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Answer Key
1. True
2. True
3. True
4. True
5. True
6. False
7. True
8. False
9. False
10. False
11. False
12. True
13. True
14. True
15. False
16. True
17. True
18. False
19. True
20. True
21. False
22. False
23. True
24. True
25. False
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26. True
27. True
28. True
29. False
30. True
31. False
32. False
33. False
34. False
35. True
36. False
37. False
38. True
39. True
40. True
41. b
42. d
43. c
44. a
45. d
46. c
47. a
48. b
49. d
50. c
51. d
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52. a
53. b
54. a
55. c
56. a
57. d
58. a
59. b
60. b
61. d
62. b
63. a
64. b
65. d
66. b
67. b
68. a
69. d
70. a
71. b
72. c
73. b
74. c
76. c
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77. b
78. b
79. d
80. c
81. b
82. c
83. d
84. d
85. c
86. d
87. c
88. c
89. b
90. a
91. c
92. d
93. c
94. c
95. a
96. b
97. a
98. c
99. d
100. a
101. 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
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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.
106. 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.
107. 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.
1. Firms with high market commonality and highly similar resources are direct and mutually acknowledged competitors.
a.
True
b.
False
2. The more dependent a firm is on its market, the more aggressively it will defend it from another competitor.
a.
True
b.
False
3. 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.
a.
True
b.
False
4. Market commonality is concerned with the number of markets with which the firm and a competitor are jointly
involved and the degree of importance of the individual markets to each.
a.
True
b.
False
5. A strategy’s success is determined not only by the firm’s initial competitive actions but also by how well it anticipates
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competitors’ responses to them and by how well the firm anticipates and responds to its competitors initial actions.
a.
True
b.
False
6. 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.
a.
True
b.
False
7. 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.
a.
True
b.
False
8. 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.
a.
True
b.
False
9. Unlike fast-cycle markets, the struggle for market share in standard-cycle markets is moderate.
a.
True
b.
False
10. Boeing’s decision to commit the resources required to build the super-efficient 787 midsized jetliner is an example of a
tactical action.
a.
True
b.
False
11. Bayou Belle Water sells water drawn only from a single artesian well in Southern Louisiana. It has a loyal following
in its region. Because Bayou Belle markets the water, just as Coca-Cola, Nestle, and PepsiCo do, Bayou Belle has high
resource similarity with these international firms.
a.
True
b.
False
12. 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.
a.
True
b.
False
13. 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.
a.
True
b.
False
14. 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.
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a.
True
b.
False
15. “Competitive dynamics” indicates that firms and their strategic actions are independent.
a.
True
b.
False
16. Disney is an example of a firm in a slow-cycle market because its animated characters are shielded from imitation by
copyrights and trademarks.
a.
True
b.
False
17. An organization with high profitability, such as Walmart, will be able to develop high organizational slack.
a.
True
b.
False
18. Walmart has recently opened a store in Alsatia, Missouri. Several local small retailers have decided that choosing not
to respond to Walmart’s competitive actions is a viable long-term option, because although the companies have high
market commonality they have little resource similarity. These small retailers are correct in their decision.
a.
True
b.
False
19. In general, strategic actions elicit fewer competitive responses than do tactical actions.
a.
True
b.
False
20. 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.
a.
True
b.
False
21. Extensive market commonality guarantees intense competition in an industry.
a.
True
b.
False
22. 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.
a.
True
b.
False
23. 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.
a.
True
b.
False
24. Awareness tends to be greatest when firms have highly similar resources and compete in multiple markets.
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a.
True
b.
False
25. Under the framework of competitive action and response, “ability” refers to an attacking or responding firm’s
knowledge of the competitive market characteristics.
a.
True
b.
False
26. Two firms, such as Fed Ex and UPS that have similar resources and common markets would be direct and mutually
acknowledged competitors.
a.
True
b.
False
27. Competitive rivalry is the set of competitive actions and responses that occur among firms as they maneuver for an
advantageous market position.
a.
True
b.
False
28. 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.
a.
True
b.
False
29. 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.
a.
True
b.
False
30. Firms that are typically late movers usually have little organizational slack.
a.
True
b.
False
31. Walmart’s aggressive pricing strategy is a strategic action that plays a major role in how it competes.
a.
True
b.
False
32. 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.
a.
True
b.
False
33. First movers can gain a sustained competitive advantage when they reduce their costs through reverse engineering.
a.
True
b.
False
34. Competitive rivalry is the contest to be the first mover in an international market.
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a.
True
b.
False
35. Mighty Mike’s, a manufacturer of power tools for the home hobbyist, has seen its main competitor, MyTools,
introduce a line of power tools that are smaller sized, lighter weight, and suitable for women and older hobbyists who
have weaker hands than the typical male workshop hobbyist. Mighty Mike is waiting to see whether MyTools’ new line is
a success. Mighty Mike could be classified as a second mover.
a.
True
b.
False
36. A tactical competitive action involves a significant commitment of specific and distinctive organizational resources.
a.
True
b.
False
37. Quality begins in marketing an organization where employees must create a perceived value of quality.
a.
True
b.
False
38. Research suggests that a firm with greater multimarket contact is less likely to initiate an attack, but more likely to
respond aggressively when attacked.
a.
True
b.
False
39. Firms operating in the same market, offering similar products and targeting similar customers are competitors.
a.
True
b.
False
40. 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.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
41. 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.
42. 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.
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43. 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.
44. 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
45. 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.
46. 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.
47. 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.
48. 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.
49. 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
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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.
50. A competitive action can be one of two types, either ____ or ____.
a.
aggressive; defensive
b.
quality-based; cost-based
c.
strategic; tactical
d.
market-based; resource-based
51. An organization’s loyalty to its own product is a competitive disadvantage in a(n) ____ market.
a.
slow-cycle
b.
standard cycle
c.
intermediate cycle
d.
fast-cycle
52. Sustained competitive advantage is most achievable in a ____ market.
a.
slow-cycle
b.
medium-cycle
c.
standard-cycle
d.
fast-cycle
53. Reverse engineering is characteristic of:
a.
first movers.
b.
fast-cycle markets.
c.
market leaders.
d.
price predators.
54. ____ 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
55. Which industry can be LEAST described as a slow-cycle market?
a.
Freight railroads
b.
Pharmaceuticals
c.
Cell phone provider
d.
Private ownership of highways and bridges
56. Quality is:
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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.
57. 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.”
58. 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.
59. Consumer goods producers are innovating in terms of healthy products. This type of incremental innovation is typical
of:
a.
fast-cycle markets.
b.
standard-cycle markets.
c.
incremental-cycle markets.
d.
slow-cycle markets.
60. 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.
61. 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
62. 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.