2. Competitive rivalry has the most effect on the firms ____ strategies than the firms other strategies.

a. business-level
b. corporate-level
c. acquisition
d. international
ANS: A

PTS: 1

DIF: Easy

REF: 128

3. 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.
ANS: D

PTS: 1

DIF: Medium

REF: 128

4. Competitive dynamics refers to the

a. circumstances in which competitors are aware of the degree of their mutual
interdependence resulting from market commonality and resource similarity.
b. set of competitive actions and competitive responses the firm takes to build or defend its
competitive advantages and to improve its market position.
c. total set of actions and responses taken by all firms competing within a market.
d. ongoing set of competitive actions and competitive responses between competitors as they
maneuver for advantageous market position.
ANS: C

PTS: 1

DIF: Hard

REF: 128

5. Intensified rivalry within an industry results in

a. increased hiring across the industry.
b. increased total revenues across the industry.
c. decreased average profitability across the industry.
d. increased entries into the industry.
ANS: C

PTS: 1

DIF: Medium

REF: 130

6. Hilliard Neutraceuticals and Ahrens Vitamins, Inc., have high market commonality, both
geographically and in the market segments in which they compete. Hilliard, the number two firm in
the industry, has undertaken a major strategic attack upon Ahrens, the market leader. Which of the
following statements is most likely to be TRUE?
a. Ahrens will not respond aggressively since this is a strategic move and not a tactical
action.
b. As the market leader, Ahrens has little to fear from an attack by Hilliard and will not
expend organizational slack on a major response.
c. Ahrens will respond aggressively because of the high multimarket contact between
Hilliard and Ahrens.
d. Ahrens will respond after a long delay as the nutrition supplement industry is a slow-cycle
industry.
ANS: C

PTS: 1

DIF: Hard

REF: 131

7. 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

REF: 131-132

8. Which pair of firms has the LEAST resource similarity?

a. McDonalds and Microsoft
b. Target and Wal-Mart
c. HP and Dell
d. FedEx and UPS
ANS: A

PTS: 1

DIF: Medium

REF: 132-133

9. 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

REF: 133 (Figure 5.3)

10. Which pair of firms has the greatest market commonality?

a. HP and Dell
b. HP and Microsoft
c. Dell and Microsoft
d. Microsoft and Lenovo
ANS: A

PTS: 1

DIF: Medium

REF: 133 | 127-128

11. 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

REF: 133

12. ____ and ____ describe the situation in which organizations are direct competitors and are fully aware
of the competition.
a. High market commonality, high resource similarity
b. High market commonality, low resource similarity
c. Low market commonality, high resource similarity
d. Low market commonality, low resource similarity
ANS: A

PTS: 1

DIF: Medium

13. Firms with few competitive resources are more likely to

a. not respond to competitive actions.
b. respond quickly to competitive actions.
c. delay responding to competitive actions.
d. respond to strategic actions, but not to tactical actions.

REF: 133 (Figure 5.3)

ANS: C

PTS: 1

DIF: Medium

REF: 134

14. ____ 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

REF: 134

15. 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

REF: 134

16. The larger the resources of a firm taking a competitive action compared with the resources of the other
firms in the industry, the ____ the response will be of these other firms.
a. more fragmented
b. the slower
c. the larger
d. more tactical
ANS: B

PTS: 1

DIF: Medium

REF: 134

17. Netflix pioneered the online movie rental business. For eight years, Netflix experienced rapid growth.
Blockbuster, the established leader in the retail rental portion of the market, eventually launched their
own online rental program. All of the following increased the likelihood of a response by Blockbuster
EXCEPT
a. the strategic actions initiated by Netflix threatened Blockbusters core business.
b. the growing size of Netflix increased its likelihood of initiating a first-mover attack.
c. Blockbusters dependence on the rental market as the primary source for its revenues.
d. Netflixs reputation as the market leader in the online market.
ANS: B

PTS: 1

DIF: Hard

REF: 135

18. 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

REF: 136

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

a. a two movies for the price of one campaign by Blockbuster Video
b. use of product coupons by a local grocer
c. entry into the European market by Home Depot
d. fare increases by Southwest Airlines
ANS: C

PTS: 1

DIF: Medium

REF: 136

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

a. Wal-Marts launch of Sams Club stores.
b. Continental Airlines exit from a hub airport in Denver.
c. Netflix beginning to offer music DVDs in addition to movies.
d. Dells launch of a new line of high performance, custom-made PCs.
ANS: C

PTS: 1

DIF: Medium

REF: 136

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

a. Aggressive pricing to ensure they are a price leader
b. Aggressively pricing toys and electronics during the holiday season
c. Aggressively pricing school-related items in the back-to-school season
d. Their decision to begin selling gasoline
ANS: D

PTS: 1

DIF: Medium

REF: 136

22. 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.
ANS: B

PTS: 1

DIF: Medium

REF: 136

23. First movers are

a. entrepreneurs who lead in the establishment of new industries.
b. firms that are first to exit a declining industry.
c. firms that take an initial competitive action.
d. individuals who move frequently as employment opportunities change in a locale.
ANS: C

PTS: 1

DIF: Medium

REF: 137-138

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

a. high degree of risk.
b. high level of competition in the new marketplace.
c. inability to earn above-average returns unless the production process is very efficient.
d. difficulty of obtaining new customers.
ANS: A

PTS: 1

DIF: Medium

REF: 137-138

25. 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.
ANS: C

PTS: 1

DIF: Medium

REF: 137-138

26. 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 movers 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.
ANS: B

PTS: 1

DIF: Medium

REF: 138-139

27. Late movers are those firms that

a. wait to act for a long period of time after the second movers have responded.
b. respond to a first movers competitive action often through imitation or a move designed
to counter the effects of the action.
c. take an initial competitive action (either strategic or tactical).
d. typically achieve higher-than-average returns because they can imitate the most efficient
actor.
ANS: A

PTS: 1

DIF: Medium

REF: 139

28. Bubble-Up, Inc., is a small manufacturer of educational toys for children under age 10. It has coexisted 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 childrens 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-Toys entry to the market because
of the resource dissimilarity between the firms.
b. Bubble-Ups greater organizational slack will allow it to aggressively attack Mega-Toy.
c. Bubble-Ups 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

REF: 139-140

29. A firm that is LEAST likely to launch competitive actions is one that has
a. organizational slack.
b. advanced research and development.
c. recently improved the quality of its products.
d. large size.
ANS: D

PTS: 1

DIF: Medium

REF: 139-140

30. 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.
ANS: B

PTS: 1

DIF: Medium

REF: 139-140

31. Which of the following is TRUE of Wal-Mart?

a. Wal-Mart has an unusual amount of flexibility for a large firm.
b. Wal-Marts 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-Marts advantage lies in its ability to think big.
ANS: A

PTS: 1

DIF: Medium

REF: 140

32. Which of the following is TRUE of Southwest Airlines?

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

b. Southwests 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. Southwests advantage lies in its ability to think small.
ANS: D

PTS: 1

DIF: Medium

REF: 140

33. Without quality, the firms products

a. can compete effectively on the basis of low price.
b. lack credibility among customers.
c. must be exported to developing countries, because they are not competitive in the U.S. or
developed countries.
d. are associated with predatory competition.
ANS: B

PTS: 1

DIF: Easy

REF: 140-141

34. 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.
ANS: A

PTS: 1

DIF: Medium

REF: 140

35. Product quality has long been a hallmark for Daimler-Benz. What company action has been attributed,
at least in part, to eroding this image?
a. Their entrance into the subcompact market.
b. Their launch of an SUV using a platform from BMW.
c. Their acquisition of Chrysler.
d. Their layoff of workers following a 60 day strike in 2007.
ANS: C

PTS: 1

DIF: Medium

REF: 141

36. 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

REF: 142

37. A firm is likely to respond to an attack by a competitor in all of the following situations EXCEPT
a. the attack is by a price predator.
b. the attack makes the firms market position less defensible.
c. the attack damages the firms ability to use its capabilities.
d. the attack improves the competitors market position.
ANS: A

PTS: 1

DIF: Medium

REF: 142-143

38. Which PC maker has historically benefited the most from its reputation?
a. Compaq
b. IBM
c. HP
d. Dell

ANS: B

PTS: 1

DIF: Medium

REF: 142

39. Ninety percent of Wm. Wrigley Companys total revenue comes from chewing gum. This is an
example of
a. market commonality.
b. standard-cycle markets.
c. economies of scale.
d. market dependence.
ANS: D

PTS: 1

DIF: Easy

REF: 143

40. Lobelias 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. Lobelias 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.
ANS: C

PTS: 1

DIF: Hard

REF: 143

41. Which organization has the highest market dependence?

a. a chain of rapid-service oil change shops
b. a manufacturer of chemicals for the international pharmaceutical industry
c. a regional department store having 26 locations in the Northwest
d. a company that specializes in making replacement tiles for the space shuttle
ANS: D

PTS: 1

DIF: Medium

REF: 143

42. 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

REF: 143

43. Walt Disneys 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

REF: 143-144

44. 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 any one 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

REF: 143-144

45. The ability of Disney to maintain its competitive advantage through proprietary rights to its characters
would be severely weakened if
a. theme parks with alternative cartoon characters were built in large numbers.
b. numerous lawsuits against copyright thieves tainted the reputation of the company.
c. Disney attempted to move beyond its traditional industry.
d. Disneys cartoon characters became widely perceived as old-fashioned and unappealing.
ANS: D

PTS: 1

DIF: Hard

REF: 143-144

46. Lawsuits over patent and copyright infringements are more common and intense in
a. fast-cycle markets because the market is innovation-driven.
b. standard-cycle markets because the firms 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

REF: 143-144

47. 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

REF: 143-145

48. 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
ANS: C

PTS: 1

49. Reverse engineering is characteristic of

a. first movers.
b. fast-cycle markets.
c. market leaders.

DIF: Medium

REF: 144-145

d. price predators.
ANS: B

PTS: 1

DIF: Medium

REF: 144-145

50. Companies in fast-cycle markets need to profit quickly from an innovative product for all of the
following reasons EXCEPT
a. the technology used is not proprietary.
b. the prices of component parts tends to rise rapidly.
c. product prices fall quickly in fast-cycle markets.
d. counterattacks from rivals come quickly.
ANS: B

PTS: 1

DIF: Medium

REF: 144-145

51. 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

REF: 144-145

52. ____ 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

REF: 144-145

53. An organizations 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

REF: 144-145

54. 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

REF: 145-146

55. 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

REF: 145-146

56. The success of HPs launch of a laptop computer sold through Best Buy with a main differentiating
feature of the case being silver and white instead of the standard black is an indication of what?
a. The laptop industry is becoming a standard cycle market.
b. The laptop industry is becoming a slow cycle market.
c. The laptop industry is becoming a fast cycle market.
d. HP is lacking slack resources.
ANS: A

PTS: 1

DIF: Medium

REF: 145-146

57. Folgers Coffee recently instituted a change to a plastic container with a handgrip from its traditional
metal can. This is
a. an indication that Folgers is competing in a fast-cycle market.
b. an incremental innovation typical of a standard-cycle market.
c. a strategic action directed at coffee house chains such as Starbucks.
d. evidence that Folgers has little loyalty to its products.
ANS: B

PTS: 1

DIF: Hard

REF: 145-146

58. In order to compete effectively, standard-cycle firms need

a. organizational slack.
b. economies of scale.
c. first mover capability.
d. innovative products.
ANS: B

PTS: 1

DIF: Medium

REF: 145-146