Chapter 8 – Dealing with the Competition
True/False Questions
1. According to Porter, a segment is unattractive if it already contains numerous, strong or aggressive
competitors. True (easy) pp. 149-150
2. A company is more likely to be harmed by its potential competitors than by its current competitors.
True (moderate) p. 151
3. Strong firms competing against companies that are just barely meeting variable costs should lower the
exit barriers for the weaker competitors. True (moderate) p. 150
4. Buyers’ bargaining power grows as they become less concentrated and as switching costs rise. False
(moderate) p. 150
5. Industries can be classified according to degree of vertical integration. True (difficult) p. 152
6. Cereal manufacturers Kellogg and Quaker operate in a differentiated oligopoly industry structure.
True (moderate) p. 152
7. Jack in the Box and Chili’s restaurants are engaged in monopolistic competition. True (moderate) p.
152
8. A firm, which acquired one of its international competitors, would be practicing vertical integration.
False (moderate) p. 152
9. A strategic group is a group of firms in an industry following the same or a similar strategy along key
dimensions. True (moderate) p. 154
10. At the center of a competitor map are direct and indirect competitors of the firm. False (difficult) p.
153
11. A company monitoring “share of heart” is concerned about the percentage of customers who can
name the company when asked about the product line. False (difficult) p. 155
12. A competitor who reacts only to certain types of attacks and not others is seeking competitive
equilibrium. False (moderate) p. 156
13. The first step in designing a competitive intelligence system involves identifying vital types of
information and its sources, and assigning someone to manage the process. True (moderate) p. 156
14. The first step in consumer value analysis is to identify the major attributes that customers value. True
(moderate) p. 157
15. A customer value analysis reveals a firm’s strengths and weaknesses relative to various competitors.
True (moderate) p. 157
16. According to the text, a company should support its good competitors and attack its bad competitors.
True (moderate) p. 157
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17. The least constructive response to competition is continuous innovation. False (easy) p. 159
18. Coca-Cola set up bottling operations in India, which it abandoned years later, only to return when
legal restrictions on the brand were deemed acceptable. This action is an example of a mobile
defense strategy. False (difficult) p. 160
19. McDonald’s introduced a line of individual pizzas to challenge high market share competitors, such
as Dominos and Pizza Hut. McDonald’s used a frontal attack strategy. True (moderate) p. 162 and
accompanying text
20. Marlys buys Exotique perfume for $6.49 a bottle because it smells like her favorite perfume which
retails at ten times the price. She is encouraging the cheaper perfume manufacturer to adopt a flanking
strategy. False (difficult) p. 162 and accompanying text
Multiple Choice Questions
21. PURO-Veg is a small Mexican company that produces and markets frozen vegetables sold as pizza
toppings. Its owner wants to expand its product mix by adding a line of precooked frozen meats for
retail bagged stir-fry meals. According to Michael Porter, which of the following poses a barrier to
PURO-Veg’s entry into the bagged frozen dinner industry?
a.) The target market for easily-prepared meals is declining.
b.) The industry contains strong and aggressive competitive rivalries. (difficult) p. 149
c.) The market segment for chicken-based meals is too small to be profitable.
d.) The target market for these types of meals is not well defined.
e.) The prepared food industry is too fragmented.
22. Scott Buttars is marketing his wife’s recipes, Mrs. Buttars’ Gourmet Cooking Oils. Product lines
include Spicy Cranberry Grapeseed, Canola Mild Honey, and California Deep Olive oil flavors. He
sells through mail order but is thinking of expanding his distribution. According to Michael Porter,
which of the following would be a barrier to Buttars’ entry into a national market?
a.) Every gourmet store and supermarket is stocked with a number of similar kinds of gourmet
oils. (difficult) p. 149
b.) Oils, like all culinary products, are in a declining market because people are cooking less.
c.) The target market for gourmet oils is large and widely dispersed.
d.) Consumers are time-poor and are not receptive to new product promotions.
e.) Various federal agencies will monitor the company’s every move when the oils move from its
present regional distribution to a national distribution.
23. Bernardo’s Italian Kitchen gets its meats from Alliant Distributors. Recently, the Alliant salesperson
has mentioned that company may eliminate service to some smaller accounts in the near future.
Bernardo’s is not a large operation and so does not have much leverage in the buying process.
According to Michael Porter, what is the best defense against strong bargaining power by suppliers?
a.) offer to pay more money to guarantee a constant supply
b.) develop its own alternative
c.) use a horizontal integration strategy
d.) build a win-win relationship with Alliant (difficult) p. 150
e.) use a combination of the above
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24. A(n) _______________ is a group of firms that offer a product or class of products that are close
substitutes for each other.
a.) industry (moderate) p. 151
b.) market
c.) segment
d.) product class
e.) buying class
25. Industries are classified according to _______________.
a.) size of customer base
b.) their target market strategies
c.) their organizational cultures
d.) degree of vertical integration (difficult) p. 152
e.) all of the above
26. Cinders for low-maintenance landscaping are a commodity. Cinders are created and sold by many
small regional companies. It is also sold in bulk to smaller distribution companies that bag the
product and sell it under a variety of brand names. Companies that produce landscaping cinders find
it hard to ask more than the going price. The industry structure for the companies that produce cinder
products is a _______________.
a.) pure monopoly
b.) monopolistic competition (moderate) p. 152
c.) pure competition
d.) differentiated oligopoly
e.) pure oligopoly
27. When you are asked to name companies in the auto industry, you will probably name Ford, GM,
DaimlerChrysler, Toyota, and Honda. Each of them produces vehicles such as sedans, minivans, and
light truck, as well as other vehicles. Each company uses pricing, sales promotions, and advertising to
distinguish itself from the others. The auto industry would be classified as a _______________.
a.) pure monopoly
b.) monopolistic competition
c.) pure competition
d.) differentiated oligopoly (moderate) p. 152
e.) pure oligopoly
28. In _______________, a few companies offer products partially differentiated by quality, features,
styling, or services. Each competitor may seek leadership in one of these attributes, attract customers
seeking that attribute, and charge a price premium for that attribute.
a.) pure monopoly
b.) pure oligopoly
c.) differentiated oligopoly (moderate) p. 152
d.) monopolistic competition
e.) pure competition
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29. In _______________, many competitors are able to differentiate their offers in whole or part
(restaurants are a good example). Competitors focus on market segments where they can meet
customer needs in a superior way and command a price premium.
a.) pure monopoly
b.) pure oligopoly
c.) differentiated oligopoly
d.) monopolistic competition (moderate) p. 152
e.) pure competition
30. Nike, Reebok, Adidas, New Balance, and others manufacture athletic shoes. While some may say
that all athletic shoes are alike, if you want a pair of Iversons—The Answer IVs—you have to buy the
Reebok brand. In this way, Reebok focuses on a particular market segment and charges a premium
price. The other athletic shoe manufacturers have similar marketing strategies. The athletic shoe
industry would be classified as a _______________.
a.) pure monopoly
b.) monopolistic competition (moderate) p. 152
c.) pure competition
d.) differentiated oligopoly
e.) pure oligopoly
31. Consumers can buy lumber at lumberyards, do-it-yourself stores, and other similar places.
Consumers perceive all lumber to be the same. Since they perceive no differences among the
producers, consumers assume the price will be the same. In terms of consumer perception, the
lumber industry is a _______________.
a.) pure monopoly
b.) monopolistic competition
c.) pure competition (moderate) p. 152
d.) differentiated oligopoly
e.) pure oligopoly
32. In _______________, many competitors offer the same product and service, so, without
differentiation, all prices will be the same.
a.) pure monopoly
b.) monopolistic competition
c.) pure competition (moderate) p. 152
d.) differentiated oligopoly
e.) pure oligopoly
33. Which of the following is not an example of an oil company that is vertically integrated?
a.) one that carries on oil exploration
b.) one that refines the raw product into useful products
c.) one that buys competing oil companies (difficult) p. 152
d.) one that owns gas stations
e.) one that separates and markets natural gas from the raw product
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34. Mountain Sports, a retailer of outdoor gear, including skis and snowboards, is struggling because for
several Winters there has been very little snow at the local ski resort. The resultant decline in business
threatens Mountain Sports viability as a business. Unfortunately, there still exists a large customerbase that requires expensive servicing due to a company policy of “life-time free tune-ups.”
Mountain Sports is facing a(n) _______________ barrier.
a.) cost structure
b.) vertical integration
c.) marketing
d.) exit (moderate) p. 152
e.) distribution
35. A manufacturer of mechanic tools sells its products through three different marketing channels—
Snap-On mobile tools retailers, the NAPA Auto Parts chain, and Sears. It wants to expand its market
by selling its products through mail order catalogs. A heavy duty 34-piece ratchet set weighs six
pounds. A mechanics large tool box weighs 20 pounds. Which of the following statements describes
the potential success of their market expansion efforts?
a.) Its market expansion strategy will fail because of mobility and exit barriers.
b.) Its market expansion strategy will fail because of cost structure and mobility barriers.
(difficult) p. 152
c.) Because it has engaged in vertical differentiation, any expansion will fail.
d.) Its market expansion strategy will fail due to the length of its distribution channel.
e.) Its market expansion strategy efforts will succeed because there are no barriers to its success.
36. Echo’s Exotics - The Tropical Fish Source sells its products through pet stores. To help maintain the
quality of the fish she sells, the owner, Echo Dillinger has purchased several of her suppliers’
companies. These include a small fleet of boats, an exporting concern, and a small animal
veterinarian clinic based in the Caribbean. What would be a disadvantage associated with this
vertical integration?
a.) a smaller share of value-added stream
b.) the loss of the ability to manipulate prices
c.) an increase in overall variable costs
d.) a loss of control over costs
e.) a lack of flexibility (difficult) p. 152
37. In a recent promotional campaign, Kodak advertised that it sold magic because its cameras were a
way to capture time. With this advertising theme, Kodak had a(n) _______________ concept of
competition.
a.) product
b.) market (moderate) p. 152
c.) industry
d.) oligopoly
e.) sales
38. A(n) _______________ is a group of firms using the same marketing mix to target the same markets.
a.) industry
b.) market
c.) pure monopoly
d.) strategic group (moderate) p. 154
e.) joint venture
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39. Once a company has identified its competitors and their strategies, the next step in analyzing the
competition is to _______________.
a.) determine competitors’ objectives (moderate) p. 154
b.) analyze competitors’ strengths and weaknesses
c.) anticipate competitors’ responses when their market share is attacked
d.) choose which competitors to attack
e.) determine whether the competition uses an offensive or a defensive strategy
40. What is the primary reason why a company should assess its competitors’ strengths and weaknesses?
a.) An assessment of the competitor’s strengths will reveal its objectives.
b.) The assessment will provide insight into competitors’ perspective on the market and their
probable strategies.
c.) An assessment of the competitor’s weaknesses will reveal how quickly it will respond to new
products.
d.) An assessment is a sure way to determine what competitors’ responses will be to the company’s
offensive strategy.
e.) A competitors’ resources and capacities determine how well it will be able to accomplish its
objectives. (difficult) p. 155
41. When gauging a competitor’s strengths, the percentage of customers who name the competitor when
asked to “name the first company that comes to mind in this industry” is considered the
_______________.
a.) share of mind (moderate) p. 155
b.) share of body
c.) share of market
d.) share of heart
e.) share of soul
42. According to the text, a _______________ is a competitor that tries to buy share rather than earn it,
invest in overcapacity, and upset the industrial equilibrium.
a.) mediocre competitor
b.) good competitor
c.) bad competitor (moderate) p. 157
d.) stochastic competitor
e.) reciprocal competitor
43. In monitoring its competition, the Pepsi Company might want to analyze its _______________ by
asking customers to name the first candy bar that comes to mind.
a.) share of market
b.) market potential
c.) economic potential
d.) share of heart
e.) share of mind (moderate) p. 155
44. In monitoring its competition, Suzuki USA might want to analyze its _______________ by asking
customers who visit its showrooms what brand of economy cars they would prefer to buy.
a.) share of market
b.) market potential
c.) economic potential
d.) share of heart (moderate) p. 155
e.) share of mind
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45. According to the text, what do “good” competitors not do?
a.) sets prices in reasonable relation to costs
b.) make realistic assumptions about the industry’s growth potential
c.) take large risks (moderate) p. 157
d.) play by the industry’s rules
e.) accept the general level of their share and profits
46. What does the industry market leader not normally do?
a.) lead the industry in new product instructions
b.) lead the industry in price changes
c.) lead the industry in promotional intensity
d.) lead the industry in distribution coverage
e.) lead the industry in competitive diversification (moderate) p. 157
47. In order to maintain dominance in an industry, the leading firm should do all of the following except
_______________.
a.) seek to monopolize the supply side of the industry (moderate) p. 158
b.) expand total market demand
c.) protect its current market share through good defensive actions
d.) protect its current market share through good offensive actions
e.) try to further increase its market share
48. The first step in designing the competitive intelligence system is to _______________.
a.) identify the vital types of competitive information and the best sources, and to assign
someone to manage the process (difficult) p. 156
b.) select the process and tools for collecting the data
c.) choose the number of competitive factors to track and which competitors (best of breed), or direct
competitors to measure
d.) check the information for validity and reliability, then interpret, organize, and distribute it
e.) do a competitive analysis to determine what information is the most readily available
49. Homer Asaad owns fruit orchards and a small retail outlet where he sells fresh and dried apricots and
cherries. There are several other orchards in the area that are about the same size and operate similar
operations. Homer could use a(n) _______________ to identify his enterprise’s strengths and
weaknesses in relation to his competitors.
a.) share of heart, share of mind, and market analysis
b.) customer value analysis (moderate) p. 157
c.) environmental assessment
d.) social audit
e.) strategic group analysis
50. The first step in customer value analysis is to _______________.
a.) assess how customers in a specific segment rate the company’s performance against a specific
competitor
b.) monitor customer values for change
c.) ask customers to rate the importance of different attributes related to the marketing mix
d.) have customers describe the performance of the company doing the analysis and its competitors
e.) identify the major attributes that customers value (moderate) p. 157
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51. Which of the following is NOT a typical market leader strategy?
a.) a geographical-expansion strategy
b.) a market penetration strategy
c.) a flanking strategy (moderate) p. 159
d.) a market broadening strategy
e.) a market diversification strategy
52. The basic defensive marketing strategy is called a _______________ defense.
a.) flank
b.) position (moderate) p. 159
c.) mobile
d.) preemptive
e.) counteroffensive
53. Invading the marketplace of a competitor who has entered your market, forcing them to defend their
territory is an example of what type of defense strategy?
a.) contraction
b.) position
c.) mobile
d.) preemptive
e.) counteroffensive (moderate) p. 160
54. World Professional Wrestling (WPW) is a regional pro wrestling company that hopes to go national.
In response to this and an in attempt by Turner Broadcasting to compete on a national basis with
another regional wrestling troupe, the owner of WWF trademarked his wrestlers’ names, started
licensing the use of those names on a variety of products, and used other strategies to reach the
nation’s wrestling fans and maintain its market share. This is an example of a _______________
defense strategy.
a.) flank
b.) position
c.) mobile
d.) preemptive (moderate) p. 160
e.) counteroffensive
55. When a new fast-food restaurant moves into an area where there is a McDonald’s, company policy
requires that McDonald’s do nothing for the first six weeks the new establishment is open in order to
let the novelty wear off. Then McDonald’s defense strategy is to use heavy advertising, couponing,
2-for-1 sales, and other price reduction strategies to recapture its customers. This is an example of a
_______________ defense strategy.
a.) flank
b.) position
c.) mobile
d.) preemptive
e.) counteroffensive (moderate) p. 160
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56. A company that is using a market broadening strategy in which they change their product from
Internet service provider to communications resource is using a _______________ defense strategy.
a.) flank
b.) position
c.) mobile (moderate) p. 160
d.) preemptive
e.) counteroffensive
57. Bill’s Athletic Shop began with shoes and running clothing. Then it included rock climbing
equipment. This diversification is an example of a _______________ defense strategy.
a.) flank
b.) position
c.) mobile (moderate) p. 160
d.) preemptive
e.) counteroffensive
58. A strategic withdrawal is an example of a _______________ defense strategy.
a.) contraction (moderate) p. 160
b.) position
c.) mobile
d.) preemptive
e.) counteroffensive
59. Some years ago a large tobacco company purchased a large food company. It seemed a good match
at the time because of similarities in distribution, but it became obvious quickly that the image of the
food company was challenged by the negative association with tobacco. The tobacco concern sold
the food concern as a part of a _______________ defense strategy.
a.) contraction (moderate) p. 160
b.) position
c.) mobile
d.) preemptive
e.) counteroffensive
60. Airwalk was using a(n) _______________ attack strategy when it introduced skateboarding shoes
and grabbed a large portion of Van’s skate shoe market share. At the time, Airwalks were perceived
as a much better fitting shoe than Van’s.
a.) flank
b.) encirclement
c.) frontal (moderate) p. 162
d.) bypass
e.) guerrilla
61. A flank attack strategy can be directed along two strategic dimensions. They are _______________.
a.) geographical and segmental (moderate) p. 162
b.) functional and technical
c.) consumer and competitor
d.) front and side
e.) offensive and defensive
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62. Cannondale introduced a highly innovative motocross motorcycle. It was a success with the
motorcycle industry magazine writers, but Cannondale has not been financially strong enough to
build a market position. The makers of KTM introduced a line of equally innovative motocross
products. KTM is using a(n) _______________ attack strategy in this example.
a.) frontal (moderate) p. 162
b.) encirclement
c.) bypass
d.) guerrilla
e.) flank
63. A(n) _______________ is another name for identifying shifts in market segments that are causing
gaps to develop, then rushing in to fill the gaps and develop them into strong segments.
a.) flanking strategy (moderate) p. 162
b.) frontal strategy
c.) encirclement strategy
d.) bypass strategy
e.) guerrilla strategy
64. Nestle attacks the food market by distributing its wide variety of food products in every major and
many minor food sales outlets and overwhelming competitors with constantly changing varieties of
offerings. It makes and sells thousands of brands around the world. Nestle is using a(n)
_______________ strategy.
a.) frontal
b.) encirclement (moderate) pp. 162-163
c.) bypass
d.) guerrilla
e.) flank
65. The most indirect assault strategy is the bypass. Which of the following is not a way of carrying out
the bypass approach?
a.) diversifying into unrelated products
b.) diversifying into new geographical markets
c.) going around the competitors via cost reduction and aggressive price cutting (moderate) p.
163
d.) leapfrogging into new technologies to supplant existing products
e.) entering new markets through merger and acquisition activity
66. Technological leapfrogging is a(n) _______________ attack strategy.
a.) frontal
b.) encirclement
c.) bypass (moderate) p. 163
d.) guerrilla
e.) flank
67. A guerrilla attack strategy _______________.
a.) is more expensive to implement than a frontal attack
b.) is practiced by larger companies against smaller ones
c.) involves all elements of the marketing mix except price
d.) must be backed by a stronger attack if the challenger hopes to beat the opponent (difficult)
p. 163
e.) is accurately described by all of the above
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68. Ebay is an Internet auction that at any point in time has approximately a million items listed for sale.
Now others including AuctionWeb.com and Amazon.com provide similar auction services on a
smaller scale. What type of a follower strategy are AuctionWeb and others like it using?
a.) counterfeiter
b.) cloner (moderate) p. 164
c.) imitator
d.) adapter
e.) modifier
69. The PA Factory in China makes SUV vehicles that look exactly like Jeep Cherokees, right down to
the brand logos attached to the body. The Factory sells the SUVs in Beijing and the surrounding
areas. What sort of follower strategy is the PA Factory using?
a.) counterfeiter (moderate) p. 164
b.) cloner
c.) imitator
d.) adapter
e.) modifier
70. The companies with the greatest chance of success are those which have developed a(n)
_______________ orientation.
a.) industry
b.) market
c.) competitor
d.) supplier
e.) customer (moderate) p. 166
Essay Questions
71. Draw, label, and explain what a competitor map might look like for a regional movie theater change.
Answer:
The inner circle should contain reference to choosing movies, and attending, choosing, and buying
refreshments. The next ring out is “Direct Competition” and should contain all companies that market
the movie (at the theater) experience. The outer ring is the “Indirect Competition” ring, and should
contain reference to any other form of entertainment that competes for the consumer’s patronage.
(moderate) p. 153
72. Just like any other organization, the monks at a monastery in Missouri need to support themselves.
Their initial foray into the marketplace was to produce and market American Flags, with which they
had reasonable success. Flag sales tended to slump in the winter. The brethren needed another
source of income, so they have decided to make and market high-quality cheeses. They’ve hired you
to talk about what entry and mobility barriers they might face. What would you tell them?
Answer:
High capital requirements for the necessary cheese-making equipment would be a barrier. The issue
of economies of scale should be discussed. Of course, legal requirements are an issue because of the
number of agencies that must approve food production, etc. The availability of first-class raw
materials at an affordable price and distributors of these items are also areas of potential concern.
Building a reputation as a producer of gourmet cheeses may also be a barrier if the brethren cannot
afford the needed promotion.
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In terms of mobility barriers, if the brethren wanted to diversify and sell their cheeses on supermarket
shelves rather than just at the monastery, they would have to contend with the existing store delis,
slotting allowances, and competition for shelf space.
(difficult) p. 150
73. The antique business is a highly competitive business. Information can make an antique retailer
successful; lack of information typically results in failure. An antique retailer like John Fletcher must
be able to recognize and buy an unsigned Granville Redmond painting before his competitors can.
Fletcher must know what the competition is doing, what the newest trends are, and potential problem
areas. Fletcher has asked you to help develop a strong competitive intelligence system using what
you have learned in your degree program. In a short essay, explain the four key steps in setting up
such a system and how the Internet can be part of that setup.
Answer:
In a small business like Fletcher’s, this person will more than likely be Fletcher. The next step is the
collection of data on a continuous basis. The Internet is creating a vast new arsenal of capabilities.
Companies place volumes of information on their Web sites, providing details to attract customers,
partners, and suppliers. Fletcher can have access to this information with a touch of a mouse. Also
trade associations can provide a wealth of information—especially on trends and potential fraudulent
antiques. The third stage is the evaluating and analysis of the information. The final step is
disseminating and responding to the information. The information is of limited value unless Fletcher
shares it with his employees.
(moderate) pp. 156-157
74. It’s important to understand the value of a market before investing the money and effort to capture it.
In a short essay, explain how to conduct a customer value analysis and how it relates to the gathering
of competitive intelligence.
Answer:
The major steps in the customer value analysis are: (1) Identify the major attributes that customers
value. (2) Assess the quantitative importance of the different attributes. (3) Assess the company’s
and competitors’ performances on the different customer values against their rated importance. This
lets the customers describe how they perceive the company and its competition. (4) Examine how
customers in a specific segment rate the company’s performance against a specific competitor on an
attribute-by-attribute basis. This step also provides important competitive intelligence. (5) Monitor
customer values over time. This step allows a company to periodically redo its customer value
analysis and reassess how it stands against its competitors.
(moderate) p. 157
75. In a short essay, describe the process a ServiceMaster carpet cleaning franchise might use to do a
customer value analysis. What would be the purpose of such an analysis?
Answer:
The purpose is to reveal the company’s strengths and weaknesses relative to the various competitors.
The steps of the process include: First, the company asks customers what attributes and performance
levels they look for in choosing carpet maintenance. Second, the company asks customers to rate the
importance of these different attributes and describe where they see the company’s and the
competitors’ performances on the attributes. Third, at a more detailed level, examine how the
customers in each targeted segment (commercial accounts, repeat customers, one-timers, for
example) rates the company’s performance against a particular competitor on an attribute-by-attribute
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basis. If the company’s offer exceeds that of the competitor, this may allow them to charge more, or
charge the same but grow market share. Last, do the process over periodically.
(difficult) p. 157
Mini-Cases
Mini-Case 8-1
A consultant visited with the newly formed Vespa-USA group to help them understand the American
market for motor scooters. Though there are many groups of hardcore scooter fans scattered throughout
the country, those groups tend to ride classic Vespas and Lambrettas from the 1950s and 1960s. Vespa’s
boutique approach to selling the scooters in the USA since 2001 has already resulted in some sales, but
the company and the franchiser/dealers have been disappointed so far. Honda is the leading seller of
motor scooters in the USA, with over 65 percent of total sales. The consultant tells the Vespa group that
in his market research, he finds that Honda’s name comes up 49 percent of the time when target
consumers are asked to “name the first company that comes to mind when you think of motor scooters.”
When asked “who would you prefer to buy a motor scooter from?” 36 percent responded “Honda.” Only
11 percent mentioned Vespa. The consultant also tells the Vespa audience that the scooters are deemed
underpowered for city use by 58 percent of those who test rode them.
76. Refer to Mini-Case 8-1. When gauging Honda’s strengths and weaknesses as a competitor, Vespa
now knows that _______________.
a.) Honda’s share of mind is 49 percent (moderate) p. 155
b.) Hondas share of heart is 49 percent
c.) Honda’s share of the market is 49 percent
d.) Honda’s share of profit is 49 percent
e.) Honda’s heart/mind ratio is larger than that of Vespa
77. Refer to Mini-Case 8-1. Vespa’s choice to sell through boutiques versus more traditional motorcycle
dealerships is an example of what type of strategy?
a.) frontal attack
b.) lobal attack
c.) encirclement attack
d.) modified frontal attack
e.) flank attack (moderate) p. 162
78. Refer to Mini-Case 8-1. The marketing research test rides mentioned are probably a part of what type
of analysis?
a.) multidimensional scale analysis
b.) customer value analysis (moderate) p. 157
c.) Porter’s Five Forces analysis
d.) cost/benefit analysis
e.) guerrilla competitor analysis
Mini-Case 8-2
Guillermina sat at her desk at the end of a very tough day. Her salon was facing intense profitability
problems. First, she thought, there were really too many salons in close proximity to hers. Many were
selling “cheap” cuts and styles, making it tough to charge much more than $15 to $18, even though
Guillermina was sure her quality was higher than most of her competition. Second, she reasoned, there is
really nothing to opening even more businesses. All a person needs is a rent deposit, a beautician’s
license, and a $45 permit from the city to start a new salon. Also, she mused, patrons had many options.
They could try new places and new stylists, they could put off cutting their hair, or even cut their own, if
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they chose. Some customers had even tried bargaining the prices for certain services with Guillermina.
Finally, as a small operator, Guillermina often felt as though she was being held hostage in terms of the
prices her suppliers, such as Redkin and Bed Head, charged for the most popular shampoos, conditioners,
and treatments.
79. Refer to Mini-Case 8-2. Without knowing it, Guillermina has been performing what type of analysis
on her business and industry?
a.) multidimensional scale analysis
b.) customer value analysis
c.) Porter’s Five Forces analysis (moderate) p. 150
d.) cost/benefit analysis
e.) guerrilla competitor analysis
80. Refer to Mini-Case 8-2. Which of Porter’s Five Forces has Guillermina not carefully considered in
the case?
a.) threat of intense segment rivalry
b.) threat of substitute products
c.) threat of new entrants
d.) threat of suppliers growing bargaining power
e.) Guillermina has pretty much considered all of Porter’s forces (moderate) p. 150
81. Refer to Mini-Case 8-2. The salon industry in Guillermina’s area is probably of what industry
structure type?
a.) pure monopoly
b.) pure oligopoly
c.) pure competition
d.) monopolistic competition (moderate) p. 152
e.) differentiated oligopoly
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