97. 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
98. 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.
99. 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.
100. In order to compete effectively, standard-cycle firms need all of the following EXCEPT
a. large market share.
b. customer loyalty through brand name.
c. careful control of operations to preserve consistency for customers.
d. rapid and continuous product introductions.
101. Define competitors, competitive rivalry, competitive behavior, and competitive dynamics.
102. What is market commonality? What is resource similarity? How are these concepts combined to identify the level
of competition between two firms?
103. Define awareness, motivation, and ability in reference to competitive behavior.
104. Define competitive actions and responses and explain the two types of competitive actions and responses.
105. What are the advantages and disadvantages of being a first mover, second mover, and late mover?
106. What factors contribute to the likelihood of a response to a competitive action?
107. Define slow-cycle, fast-cycle, and standard cycle markets.
Subjective Short Answer
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 percent of
U.S. industry sales. Paralleling this trend, its customers—composed 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 percent 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.
108. (Refer to Case Scenario 1). Develop an argument as to why RI should try to be a first-mover with this new
technology.
109. (Refer to Case Scenario 1). Develop an argument as to why RI should hold back and be a second mover with the
new technology.
110. (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?
111. (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 toward
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?
Case Scenario 2: Plasco.
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 5 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 Walmart, who in turn have been unwilling
to help Plasco absorb the higher resin costs. Enhancing Walmart’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 percent to 15 percent less than Plasco.
112. (Refer to Case Scenario 2). Is Walmart a competitor or a customer of Plasco?
113. (Refer to Case Scenario 2). Is the toolbox business a slow-, standard-, or fast-cycle business?
114. (Refer to Case Scenario 2). How can a small player like Zig be such a successful competitor against a large,
established firm like Plasco?
115. (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.
Case Scenario 3: The Pet Food Industry.
The pet food industry is composed 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.
116. (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.
117. (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.
118. (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.