Global Marketing Management, 8e (Keegan)
Chapter 9 Competitive Analysis and Strategy
1) Competition works to drive down the rate of return on invested capital toward the rate that
would be earned in a perfectly competitive industry.
2) New entrants in an industry push prices downward and squeeze margins, resulting in reduced
industry profitability.
3) One of the barriers that a new entrant to an industry might face is low switching costs.
4) The availability of substitute products places limits on the prices market leaders can charge in
an industry.
5) Suppliers enjoy bargaining power when their products or services carry low switching costs.
6) A buyer can exert power over a supplier when the supplier’s products are highly differentiated.
7) Buyers enjoy bargaining power when they are willing to achieve backward vertical
integration.
8) According to Michael Porter, motivation is one of the local things that distant rivals will find
hard to match.
9) Firms with high strategic stakes in achieving success in an industry generally are destabilizing
because they may be willing to accept unreasonably low profit margins to establish themselves.
10) The effects of global competition have been highly disadvantageous for consumers around
the world.
11) The downside of global competition is its impact on the producers of goods and services.
12) A country’s size and location are considered as its physical resources.
13) The quantity of workers available in a country and their wage levels constitute a nation’s
knowledge resource factors.
14) Firms paying high capital costs are frequently unable to stay in a market in which the
competition comes from a nation with low capital costs.
15) Basic factors do not lead to sustainable international competitive advantage.
16) A focused educational system is an example of a generalized factor.
17) Competitive advantage may be created indirectly by nations that have selective factor
disadvantages.
18) The presence of significant domestic rivalry will create complacency in home firms and will
eventually cause them to become noncompetitive in the world markets.
19) Chance events are occurrences that are beyond the control of firms, industries, and usually
governments.
20) Governments are not considered determinants but can exert their influence on determinants.
21) A market environment principally involves economic exchange whereas a nonmarket
environment includes regulatory bodies.
22) The thesis that a firm’s home-base country is the main source of core competencies and
innovation was challenged by Michael Porter.
23) The uniqueness and magnitude of the customer value created by a firm’s strategy are
ultimately determined by the firm’s management.
24) When a firm’s product delivers unique value because of an actual or perceived uniqueness in
a broad market, it is said to have a cost-leadership advantage.
25) Cost leadership is a sustainable source of competitive advantage only if barriers exist that
prevents competitors from achieving the same low costs.
26) A narrow-focus strategy can be combined with differentiation-advantage strategies but not
with cost-leadership strategies.
27) A cost-focus strategy focuses on a narrow target segment.
28) The generic strategy used in variety-based positioning is product differentiation.
29) According to Porter, segmentation is the generic strategy used in access-based positioning.
30) Richard D’Aveni notes that in today’s business environment, market stability is high due to
long product life cycles.
31) According to Hambrick and Fredrickson, which of the following elements of a strategy
represents the competitive advantage of an organization?
A) arenas
B) vehicles
C) differentiators
D) economic logic
32) ________ refers to the decline in per unit product costs as the absolute volume of production
per period increases.
A) Economies of scale
B) Economies of scope
C) Diseconomies of scale
D) Diseconomies of scope
33) According to Michael Porter, which of the following is a barrier to the entry of new
companies into an industry?
A) vertical integration
B) horizontal integration
C) product differentiation
D) rapid manufacturing
34) ________ is a major entry barrier where industry leaders convince potential competitors that
any market entry effort will be countered with vigorous and unpleasant responses.
A) Corporate narcissism
B) Brinkmanship
C) Gamesmanship
D) Chaotics
35) According to Michael Porter, one of the major forces influencing competition in an industry
is the threat of ________.
A) Giffen goods
B) independent goods
C) Veblen goods
D) substitute goods
36) According to Michael Porter, the suppliers in an industry enjoy bargaining power when
________.
A) there are many suppliers to choose from
B) their products or services are not differentiated
C) their products or services carry low switching costs
D) their businesses are not threatened by alternative products
37) According to Michael Porter, the buyers in an industry enjoy bargaining power when
________.
A) they are planning to integrate horizontally
B) they purchase in large quantities from supplier firms
C) supplier products represent a small portion of the buyers’ costs
D) the supplier’s products are highly differentiated
38) The reluctance of U.S. manufacturers to produce small cars for smaller unit profits despite
the growing preference of U.S. customers for small cars is a classic example of ________.
A) marketing myopia
B) vertical disintegration
C) diseconomies of scale
D) diseconomies of scope
39) Which of the following production concepts was invented in Japan and gave Japanese
automobile companies a knockout advantage in world markets through lower costs and higher
quality?
A) horizontal integration
B) vertical integration
C) lean manufacturing
D) mass customization
40) According to Michael Porter, which of the following refers to a country’s endowment of
resources?
A) factor conditions
B) dependent variables
C) cultural dimensions
D) value constructs
41) Which of the following is scarcer in nature, requires sustained investment, and leads to
sustainable international competitive advantage?
A) advanced factors
B) basic factors
C) human resources
D) physical resources
42) Which of the following is true of the demand conditions described in Porter’s diamond
model?
A) Early market saturation puts extreme pressure on a company to expand, which leads to
inappropriate establishment in foreign countries that destabilize the company.
B) Early home demand fails to anticipate international demand and hence gives foreign rivals the
advantage of getting established in an industry sooner than local firms.
C) Slow home-market growth is an incentive for companies to invest in and adopt new
technologies, and to build large, efficient facilities.
D) The size and pattern of growth of home demand are important only if the composition of the
home demand is sophisticated and anticipates foreign demand.
43) ________ are geographic concentrations of interconnected companies and institutions in a
particular field, which constitute a critical mass.
A) Districts
B) Clusters
C) Mill towns
D) Creative cities
44) According to Michael Porter, which of the following is a broad market strategy that can
enable companies to offer lower prices to customers in the late, more competitive stages of the
product life cycle?
A) focused differentiation
B) product differentiation
C) cost leadership
D) cost focus
45) According to Michael Porter, which of the following is true of differentiation as a generic
strategy?
A) It is an effective strategy for obtaining above-average financial returns because unique
products often command premium price.
B) It offers an opportunity for small, specialized companies to grow while retaining their narrow
focus on highly differentiated products.
C) It requires companies to construct the most efficient facilities in terms of scale or technology
and obtain the largest share of market.
D) It has become increasingly popular in recent years as a result of the popularization of the
experience curve concept.
46) According to Michael Porter, which of the following is a narrow market strategy for creating
competitive advantage?
A) vertical integration
B) horizontal integration
C) cost leadership
D) focused differentiation
47) According to Michael Porter, ________ is a generic strategy in which a company can offer
lower prices than the competition to a narrow target market.
A) focused differentiation
B) product differentiation
C) cost leadership
D) cost focus
48) According to Michael Porter, ________ is based on a firm’s decision to carry out a limited
number of activities related to delivering a limited product or service.
A) needs-based positioning
B) variety-based positioning
C) access-based positioning
D) global network positioning
49) According to Michael Porter, access-based positioning occurs when a company ________.
A) satisfies a broad set of needs of all the customers in a wide segment
B) limits its product offering in order to minimize its prices
C) uniquely or preferentially reaches a specific market
D) focuses on the cost leadership generic strategy alone
50) According to Hamel and Prahalad, which of the following approaches is being utilized by a
company that refuses to follow the practices and regulations set by industry leaders and finds
new ways to gain competitive advantage?
A) searching for loose bricks
B) changing the rules of engagement
C) collaborating
D) building layers of advantage
51) According to Hamel and Prahalad, which of the following approaches is being utilized by a
company that gains access to the know-how developed by other companies through licensing
agreements, joint ventures, or partnerships?
A) collaborating
B) searching for loose bricks
C) building layers of advantage
D) changing the rules of engagement
52) Richard D’Aveni uses the term ________ to describe a dynamic, competitive world in which
no action or advantage can be sustained for long.
A) hypercompetition
B) imperfect competition
C) interspecific competition
D) intraspecific competition
53) According to Porter, what are the different barriers that new entrants to an industry face?
54) According to Porter, what are the generic strategies for creating competitive advantage?