position.

ANS: T PTS: 1 DIF: Easy OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Knowledge

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.31. 32. 33. 34. 35. 36. 37. A tactical competitive action involves a significant commitment of specific and distinctive

organizational resources.

ANS: F PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Knowledge

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

ANS: F PTS: 1 DIF: Easy OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Knowledge

Boeing’s decision to commit the resources required to build the super-efficient 787 midsized jetliner is

an example of a tactical action.

ANS: F PTS: 1 DIF: Easy OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

Wal-Mart’s aggressive pricing strategy is a strategic action that plays a major role in how it competes.

ANS: F PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

As noted in the Chapter 5 Opening Case, Apple opened a service called “Game Center” once it found

that users were using its iPhone, iPad, and iPod platforms for videogames. This is an example of a

strategic action by Apple which was followed by strategic responses by Nintendo and Sony.

ANS: T PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

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

ANS: T PTS: 1 DIF: Easy OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Comprehension

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

engineering.

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.38. 39. 40. ANS: F PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Comprehension

To be a first mover, the firm must have readily available resources to invest in R&D as well as to

rapidly and successfully produce and market a stream of innovative products.

ANS: T PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Comprehension

Often, successful imitation of the first mover’s innovations allows the second mover to avoid the

mistakes and major investments of the first mover.

ANS: T PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Comprehension

An organization with high profitability, such as Wal-Mart, will be able to develop high organizational

slack.

41. ANS: T PTS: 1 DIF: Easy OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

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.

42. 43. ANS: T PTS: 1 DIF: Easy OBJ: Application

NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing

strategy & innovation | Bloom: Application

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

ANS: T PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Strategic & systems skills | Bloom: Comprehension

In general, small firms are more likely than large firms to launch competitive actions and tend to do it

more quickly.

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.44. 45. 46. 47. 48. 49. ANS: T PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Strategic & systems skills | Bloom: Comprehension

Large firms are likely to initiate more competitive actions along with more strategic actions during a

given period.

ANS: T PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Strategic & systems skills | Bloom: Comprehension

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

actions) but who remain flexible and act like small firms (i.e., are able to launch a variety of actions)

will be more successful against rivals.

ANS: T PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Strategic & systems skills | Bloom: Comprehension

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

ANS: T PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff

& Rubin: Managing strategy & innovation | Bloom: Comprehension

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.

ANS: F PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff

& Rubin: Managing strategy & innovation | Bloom: Comprehension

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

permeate the entire organization.

ANS: F PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff

& Rubin: Managing strategy & innovation | Bloom: Comprehension

Quality affects the degree of rivalry in that firms lacking quality are likely to me more aggressive in

their competitive actions until the quality problems are corrected.

ANS: F PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.50. 51. 52. 53. 54. & Rubin: Managing strategy & innovation | Bloom: Comprehension

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.

ANS: T PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff

& Rubin: Managing strategy & innovation | Bloom: Comprehension

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

ANS: T PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Comprehension

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.

ANS: F PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Comprehension

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.

ANS: T PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

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

leader.

55. ANS: T PTS: 1 DIF: Easy OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing decision-making processes | Bloom: Comprehension

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.

ANS: F PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment |Bloom: Comprehension

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.56. 57. 58. 59. 60. 61. 62. 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.

ANS: F PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Comprehension

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

competitor.

ANS: T PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Comprehension

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

ANS: T PTS: 1 DIF: Easy OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Knowledge

Disney is an example of a firm in a slow-cycle market because its animated characters are shielded

from imitation by copyrights and trademarks.

ANS: T PTS: 1 DIF: Easy OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Application

Patent laws and regulatory requirements such as required FDA (Food and Drug Administration)

approval to launch new products shield pharmaceutical companies’ positions in this slow-cycle market.

ANS: T PTS: 1 DIF: Easy OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Application

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.

ANS: T PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Reflective Thinking Skills | Management: Leadership Principles | Dierdorff & Rubin:

Interpersonal orientation | Bloom: Application

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.

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.63. 64. 65. 66. ANS: T PTS: 1 DIF: Easy OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Comprehension

Fast-cycle markets are characterized by “generational products” which start out with a substantial

technological advance in the performance of a product category followed by incremental technological

advances as new generations of products are introduced.

ANS: T PTS: 1 DIF: Easy OBJ: Application

NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing

strategy & innovation | Bloom: Application

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.

ANS: T PTS: 1 DIF: Easy OBJ: Application

NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing

strategy & innovation | Bloom: Application

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

ANS: F PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Comprehension

In the Chapter 5 Strategic Focus, companies such as Amazon, Oracle, HP and Dell competing in the

cloud computing market have been able to develop sustainable competitive advantages.

ANS: F PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Application

MULTIPLE CHOICE

1. Canon’s desktop copiers and Apple’s iPhone are examples of _____________ that are ________

rivalry battles with competitors (Chapter 5 Opening Case).

a. incremental innovations; winning

b. disruptive innovations; winning

c. new products; intensifying

d. disruptive innovations; reducing

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.2. 3. 4. 5. ANS: B PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

According to the Chapter 5 Opening Case, in the video-on-demand market, Apple’s iTunes service

________________.

a. b. d. is shielded from competition by Apple’s superior technology

is an example of an incremental innovation

c. has no current rivals

might be disrupted by Walmart’s Vudu video streaming service

ANS: D PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

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

ANS: A PTS: 1 DIF: Easy OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Knowledge

Multimarket competition occurs when firms

a. b. c. d. sell different products to the same customer.

have a high level of awareness of their competitors’ strategic intent.

simultaneously enter into an attack strategy.

compete against each other in several geographic or product markets.

ANS: D PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Knowledge

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. d. total set of actions and responses taken by all firms competing within a market.

ongoing set of competitive actions and competitive responses between competitors as they

maneuver for advantageous market position.

ANS: C PTS: 1 DIF: Hard OBJ: Knowledge

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.6. 7. 8. 9. NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Knowledge

Intensified rivalry within an industry results in

a. b. c. d. increased hiring across the industry.

increased total revenues across the industry.

decreased average profitability across the industry.

increased entries into the industry.

ANS: C PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Knowledge

Competition in the global automobile producer industry is characterized by________________

(Chapter 5 Strategic Focus)

a. b. c. d. lack of awareness and motivation.

high market commonality and low resource similarity.

high market commonality and high resource siimilarity.

reduced rivalry, especially in the production of fuel efficient cars.

ANS: C PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Application

US-owned automobile companies have recently (2011) bolstered their fuel efficient offerings in part

due to __________________ (Chapter 5 Strategic Focus)

a. b. the high exit barriers in the industry.

knowing what had to be done and having the motivation to do it which came from the

overlapping market commonality and resource similarity between global competitors.

c. d. low market commonality which prevented retaliation from competitors in key markets.

reduced rivalry in the segment of the industry producing fuel efficient cars.

ANS: B PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Application

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

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.10. 11. 12. d. Hilliard and Ahrens.

Ahrens will respond after a long delay as the nutrition supplement industry is a slow-cycle

industry.

ANS: C PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing the

task environment | Bloom: Application

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.

ANS: B PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Comprehension

Research suggests that a firm with greater multimarket contact is _______ likely to initiate and attack,

and _____ likely to respond aggressively when attacked.

a. more; more

b. less; more

c. less; less

d. more; less

ANS: B PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Comprehension

Which pair of firms has the LEAST resource similarity?

a. Small, family-owned Italian restaurant; Olive Garden

b. Target; Wal-Mart

c. HP; Dell

d. FedEx; UPS

ANS: A PTS: 1 DIF: Easy OBJ: Application

NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing the

task environment | Bloom: Application

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.13. 14. 15. 16. 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.

ANS: D PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing the

task environment | Bloom: Application

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

ANS: C PTS: 1 DIF: Easy OBJ: Comprehension

NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing

strategy & innovation | Bloom: Comprehension

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.

ANS: D PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Knowledge

____ and ____ describe the situation in which organizations are direct competitors and are fully aware

of the competition.

a. b. c. d. High market commonality, high resource similarity

High market commonality, low resource similarity

Low market commonality, high resource similarity

Low market commonality, low resource similarity

ANS: A PTS: 1 DIF: Medium OBJ: Knowledge

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.17. 18. 19. 20. NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Knowledge

Firms with few competitive resources are more likely to

a. b. c. d. not respond to competitive actions.

respond quickly to competitive actions.

delay responding to competitive actions.

respond to strategic actions, but not to tactical actions.

ANS: C PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Comprehension

____ 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

ANS: A PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing decision-making processes | Bloom: Knowledge

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

ANS: B PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing decision-making processes | Bloom: Knowledge

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. slower

c. larger

d. more tactical

ANS: B PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing decision-making processes | Bloom: Comprehension

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.21. 22. 23. 24. 25. Wal-Mart 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. b. c. d. rapid; were nimble and flexible

slow; lacked the ability to marshal resources

rapid; perceived gains from responding to Wal- Mart’s attack

rapid; had the resources and flexibility compete against Wal-Mart

ANS: B PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Application

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

ANS: C PTS: 1 DIF: Easy OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Knowledge

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

a. b. c. d. a “two movies for the price of one” campaign by Blockbuster Video

use of product coupons by a local grocer

entry into the European market by Home Depot

fare increases by Southwest Airlines

ANS: C PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

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

a. b. c. d. Wal-Mart’s launch of Sam’s Club stores.

Continental Airlines exit from a hub airport in Denver.

Netflix beginning to offer music DVDs in addition to movies.

Dell’s launch of a new line of high performance, custom-made PCs.

ANS: C PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

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

a. b. Aggressive pricing to ensure they are a price leader

Aggressively pricing toys and electronics during the holiday season

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.c. d. Aggressively pricing school-related items in the back-to-school season

Entering a new foreign market

ANS: D PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

26. On the whole there are more competitive responses to

a. b. c. d. strategic actions than to tactical actions.

tactical actions than to strategic actions.

buyer pressures than to supplier pressures.

the demands of the top management team than to industry structural pressures.

ANS: B PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Strategic & systems skills | Bloom: Comprehension

27. First movers are

a. b. c. d. entrepreneurs who lead in the establishment of new industries.

firms that are first to exit a declining industry.

firms that take an initial competitive action.

individuals who move frequently as employment opportunities change in a locale.

ANS: C PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Strategic & systems skills | Bloom: Knowledge

28. The chief disadvantage of being a first mover is the

a. high degree of risk.

b. c. d. high level of competition in the new marketplace.

inability to earn above-average returns unless the production process is very efficient.

difficulty of obtaining new customers.

ANS: A PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff

& Rubin: Managing strategy & innovation | Bloom: Comprehension

29. Which of the following statements is FALSE?

a. b. c. d. First movers tend to take higher risks than second and later movers.

First movers tend to have significantly higher revenues than second movers.

First movers have lower survival rates than second and late movers.

First movers tend to have more organizational slack than later movers.

ANS: C PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Knowledge

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.30. A second mover

a. b. c. is typically ineffective in its response to the first mover.

attempts to provide a product with greater customer value than the first mover’s product.

usually incurs higher expenses than the first mover since it must engage in reverse

engineering.

31. 32. 33. d. typically has a higher survival rate than first movers which typically take greater risks.

ANS: B PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Comprehension

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. d. take an initial competitive action (either strategic or tactical).

typically achieve higher-than-average returns because they can imitate the most efficient

actor.

ANS: A PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Knowledge

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. c. Bubble-Up’s greater organizational slack will allow it to aggressively attack Mega-Toy.

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.

ANS: C PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing

strategy & innovation | Bloom: Comprehension

A firm that is LEAST likely to launch competitive actions is one that has

a. organizational slack.

b. advanced research and development.

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.34. 35. 36. 37. c. recently improved the quality of its products.

d. large size.

ANS: D PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing decision-making processes | Bloom: Comprehension

All competitive advantages do not accrue to large-sized firms. A major advantage of smaller firms is

that they

a. b. c. d. are more likely to have organizational slack.

can launch competitive actions more quickly.

have more loyal and diverse workforces.

can wait for larger firms to make mistakes in introducing innovative products.

ANS: B PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Strategic & systems skills | Bloom: Comprehension

Which of the following is TRUE of Wal-Mart?

a. b. Wal-Mart has an unusual amount of flexibility for a large firm.

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.”

ANS: A PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

Which of the following is TRUE of Southwest Airlines?

a. b. Southwest has an unusually low amount of flexibility for a large firm.

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.”

ANS: D PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

Without quality, the firm’s products

a. can compete effectively on the basis of low price.

b. lack credibility among customers.

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.c. d. must be exported to developing countries, because they are not competitive in the U.S. or

developed countries.

are associated with predatory competition.

ANS: B PTS: 1 DIF: Easy OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff

& Rubin: Managing strategy & innovation | Bloom: Comprehension

38. 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.

39. 40. 41. ANS: A PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Comprehension

Quality affects competitive rivalry because a competitor whose products suffer from poor quality

likely will _____________ until ________________.

a. b. c. d. initiate more competitive actions; the firm returns to profitability

initiate fewer competitive actions; the quality problems are corrected

initiate more competitive actions; the quality problems are corrected

advertise more; customers believe the quality had improved

ANS: B PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff

& Rubin: Managing strategy & innovation | Bloom: Comprehension

Competitors are more likely to respond to competitive actions that are taken by

a. differentiators.

b. larger companies.

c. first movers.

d. market leaders.

ANS: D PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Knowledge

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

a. b. c. d. the attack is by a price predator.

the attack makes the firm’s market position less defensible.

the attack damages the firm’s ability to use its capabilities.

the attack improves the competitor’s market position.

ANS: A PTS: 1 DIF: Hard OBJ: Comprehension

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.42. 43. 44. 45. NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Comprehension

Which company below committed significant resources to enter the information services market and,

given its success, was imitated by other competitors?

a. Compaq

b. IBM

c. HP

d. Dell

ANS: B PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Knowledge

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, what would be

Akamai’s likely response?

a. raise its prices

b. do nothing since it is the market leader

c. exit the industry

d. lower its prices

ANS: D PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

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. c. d. respond with fierce attacks because of resource dissimilarity.

respond aggressively because of high market dependence.

take no competitive response because of the lack of mutual interdependence among the

nurseries.

ANS: C PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing

strategy & innovation | Bloom: Application

Which organization has the highest market dependence?

a. a chain of rapid-service oil change shops

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.46. 47. 48. b. c. d. a manufacturer of chemicals for the international pharmaceutical industry

a regional department store having 26 locations in the Northwest

a company that specializes in making replacement tiles for the space shuttle

ANS: D PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

Sustained competitive advantage is most achievable in a ____ market.

a. slow-cycle

b. medium-cycle

c. standard-cycle

d. fast-cycle

ANS: A PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Comprehension

Walt Disney’s focus on ____ is typical of a slow-cycle market.

a. innovation

b. total quality

c. proprietary rights

d. economies of scale

ANS: C PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff

& Rubin: Managing strategy & innovation | Bloom: Application

The CEO of the Wholesome Food retail grocery chain, which specializes in organic and natural

produce and meat, has stated, “The key to success is to find your niche and focus on it, regardless of

what anyone else does.” The CEO

a. realizes that he must understand competitors in order to predict their competitive actions

and responses.

b. understands that he is the market leader in his niche and thus has a sustainable competitive

advantage.

c. believes he has placed his firm in a slow-cycle industry where concerns about protecting

unique competencies dominate concerns about market share.

d. realizes his firm has such lower resources than other competitors that his chain is

“competitively invisible” to them.

ANS: C PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing the task environment | Bloom: Application

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.49. 50. 51. 52. The ability of Disney to maintain its competitive advantage through proprietary rights to its characters

would be severely weakened if

a. b. c. d. theme parks with alternative cartoon characters were built in large numbers.

numerous lawsuits against copyright thieves tainted the reputation of the company.

Disney attempted to move beyond its traditional industry.

Disney’s cartoon characters became widely perceived as old-fashioned and unappealing.

ANS: D PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing the task environment | Bloom: Application

Lawsuits over patent and copyright infringements are more common and intense in

a. b. fast-cycle markets because the market is innovation-driven.

standard-cycle markets because the firm’s brand name is such an important competitive

advantage.

c. slow-cycle markets, because of the ability to shelter the company from imitation of its

competitive advantage.

d. standard-cycle markets because innovation is rare, and so gives the innovating firm a

significant competitive advantage.

ANS: C PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing the task environment | Bloom: Comprehension

Traditionally, the music industry signed multi-year contracts with artists and sold copyright protected

music through established distribution channels. A shift to the digital format and the rise of Internet

technology has resulted in the sharing of music over peer-to-peer networks, a practice the industry

called “piracy.” In recent years, the music industry has seen a rapid decline in the number of CDs sold.

At the same time, the ownership of the distribution rights of musical content under copyright laws

remains clear. Attempts at innovation by individual record labels to offer music as direct downloads to

consumer are quickly copied by other labels. Based on these factors, the best assessment is that the

music industry has shifted from a ____ to a ____ cycle market.

a. slow; fast

b. slow; standard

c. standard; slow

d. standard; fast

ANS: D PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing the task environment | Bloom: Comprehension

Which industry can be LEAST described as a slow cycle market?

a. Freight railroads

b. Pharmaceuticals

c. Cell phone provider

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.53. 54. 55. 56. d. Private ownership of highways and bridges

ANS: C PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing the task environment | Bloom: Application

Reverse engineering is characteristic of

a. first movers.

b. fast-cycle markets.

c. market leaders.

d. price predators.

ANS: B PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Strategic & systems skills | Bloom: Knowledge

Companies in fast-cycle markets need to profit quickly from an innovative product for all of the

following reasons EXCEPT

a. b. c. d. the technology used is not proprietary.

the prices of component parts tends to rise rapidly.

product prices fall quickly in fast-cycle markets.

counterattacks from rivals come quickly.

ANS: B PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing the task environment | Bloom: Comprehension

A company in a ____ industry is LEAST likely to make heavy use of patents and copyrights.

a. slow-cycle

b. medium-cycle

c. standard-cycle

d. fast-cycle

ANS: D PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing the task environment | Bloom: Comprehension

____ markets are often described as volatile and innovative.

a. Slow-cycle

b. Fast-cycle

c. Standard-cycle

d. Sheltered

ANS: B PTS: 1 DIF: Easy OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing strategy & innovation | Bloom: Knowledge

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.57. 58. 59. 60. An organization’s loyalty to its own product is a competitive disadvantage in a ____ market.

a. slow-cycle

b. standard cycle

c. intermediate cycle

d. fast-cycle

ANS: D PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff

& Rubin: Managing strategy & innovation | Bloom: Comprehension

Because Coca-Cola, Nestle, and PepsiCo all sell a product (bottled water) that is essentially the same

and all three giant companies are engaged in battles for market share using incremental changes in

their products and seeking loyalty to brand names, it is most likely that the bottled water market is

a(an)

a. slow-cycle market

b. standard cycle market.

c. fast-cycle market.

d. intermediate-cycle market.

ANS: B PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

Competition between candy makers (e.g., Hershey, Mars, Cadbury, Nestle, and Godiva) where firms

package design (including package downsizing) and ease of availability is characteristic of a

a. slow-cycle market

b. standard cycle market.

c. fast-cycle market.

d. intermediate-cycle market.

ANS: B PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Application

Goods or services in standard-cycle markets reflect

a. organizations that serve a mass market.

b. numerous first mover advantages.

c. an inability to sustain a competitive advantage except for brief periods of time.

d. competitive advantages that are shielded from imitation.

ANS: A PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing strategy & innovation | Bloom: Comprehension

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.61. 62. 63. 64. The competitive actions and responses in __________ markets are designed to seek large market

shares, to gain customer loyalty through brand names, and to carefully control the firm’s operations in

order to consistently provide the same positive experience for customers.

a. standard-cycle

b. fast-cycle

c. slow-cycle

d. intermediate-cycle

ANS: A PTS: 1 DIF: Hard OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing strategy & innovation | Bloom: Comprehension

The flat-panel television market where prices have come down and competition has become more

stable is best characterized as

a. standard-cycle.

b. fast-cycle.

c. slow-cycle.

d. competitive rivalry.

ANS: A PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing strategy & innovation | Bloom: Application

Consumer goods producers are innovating in terms of healthy products. innovation is typical of

a. fast-cycle markets.

b. standard-cycle markets.

c. incremental-cycle markets.

d. slow-cycle markets.

This type of incremental

ANS: B PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing strategy & innovation | Bloom: Application

In the Chapter 5 Strategic Focus, rivals such as Amazon, Oracle, HP and Dell in the cloud computing

market are competing in a_________________.

a. fast-cycle market

b. standard-cycle market

c. incremental-cycle market

d. slow-cycle markets

ANS: B PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing strategy & innovation | Bloom: Application

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.65. 66. In the The Chapter 5 Strategic Focus, rivals (Amazon, Oracle, HP and Dell) in the cloud computing

market have competitive advantages that are __________________.

a. shielded from imitation

b. partially shielded from imitation

c. sustainable for long periods of time

d. not shielded from imitation

ANS: D PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing strategy & innovation | Bloom: Application

In order to compete effectively, standard-cycle firms need all of the following EXCEPT

a. large market share.

b. c. d. customer loyalty through brand name.

careful control of operations to preserve consistency for customers.

rapid and continuous product introductions.

ANS: D PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing strategy & innovation | Bloom: Knowledge

ESSAY

1. Define competitors, competitive rivalry, competitive behavior, and competitive dynamics.

2. ANS:

Competitors are firms competing in the same market, offering similar products, and targeting similar

customers. Competitive rivalry is the ongoing set of competitive actions and competitive responses

occurring between competitors as they compete against each other for an advantageous market

position. For the individual firm, the set of competitive actions and responses it takes while engaged in

competitive rivalry is called competitive behavior. Competitive dynamics is the set of actions and

responses taken by all firms that are competitors within a particular market.

PTS: 1 DIF: Easy OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing strategy & innovation | Bloom: Knowledge

What is market commonality? What is resource similarity? identify the level of competition between two firms?

How are these concepts combined to

ANS:

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.3. 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. When firms

produce similar products and compete for the same customers, the competitive rivalry is likely to be

high. Firms competing against one another in several or many markets engage in multimarket

competition. Research suggests that a firm with greater multimarket contact is less likely to initiate an

attack, but more likely to respond when attacked. In general, multimarket competition reduces

competitive rivalry but some firms will still compete when the potential rewards (e.g., potential market

share gain) are high.

Resource similarity is the extent to which the firm’s tangible and intangible resources are comparable

to a competitor’s in terms of both type and amount. Firms with resource similarity are likely to have

similar strengths and weaknesses and to use similar strategies.

The combination of high or low market commonality and high or low resource similarity identifies

whether firms are competitors. Firms having both high market commonality and high resource

similarity are direct and mutually acknowledged competitors. If firms share few markets and have little

similarity in resources they are not direct and mutually acknowledged competitors.

PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing strategy & innovation | Bloom: Knowledge

Define awareness, motivation and ability in reference to competitive behavior.

ANS:

Awareness, motivation and ability are the drivers of competitive behavior. They influence the firm’s

actions toward and responses to competitors. Awareness is the extent to which competitors recognize

the degree of their mutual interdependence that results from market commonality and resource

similarity. Awareness affects the extent to which the firm understands the consequences of its

competitive actions and responses. Awareness is greatest when firms have highly similar resources.

Motivation concerns the firm’s incentive to take action against a competitor or to respond to a

competitor’s attack. If the firm doesn’t believe that attacking its competitors will improve its position,

it will not act. If the firm does not believe a competitor’s action will result in losses for it, it will not

have motivation to respond. High market commonality gives firms more motivation to attack and to

respond to competitors’ actions than when market commonality is low. Ability relates to each firm’s

resources and the flexibility these resources provide. When a firm faces a competitor with similar

resources, careful study of a possible attack is essential because a competitor with similar resources is

likely to respond to competitive attack. When the resources between two competitors are very

dissimilar, the weaker firm will delay in responding to an attack by the stronger firm.

PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing decision-making processes | Bloom: Knowledge

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.4. 5. 6. Define competitive actions and responses and explain the two types of competitive actions and

responses.

ANS:

A competitive action is a strategic or tactical action the firm takes to build or defend its competitive

advantages and improve its market position. A competitive response is a strategic or tactical action

the firm takes to counter the effects of a competitor’s competitive action. A strategic action or

strategic response is a market-based move that involves a significant commitment of organizational

resources and is difficult to implement or reverse. A tactical action or tactical response is a market-

based move that is taken to fine-tune a strategy. It involves fewer resources and is relatively easy to

implement and reverse. Strategic actions tend to receive strategic responses. Tactical actions tend to

receive tactical responses because they are easy to put into place. Strategic actions elicit fewer total

competitive responses than do tactical actions. Responses to strategic actions will be slower than will

responses to tactical actions because competitors need time to observe whether the strategic action will

be successful. But, if a competitor’s action threatens a large number of a firm’s customers, the firm

will react strongly regardless of whether the competitor’s action is strategic or tactical.

PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Knowledge

What are the advantages and disadvantages of being a first mover, second mover, and late mover?

ANS:

First movers can gain market share, customer loyalty, and high revenues by being the first in the

market. But, first movers also take more risk because it is difficult to judge the returns the firm will

earn from product innovations. Moreover, if the first mover is successful, other firms will enter its

arena. First movers tend to have a significant amount of organizational slack to fund research and

development. Second movers imitate the first movers, after they have studied the first mover’s

successes and mistakes. Consequently second movers can develop more efficient processes and

technologies than first movers, which results in lower costs. Late movers react to the first and second

movers’ actions after a long delay. A late mover may be able to earn average returns if it has learned

how to create at least as much value for customers as the value created by the first and second movers.

In general, late movers are relatively ineffective.

PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Comprehension

What factors contribute to the likelihood of a response to a competitive action?

ANS:

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.In general, a firm is more likely to respond to a competitive action if: (1) the action leads to better use

of the competitor’s capabilities to gain or produce stronger competitive advantage or to improve its

market position, (2) the action damages the firm’s ability to use its capabilities to create or maintain an

advantage, or (3) the firm’s market position becomes less defensible. In addition, a firm is more likely

to respond to a competitor’s tactical action, rather than to a competitor’s strategic action. Strategic

actions involve a significant commitment of resources and are difficult to implement and reverse, as

well as requiring time to put into place. In contrast, tactical actions can be implemented quickly and

are quickly reversed, and are relatively less costly than strategic actions. A firm is also more likely to

respond to a competitor’s action when the competitor is the market leader – a firm that has the

reputation for above-average returns. Successful actions by competitors are likely to be quickly

imitated, even if not initiated by a market leader. Actions by price predators are usually not responded

to, nor are actions by firms with reputations for risky, complex, and unpredictable behavior. Finally,

competitors with high market dependence are likely to respond strongly to attacks threatening their

market position.

PTS: 1 DIF: Medium OBJ: Comprehension

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing strategy & innovation | Bloom: Comprehension

7. Define slow-cycle, fast-cycle and standard cycle markets.

ANS:

In slow-cycle markets, the firm’s competitive advantage is shielded from imitation for long periods of

time and imitation is costly. Competitive advantages are sustainable in slow-cycle markets. Successful

firms in slow-cycle markets have difficult-to-understand and costly-to-imitate advantages resulting

from unique historical conditions, causal ambiguity and/or social complexity. These conditions can

include copyrights, patents, and ownership of an information resource. Firms in slow-cycle markets

focus on protecting their competitive advantages and exploiting them as long as possible. In fast-cycle

markets, imitation happens quickly. Competitive advantages are not sustainable. Reverse engineering

and quick technology diffusion facilitate rapid imitation. In fast-cycle markets, innovation is critical

and firms avoid “loyalty” to any product. Firms must focus on rapidly and continuously developing

new competitive advantages, because prices fall quickly and firms need to profit rapidly from

innovations, and move on to the next product. Fast-cycle markets are volatile and the pace of

innovation is frenzied. In standard-cycle markets, the firm’s competitive advantages are moderately

shielded from imitation and imitation is moderately costly. Competitive advantages are partially

sustainable if the firm can continuously upgrade the quality of its capabilities making its competitive

advantage dynamic. Typically, these markets have large firms seeking high market share, striving for

customer brand loyalty, and controlling their operations to give customers consistent experiences.

Economies of scale are necessary for survival. Competition for market share is intense and is often

based on incremental innovation in a product rather than radical innovation.

PTS: 1 DIF: Medium OBJ: Knowledge

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Managing strategy & innovation | Bloom: Knowledge

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.CASE

1. 2. Case Scenario 1: Romulac, Inc.

Romulac Inc. (RI), a subsidiary of a large successful manufacturing conglomerate, supplies a key

component in the assembly of residential cooling systems (air conditioning units, etc.). There has been

tremendous consolidation in RI’s industry, to the point where only five suppliers of this particular

component account for nearly 90% of U.S. industry sales. Paralleling this trend, its customers –

comprised of makers of branded residential air conditioning units like Carrier and Trane – have seen

similar levels of consolidation in their own industry. Half of these firms produce all their components

in-house, while the balance purchases them from specialized component manufacturers like RI. RI’s

business is extremely capital intensive, and their 40% share of the market allows them to also be the

most profitable domestic player. Strong competitors exist in Europe and Asia. Although like RI, these

foreign players’ strongholds are their home regions, with negligible presence outside of the region.

Some of the larger Asian manufacturers have signaled an interest in more aggressively pursuing the

lucrative U.S. market. RI is presently considering a $400 million dollar investment in a new plant,

which will create a component that is much quieter, more efficient, and is likely to satisfy future

regulatory standards. While the core technology for the new component is very old, RI’s engineering

and design skills have allowed them to retain their low cost-advantage, even though the component

will represent a significant improvement over products currently provided by its competition.

(Refer to Case Scenario 1) Develop an argument as to why RI should try to be a first-mover with this

new technology.

ANS:

The best answers will begin by suggesting that RI move quickly to retain its dominant market share,

particularly since the technology itself is not new, and competitors may easily develop their own

efficient designs. A more subtle argument is that RI has an opportunity to set a new industry standard,

and as the leader, may likely gain even greater market share.

PTS: 1

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff

& Rubin: Managing strategy & innovation | Bloom: Application

(Refer to Case Scenario 1) Develop an argument as to why RI should hold back and be a second mover

with the new technology.

ANS:

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.3. 4. The best answers will observe that RI cannot predict with certainty that its new technology will be

cheaper, or as cheap to produce. Thus, a primary risk is that RI invests in the plant, the industry moves

to the new technology, but the technology is actually more costly to produce – in this way, RI may

cannibalize its existing low-cost position with a higher-cost one. By waiting, RI can learn from its

competitors’ mistakes. A secondary risk is that competitors will learn from RI’s initial mistakes, and be

able to offer the new technology for considerably lower cost. The nightmare scenario here is that the

industry moves to the new technology, RI has a higher cost position, and overseas competitors steal

domestic market using the new technology, which they have learned to manufacture at a lower cost.

Thus, RI could avoid this latter risk by again waiting out the competition.

PTS: 1

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff

& Rubin: Managing strategy & innovation | Bloom: Application

(Refer to Case Scenario 1) As one of RI’s direct competitors, how would you try to predict what it will

do with regard to the new technology?

ANS:

The best responses can begin by pointing to three main characteristics that are likely to heavily

influence RI’s choices. The ways these factors bode in favor and against the move should be discussed.

First, RI is both large and a dominant player in this market. Second, RI is very profitable and such

profitability is a direct consequence of its large market share. Finally, RI is the subsidiary of a large

successful conglomerate – students would want to point out that the new technology will require a

large corporate commitment ($400 million). A related issue is whether the corporate parent considers

itself to be primarily a first or second mover in its competitive interactions.

PTS: 1

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff

& Rubin: Managing strategy & innovation | Bloom: Application

(Refer to Case Scenario 1) Assume that you are a consultant and have been asked by the management

at Romulac Inc. whether it should be a first mover with the new component technology. Romulac is

leaning towards being a first mover because the general evidence is that first movers have greater

survival rates than later market entrants. Is this true or false?

ANS:

PTS: 1 DIF: Hard OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff

& Rubin: Managing strategy & innovation | Bloom: Application

Case Scenario 2: Plasco.

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.5. 6. Plasco is a $3 billion U.S.-based manufacturer of flexible plastic products like trash cans, reheatable

and freezable food containers, and a broad range of other plastic storage containers designed for home

and office use. Historically, Plasco has been the category killer for most of its products and has

devoted tremendous resources to new product development on an ongoing basis – this research

intensity has allowed the company to release, on average, a new product every day over the past five

years. Despite its past strength and high brand awareness, Plasco’s profitability has been eroded by

dramatic increases in the cost of plastic resin, the primary input into its plastic products. Moreover, the

retail channel has experienced rapid consolidation resulting in a shift in the balance of power from

branded manufacturers like Plasco, to strong retailers like Wal-Mart, who in turn have been unwilling

to help Plasco absorb the higher resin costs. Enhancing Wal-Mart’s power is the fact that it can always

turn to alternative high-volume sources of consumer plastic products like Sterlite. Further hampering

Plasco’s recovery is the emergence of feisty little foreign competitors like Zig Industries, a $250

million Israeli firm that has begun to take part of Plasco’s market share in plastic toolboxes. Ironically,

Plasco was the first company to offer plastic toolboxes some 20 years ago. This innovation changed

the market dramatically and Plasco’s first mover strategy rewarded it with a rapidly growing new

segment and a dominant market position. Today, Plasco’s toolboxes are viewed as rather boring, while

Zig’s products are ingeniously designed to catch the customer’s eye in the aisle (better merchandising

the product) and capture their interest (and pocketbook) with many new and novel features. Zig is also

able to provide this new line of toolboxes at between 10% to 15% less than Plasco.

(Refer to Case Scenario 2) Is Wal-Mart a competitor or a customer of Plasco?

ANS:

The best answers will start by summarizing that Wal-Mart is both a customer and a competitor. It is a

customer in the sense that it is a primary outlet for Plasco’s products. Wal-Mart is a competitor from

the standpoint that Wal-Mart has control over Plasco’s profitability and, in a sense, is competing for a

portion of the profit pool in Plasco’s industry as well.

PTS: 1

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Strategic & systems skills | Bloom: Application

(Refer to Case Scenario 2) Is the toolbox business a slow-, standard-, or fast-cycle business?

ANS:

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.7. 8. The best answers will suggest that the cycle characteristics of the toolbox market appear to have

shifted over time. Before Plasco entered the business, metal toolboxes were the norm and this was

likely to be characterized as standard to slow in terms of its cycle speed. The metal toolbox market was

probably an oligopolistic one, dominated by a few profitable players. With the entrance of Plasco and

its plastic toolboxes, the cycle speed among metal toolbox manufacturers increased, where they no

longer dominated the industry. Plasco’s innovative product plus its unique capacity (at the time) to

produce a durable plastic toolbox probably turned its segment into a slow-cycle market (with Plasco

enjoying a near monopoly position), while the metal toolbox took on standard- to fast-cycle market

characteristics. With the new entrance of Zig into plastic toolboxes, this segment is now likely to be

characterized as standard to fast cycle – plastic technologies aren’t proprietary and designs are readily

copied by competitors.

PTS: 1

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing the task environment | Bloom: Application

(Refer to Case Scenario 2) How can a small player like Zig be such a successful competitor against a

large, established firm like Plasco?

ANS:

The value of this question is that it forces students to consider how changes in both a focal industry

and its upstream industry may affect competition. The best answers can begin by noting that the

market for plastic toolboxes is probably pretty large (tools, cosmetics, fishing gear, toys, etc),

especially on a global basis. Couple this observation with the fact that there are a number of mega-

retailers who would find this to be a necessary product to stock on their shelves. Thus, this market

segment is nearly an industry in and of itself and a small focused player could gain economies of scale

in manufacturing as well as distribution and marketing to the staple, volume retailers like Wal-Mart,

Home Depot, and Carrefour. Finally, Plasco was apparently treating the plastic toolbox market as a

stable one, leaving it less likely to invest much of any additional resources into further innovation. This

creates a window of opportunity for a nimble, aggressive, focused and talented new entrant like Zig.

PTS: 1

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing strategy & innovation | Bloom: Application

(Refer to Case Scenario 2) Although Plasco was the first mover in plastic toolboxes several years ago,

its competitor Zig has gained market share by building brand loyalty to its boxes which are viewed as

more attractive and have novel features. The characteristics of this market are most similar to a

standard-cycle market.

ANS:

PTS: 1 DIF: Medium OBJ: Application

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &

Rubin: Strategic & systems skills | Bloom: Application

Case Scenario 3: The Pet Food Industry.

The pet food industry is comprised primarily of six market segments: dry dog food, dry cat food, moist

dog food, moist cat food, canned dog food, and canned cat food. Five large firms dominate the market

and each has some market share in all segments, and the leading share in at least one segment. The

largest firm participates solely in the pet food industry, while the next four firms are actually

subsidiaries of some of the world’s largest food and consumer products companies. Top management

of these larger firms have made public statements that suggest they each see themselves as future

leaders of the pet food industry. All five have acquired comparable skills in terms of manufacturing

and marketing. Two small firms also participate in the industry, but these players are relatively weak

and compete in just two of the six segments; the pet food industry is the only industry in which they

operate. Inputs to the industry are basic commodities and there is no real threat of substitute products

except across segments and price points. The industry is growing slowly, barely keeping up with the

rate of inflation. Barriers to entry are enormous when pet food companies can gain scale economies in

production coupled with aggressive marketing, though even then these coordinated actions may only

yield average industry profitability. Any firm can increase its market share only to the extent that

another firm’s share is decreased.

9. (Refer to Case Scenario 3) The pet food industry is best characterized as an example of

a. slow-cycle markets.

b. standard-cycle markets.

c. fast-cycle markets.

d. neither slow-cycle, standard-cycle, nor fast-cycle markets.

ANS:

10. PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing the task environment | Bloom: Application

(Refer to Case Scenario 3) The pet food industry provides an example of

a. market commonality.

b. resource similarity.

c. multimarket competition.

d. market commonality, resource similarity, and multimarket competition.

ANS:

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.11. PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing the task environment | Bloom: Application

(Refer to Case Scenario 3) Members of the pet food industry are likely to experience

a. no competition.

b. little competition.

c. moderate competition.

d. extensive competition.

ANS:

PTS: 1 DIF: Medium OBJ: Application

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |

Dierdorff & Rubin: Managing strategy & innovation | Bloom: Application

U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

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