Chapter 11: Dealing with Competition
GENERAL CONCEPT QUESTIONS
Multiple Choice
1. Michael Porter has identified five forces that determine the intrinsic long-run
attractiveness of a market or market segment. Which of the following would NOT be
among Porter’s five forces?
a. Industry competitors
b. Technological partners
c. Substitutes
d. Buyers
e. Potential entrants
Answer: b
Page: 342
Level of difficulty: Medium
2. Which of the following would be the most likely threat that is associated with
potential new entrants in Porter’s segment structural attractiveness model?
a. Threat of positioning
b. Threat of response
c. Threat of delayed action
d. Threat of role reversal
e. Threat of mobility
Answer: e
Page: 342
Level of difficulty: Hard
3. A segment is unattractive when there are actual or potential ________ for the product.
a. contenders
b. competitors
c. substitutes
d. unclear demand
e. profit fluctuation
Answer: c
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Level of difficulty: Medium
4. Wal-Mart is perhaps one of the best illustrations of the threat of ________ found in
Porter’s model.
a. intense segment rivalry
b. new entrants
c. substitute products
d. buyers’ growing bargaining power
e. suppliers’ growing bargaining power
Answer: d
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Level of difficulty: Hard
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5. A segment is unattractive if the company’s suppliers are able to raise prices or reduce
quantity supplied. Which of the following is the best illustration of the threat of
suppliers’ growing bargaining power?
a. Wal-Mart has almost no competitors in its market space.
b. Oil companies must purchase a significant amount of their product from OPEC.
c. McDonald’s is the largest fast food franchise and is still growing.
d. The U.S. Post Office has merged package operations with FedEx.
e. Sears unsuccessfully attempted to compete with Wal-Mart and Kmart.
Answer: b
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Level of difficulty: Hard
6. A(n) ________ is a group of firms that offer a product or class of products that are
close substitutes for one another.
a. industry
b. cartel
c. cooperative
d. monopoly
e. demand field
Answer: a
Page: 344
Level of difficulty: Easy
7. When only one firm provides a certain product or service in a certain country or area
a ________ exists.
a. duopoly
b. monopoly
c. oligopoly
d. monopolistic competition
e. pure competition
Answer: b
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Level of difficulty: Easy
8. Which of the following would be the best illustration of a pure oligopoly?
a. Autos
b. Cameras
c. Steel
d. Pharmaceuticals
e. High fashion clothing
Answer: c
Page: 344
Level of difficulty: Hard
9. Which of the following is often considered to be a good illustration an industry
structure type known as pure competition?
a. Oil
b. Plastics
c. Pharmaceuticals
d. High fashion clothing
e. Stock market
Answer: e
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Level of difficulty: Medium
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10. All of the following are considered to be major entry barriers in markets EXCEPT
________.
a. high capital requirements
b. economies of scale
c. patents and licensing requirements
d. product or service line
e. reputation requirements
Answer: d
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Level of difficulty: Medium
11. If a marketer is facing government restrictions, high vertical integration, emotional
barriers, low asset-salvage value due to obsolescence, and legal obligations to
creditors, the marketer is most likely facing what are called ________ barriers in a
marketplace.
a. exit
b. entrance
c. competitive
d. virtual
e. contrived
Answer: a
Page: 345
Level of difficulty: Medium
12. Major oil producers carry on oil exploration, oil drilling, oil refining, chemical
manufacture, and service-station operation. When an organization does all of these
separate tasks within a distribution channel they can be said to have achieved what is
called ________.
a. vertical integration
b. horizontal integration
c. concentric integration
d. parallel marketing
e. conglomerate marketing
Answer: a
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Level of difficulty: Medium
13. Using the market approach, ________ are companies that satisfy the same customer
need.
a. partners
b. competitors
c. entrepreneurs
d. innovators
e. followers
Answer: b
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Level of difficulty: Easy
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14. A group of firms following the same strategy in a given target market is called
________.
a. cartel
b. cabal
c. cooperative
d. informal alliance
e. strategic group
Answer: e
Page: 347
Level of difficulty: Easy
15. An example of a strategic group in the appliance industry would be one where
________.
a. there was a large franchised dealer system
b. a common promotional theme used
c. competitors had broad lines, medium manufacturing costs, low service
responsibility, and low prices
d. multinational operations are mandated
e. a value orientation rather than a cost orientation
Answer: c
Page: 347
Level of difficulty: Medium
16. Once a company has identified its main competitors and their strategies, it must next
ask: ________?
a. What are the competitors’ objectives
b. What are the competitive brand attributes
c. What are the competitive promotion schemes
d. What is the attrition rate in the market
e. What are the subtle market entrance requirements
Answer: a
Page: 347
Level of difficulty: Hard
17. In general, a company should monitor the following variables when analyzing
competitors: ________, share of mind, and share of market.
a. share of demand
b. share of profits
c. share of promotion
d. share of universe
e. share of heart
Answer: e
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Level of difficulty: Medium
18. ________ is the percentage of customers who named the competitor in responding to
the statement, “Name the company from which you would prefer to buy the product.”
a. Share of market
b. Share of mind
c. Share of heart
d. Share of competitive space
e. Share of psychological field
Answer: c
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Level of difficulty: Medium
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19. Most companies aim their competitive shots at ________ competitors, because this
requires fewer resources per share point gained.
a. strong
b. weak
c. distant
d. “good”
e. unacknowledged
Answer: b
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Level of difficulty: Easy
20. ________ competitors try to buy market share rather than earn it; take large risks;
invest in overcapacity; and upset industrial equilibrium.
a. “Bad”
b. “Good”
c. Distant
d. Close
e. Strong
Answer: a
Page: 349
Level of difficulty: Hard
21. In general, a market leader will have about ________ of the total market in relation to
other competitors.
a. 60 percent
b. 50 percent
c. 40 percent
d. 30 percent
e. 75 percent
Answer: c
Page: 349
Level of difficulty: Medium
22. The market nicher serves small market segments not being served by larger firms.
Nichers account for about ________ of the market in relation to other competitors.
a. 30 percent
b. 25 percent
c. 20 percent
d. 15 percent
e. 10 percent
Answer: e
Page: 349
Level of difficulty: Hard
23. The aim of benchmarking is to copy or improve on ________, either within an
industry or across industries.
a. profitability
b. manufacturing
c. ideation
d. aggressiveness
e. “best practices”
Answer: e
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Level of difficulty: Medium
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24. Being a market leader is often a difficult position to maintain and defend. The market
leader must protect its current market share through good defensive and offensive
actions. Second, the firm can try to increase its market share, even if the market size
remains constant. What is the third course of action recommended for market leaders?
a. The firm must find be a cost leader.
b. The firm must find new, innovative technologies on a monthly basis.
c. The firm must strive to win promotional awards.
d. The firm must find ways to expand total market demand.
e. The firm must pursue markets others do not want.
Answer: d
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Level of difficulty: Medium
25. As a marketing manager, you have decided to pursue new customers with your
established products. Specifically, the new customers that you want are those who
might use the product but do not at present. Which of the following strategies is
recommended to pursue such a customer market?
a. Market-penetration strategy
b. New-market segment strategy
c. Geographical-expansion strategy
d. Needs-assessment strategy
e. Consolidation strategy
Answer: a
Page: 350
Level of difficulty: Hard
26. One of the market leader strategies for expanding the total market is to focus on more
usage. Two avenues are open for doing this: increasing the frequency of consumption
or ________.
a. increasing adherence to everyday low pricing
b. decreasing the number of product returns
c. increasing the level or quantity of consumption
d. increasing the level of promotional expenditures relative to market share
percentage
e. decreasing sales-related expenses
Answer: c
Page: 350
Level of difficulty: Hard
27. To counter value-based players, it will be necessary to focus on areas where their
business models give other companies room to maneuver. For example, instead of
directly competing with Wal-Mart and other retailers, Walgreen’s emphasizes
convenience across all elements of its business. Which of the following general
strategies is Walgreen’s using as its main competitive focus?
a. Execution
b. Implementation
c. Vertical integration
d. Differentiation
e. Cost leadership
Answer: d
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Level of difficulty: Medium
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28. Market leaders are constantly under attack from large and small competitors alike.
What is the most constructive response a market leader can make when defending its
terrain?
a. Basic cost control.
b. Expanding expected benefits.
c. Expanding desired benefits.
d. Meet all challengers with a swift response.
e. Continuous innovation.
Answer: e
Page: 352
Level of difficulty: Medium
29. Caterpillar has become dominant in the construction-equipment industry despite
charging a premium price and being challenged by a number of able competitors. All
of the following have been cited as policies used by Caterpillar to meet its
competitors EXCEPT ________.
a. limited-line strategy
b. premium performance
c. superior service
d. extensive and efficient dealership system
e. good financing
Answer: a
Page: 352
Level of difficulty: Hard
30. Sony is an unusual market leader. It gives its customers new products that they have
never even asked for (e.g., Walkmans, VCRs, video cameras, CDs). This makes Sony
a(n) ________ firm.
a. market-driven
b. market-driving
c. operations-driven
d. vision-driven
e. virtually-driven
Answer: b
Page: 353
Level of difficulty: Medium
31. ________ defense involves occupying the most desirable market space in the minds
of the consumers, making the brand almost impregnable.
a. Position
b. Flank
c. Preemptive
d. Mobile
e. Contraction
Answer: a
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Level of difficulty: Medium
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32. A marketing manager has planned a strategy that will require that the organization
erect outposts to protect its weak front-running brands. Because these outposts will be
central to the organization’s new competitive strategy, we can say that a ________
defense is being used.
a. position
b. flank
c. preemptive
d. counteroffensive
e. mobile
Answer: b
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Level of difficulty: Medium
33. The “best defense is a good offense” would be a policy under which of the following
market leader defensive strategies?
a. Position defense
b. Flank defense
c. Contraction defense
d. Preemptive defense
e. Lateral defense
Answer: d
Page: 354
Level of difficulty: Medium
34. Market broadening and market diversification are likely tactics employed in which of
the following market leader defensive strategies?
a. Position defense
b. Flank defense
c. Preemptive defense
d. Counteroffensive defense
e. Mobile defense
Answer: e
Page: 354
Level of difficulty: Hard
35. Because the cost of buying higher market share may far exceed its revenue value, a
company should consider four factors before pursuing increased market share. All of
the following would be among those four factors EXCEPT ________.
a. the possibility of provoking antitrust action
b. economic cost
c. pursuing the wrong marketing-mix strategy
d. the likelihood that an award-winning promotional campaign can be generated
e. the effect of increased market share on actual and perceived quality
Answer: d
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Level of difficulty: Medium
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36. Some market leaders have increased profitability by selectively ________ market
share in weaker areas.
a. decreasing
b. increasing
c. protecting
d. sharing
e. trading
Answer: a
Page: 355
Level of difficulty: Medium
37. All of the following companies have been characterized as being market challengers
in their respective fields EXCEPT ________.
a. Toyota
b. British Airways
c. Boeing
d. Honda
e. Proctor & Gamble
Answer: c
Page: 355
Level of difficulty: Easy
38. A market challenger must decide who to attack. All of the following are considered as
likely possible targets (as per information found in the text) EXCEPT ________.
a. it can attack the market leader
b. it can attack firms its own size that are not doing the job
c. it can attack firms its own size that are underfinanced
d. it can attack a global conglomerate that is market hungry
e. it can attack small local firms
Answer: d
Page: 356
Level of difficulty: Medium
39. All of the following are considered to be viable attack strategies that can be employed
by a market challenger EXCEPT ________.
a. counteroffensive attack
b. frontal attack
c. flank attack
d. bypass attack
e. guerilla warfare
Answer: a
Pages: 356–358
Level of difficulty: Hard
40. According to attack strategies available to the market challenger, the ________ can
be used when the challenger spots areas where the opponent is underperforming.
a. encirclement attack
b. frontal attack
c. flank-geographic-attack
d. backwards-flank-attack
e. guerilla warfare
Answer: c
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41. Sally Seabrook is an up-and-coming marketing manager for a large department store
chain. Ms. Seabrook has distinguished herself with bold strategies such as launching
attacks on her primary competitor from several fronts (including advertising, new
store openings, price cuts, new distributor alliances, and creative merchandising).
Her “blitz” is comparable to any done by the military in time of war. Which of the
following market challenger attack strategies is Ms. Seabrook using to attack her
competition?
a. Frontal attack
b. Bypass attack
c. Guerrilla warfare
d. Flank attack
e. Encirclement attack
Answer: e
Page: 357
Level of difficulty: Hard
42. A marketing manager of a market challenger-type organization has decided to
“leapfrog” competition by moving into cutting-edge technologies. This indirect
approach to attacking competition can be characterized as being what is called the
________.
a. flank attack
b. encirclement attack
c. bypass attack
d. guerrilla warfare
e. frontal attack
Answer: c
Page: 357
Level of difficulty: Medium
43. A market challenger strategist must carefully consider all attack options before
moving forwards. If the strategist chooses the ________ approach, selective price
cuts, intense promotional blitzes, and occasional legal action will probably be
commonplace in the strategic design.
a. frontal attack
b. flank attack
c. bypass attack
d. encirclement attack
e. guerilla warfare
Answer: e
Page: 358
Level of difficulty: Hard
44. All of the following are considered to be valid market challenger attack strategies
EXCEPT ________.
a. price discounts
b. lower price goods
c. prestige goods
d. partnerships with rival market leaders
e. product proliferation
Answer: d
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Level of difficulty: Medium
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45. Avon became a major cosmetics company by perfecting door-to-door selling instead
of battling other cosmetic firms in conventional stores. This is an example of which
of the following specific market challenger attack strategies?
a. Manufacturing-cost reduction
b. Intensive advertising promotion
c. Distribution innovation
d. Product innovation
e. Product proliferation
Answer: c
Page: 359
Level of difficulty: Medium
46. Which of the following best describes the premise of Theodore Levitt’s “Innovative
Imitation” article?
a. Imitation is wrong and should be punished.
b. Product imitation might be as profitable as a strategy of product innovation.
c. Innovation is not possible without substantial imitation.
d. Innovation cannot begin unless dissatisfaction with imitation occurs.
e. Imitation should be against the law because of the intellectual property decision
involved.
Answer: b
Page: 359
Level of difficulty: Hard
47. Many companies prefer to follow rather than challenge the market leader. Patterns of
________ are common in capital-intensive, homogeneous-product industries, such as
steel, fertilizers, and chemicals. Competitors present similar offers to buyers, usually
by copying the leader. Market shares show high stability.
a. “conscious parallelism”
b. “feature fashion”
c. “covert security analysis”
d. “supply delay”
e. “predatory pricing”
Answer: a
Page: 360
Level of difficulty: Hard
48. All of the following are considered to be viable market follower strategies EXCEPT
________.
a. counterfeiter
b. cloner
c. imitator
d. innovator
e. adapter
Answer: d
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Level of difficulty: Medium
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49. As a market follower strategy, the ________ emulates the leader’s products, name,
and packaging, with slight variations.
a. counterfeiter
b. cloner
c. imitator
d. adapter
e. innovator
Answer: b
Page: 361
Level of difficulty: Hard
50. As a market follower strategy, the ________ copies some things from the leader but
maintains differentiation in terms of packaging, advertising, pricing, or location. This
strategy is tolerated by the market leader as long as the follower’s aggressiveness
does not mount.
a. counterfeiter
b. cloner
c. imitator
d. adapter
e. innovator
Answer: c
Page: 361
Level of difficulty: Medium
51. An alternative to being a market follower in a large market is to be a leader in a small
market. This type of competitor is called a(n) ________.
a. marketing knave
b. market nicher
c. segment king
d. guerilla marketer
e. strategic clone
Answer: b
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Level of difficulty: Medium
52. Which of the following tennis shoe companies is considered to be a market nicher?
a. New Balance
b. Adidas
c. Reebok
d. Wal-Mart brand tennis shoes
e. Nike
Answer: a
Page: 362
Level of difficulty: Medium
53. In terms of comparisons with a market leader, whereas the market leader achieves
high volume, the market nicher achieves ________.
a. high margin
b. low margin
c. high promotability
d. medium pricing
e. lower demand
Answer: a
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Level of difficulty: Medium
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54. The key idea in successful nichemanship is specialization. Which of the following
specialists would most closely be identified with the characterization of being an
organization that limits its selling to one customer?
a. End-user specialist
b. Vertical-level specialist
c. Customer-size specialist
d. Specific-customer specialist
e. Quality-price specialist
Answer: d
Page: 364
Level of difficulty: Medium
55. A market nicher is considered to be a ________ specialist if the firm specializes in
producing a certain type of product or product feature such as Rent-a-Wreck that
rents only “beat-up” cars.
a. end-user
b. vertical-level
c. customer-size
d. channel
e. product-feature
Answer: e
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Level of difficulty: Easy
56. Which of the following strategies for entering a market held by incumbent firms
would be best if the desire was to position away from the dominant brand with a
comparable or premium price and heavy advertising spending to establish the new
brand as a credible alternative?
a. Differentiation
b. Challenger
c. Niche
d. Premium
e. Standard
Answer: a
Page: 364
Level of difficulty: Medium
57. Which of the following types of companies is characterized as having a “fighter
orientation”?
a. Customer-centered
b. Competitor-centered
c. Distribution-centered
d. Promotion-centered
e. Niche-centered
Answer: b
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58. Which of the following types of companies is characterized as being “too reactive”?
a. Competitor-centered
b. Customer-centered
c. Service-centered
d. Distribution-centered
e. Niche-centered
Answer: a
Page: 365
Level of difficulty: Medium
59. Which of the following types of companies is felt to be in a better position to identify
new opportunities?
a. Competitor-centered
b. Consumer-centered
c. Nicher-centered
d. Distribution-centered
e. Organization-centered
Answer: b
Page: 365
Level of difficulty: Medium
60. In a ________ company, the obsession of the company is with the customer, not the
competition.
a. niche-centered
b. price-centered
c. cost-centered
d. customer-centered
e. promotion-centered
Answer: d
Page: 365
Level of difficulty: Easy
True/False
61. Markets have become too competitive to just focus on the consumer alone.
Answer: True
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Level of difficulty: Easy
62. A market is unattractive if it already contains numerous, strong, or aggressive
competitors.
Answer: True
Page: 342
Level of difficulty: Medium
63. The most attractive segment is one in which the entry barriers are low and exit
barriers are high.
Answer: False
Page: 342
Level of difficulty: Medium
64. Many businesses have failed to look to the Internet for their most formidable
competitors.
Answer: True
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Level of difficulty: Easy
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Chapter 11: Dealing with Competition
65. An industry is a group of firms that offer a product or class of products that are close
substitutes for one another.
Answer: True
Page: 344
Level of difficulty: Easy
66. In a pure monopoly, a small number of large firms produce products that range from
highly differentiated to standardized.
Answer: False
Page: 344
Level of difficulty: Medium
67. In monopolistic competition, competitor’s focus on market segments where they can
meet customers’ needs in a superior way and command a price premium.
Answer: True
Page: 344
Level of difficulty: Medium
68. Good illustrations of entry barriers into a market might be legal or moral obligations
to customers, creditors, and employees, high vertical integration, and emotional
barriers.
Answer: False
Page: 345
Level of difficulty: Medium
69. Vertical integration means that a product manufacturer enters into an alliance with
another similar manufacturer to achieve volume discounts in storage or shipping from
a third party.
Answer: False
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Level of difficulty: Medium
70.
Using a market approach, competitors are companies that satisfy the same
customer need.
Answer: True
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Level of difficulty: Easy
71. A competitor map shows the sales volume of various competitors in a market space.
Answer: False
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Level of difficulty: Medium
72. A group of firms following the same strategy in a given target market is called a
strategic alliance.
Answer: False
Page: 347
Level of difficulty: Medium
73. The competitor’s share of a target market is called the share of market.
Answer: True
Page: 348
Level of difficulty: Easy
74. Share of heart is the percentage of customers who named the competitor in
responding to the statement, “Name the first company that comes to mind in this
industry.”
Answer: False
Page: 348
Level of difficulty: Hard
75. As a strategy for expanding the total market, a market-penetration strategy is aimed at
consumers who might use the product but do not at present.
Answer: True
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Level of difficulty: Medium
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76. The most constructive strategy that a market leader can use to defend its terrain is to
follow the path of “attack before they do.”
Answer: False
Page: 352
Level of difficulty: Medium
77. If a market leader follows a strategy of continuous innovation, it keeps increasing its
competitive strength and value to its customers.
Answer: True
Page: 352
Level of difficulty: Medium
78. Position defense involves occupying the most desirable market space in the minds of
consumers, making the brand almost impregnable.
Answer: True
Page: 353
Level of difficulty: Medium
79. A preemptive defense is basically a strategic retreat until resources can be assembled
for a more advantageous attack.
Answer: False
Page: 354
Level of difficulty: Medium
80. A good way of describing a contraction defense would be to label it a strategic
withdrawal.
Answer: True
Page: 354
Level of difficulty: Easy
81. The market leader should consider several factors before pursuing increased market
share. One of the chief factors for consideration is the effect of increased market
share on actual and perceived quality.
Answer: True
Page: 355
Level of difficulty: Medium
82. After the market leader position, firms that occupy second, third, and lower ranks in
an industry are often called fledgling leaders.
Answer: False
Page: 355
Level of difficulty: Medium
83. The first step that a market challenger must take in establishing its stance against
competitors is to define its strategic objective.
Answer: True
Page: 356
Level of difficulty: Medium
84. The frontal attack by a market challenger looks for weak spots on the fringe of the
opponent’s defenses because these are natural targets.
Answer: False
Page: 356
Level of difficulty: Medium
85. The most indirect assault strategy that can be used by a market challenger is the
bypass attack where the challenger bypasses the enemy and attacks easier markets to
broaden one’s resource base.
Answer: True
Page: 357
Level of difficulty: Medium
86. The encirclement attack by a market challenger consists of waging small, intermittent
attacks to harass and demoralize the opponent and eventually secure permanent
footholds.
Answer: False
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Level of difficulty: Medium
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87. Prestige goods is a specific attack strategy that a market challenger can launch for a
higher-quality product and charge a higher price than the market leader.
Answer: True
Page: 359
Level of difficulty: Medium
88. According to an article by Theodore Levitt (“Innovative Imitation”), product
innovation is always a more profitable strategy than product imitation.
Answer: False
Page: 359
Level of difficulty: Medium
89. As one of the market follower strategies, counterfeiting duplicates the leader’s
product and package and sells it on the black market or through disreputable dealers.
Answer: True
Page: 360
Level of difficulty: Easy
90. As a market follower strategy, the adapter emulates the leader’s products, name, and
packaging with slight variations.
Answer: False
Page: 361
Level of difficulty: Medium
91. A typical market challenger strategy is that of being an imitator (e.g., copies some
things from the leader but maintains differentiation in terms of packaging,
advertising, pricing, or location).
Answer: False
Page: 361
Level of difficulty: Hard
92. In a study of hundreds of business units, the Strategic Planning Institute found that
the return on investment (ROI) averaged 27 percent in smaller markets, but only 11
percent in larger markets.
Answer: True
Page: 362
Level of difficulty: Medium
93. One of the chief advantages held by a market nicher is the fact that once a niche is
established it tends to be rather stable and can be “milked for profit” for several years
(i.e., single niching is a preferred strategy).
Answer: False
Page: 363
Level of difficulty: Hard
94. As a niche specialist role, a channel specialist specializes in serving only one channel
of distribution.
Answer: True
Page: 364
Level of difficulty: Easy
95. Hewlett-Packard specializes in the high-quality, high-price end of the hand-calculator
market qualifying the company to be called a quality-price specialist.
Answer: True
Page: 364
Level of difficulty: Easy
96. If you were a marketing manager of a rival brand of Jell-O, one of the strategies that
could be used to overcome your competitor would be called premium.
Answer: True
Page: 364
Level of difficulty: Medium
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97. When Pepsi positions close to the dominant brand (Coke) with heavy advertising
spending and comparable or premium price to challenge Coke’s dominant brand in
the soft drink category, it is following a strategy called differentiation.
Answer: False
Page: 364
Level of difficulty: Hard
98. As a proven strategy for meeting competitors, almost all companies spend the
majority of their time focusing on competitors exclusively.
Answer: False
Page: 365
Level of difficulty: Medium
99. As a result of a competitor-centered company orientation, the company develops a
fighter orientation.
Answer: True
Page: 365
Level of difficulty: Easy
100. A customer-centered company focuses on competitors’ efforts to win customers and
devises strategies to thwart these efforts.
Answer: False
Page: 365
Level of difficulty: Medium
Essay
101.
Michael Porter has identified five forces that determine the intrinsic long-run
attractiveness of a market or market segment. Briefly, list and characterize those
forces.
Suggested Answer: Porter’s five forces are: (1) threat of intense segment
rivalry—a segment is unattractive if it already contains numerous, strong, or
aggressive competitors; (2) threat of new entrants—a segment’s attractiveness
varies with the height of its entry and exit barriers; (3) threat of substitute
products—a segment is unattractive when there are actual or potential substitutes
for the product; (4) threat of buyers’ growing bargaining power; and (5) threat of
suppliers’ growing bargaining power—a segment is unattractive if the company’s
suppliers are able to raise prices or reduce quantity supplied. For additional
information and characterization, see chapter section.
Pages: 342–343
Level of difficulty: Medium
102.
There are four industry structure types associated with an industry concept of
competition. List and briefly characterize those four (4) types.
Suggested Answer: The four industry types are: (1) pure monopoly—only one
firm provides a certain product or service in a certain country or area (a local
water or cable company); (2) oligopoly—a small number of large firms produce
products that range from highly differentiated to standardized; (3) monopolistic
competition—many competitors are able to differentiate their offers in whole or
in part; and (4) pure competition—many competitors offer the same product and
service. For additional characterizations, see chapter section.
Pages: 344
Level of difficulty: Medium
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Chapter 11: Dealing with Competition
103.
Industries differ greatly in ease of entry. List four typical entry barriers into a
market?
Suggested Answer: The typical entry barriers into a market are: (1) high capital
requirements; (2) economies of scale; (3) patents and licensing requirements; (4)
scarce locations, raw materials, or distributors; (5) and reputation requirements.
For additional details, see chapter section.
Page: 345
Level of difficulty: Medium
104.
Discuss the concept of vertical integration by examining the term and the
advantages and disadvantages of integration. Illustrate your thoughts with an
example of how the process works.
Suggested Answer: Companies find it advantageous to integrate backward or
forward (vertical integration). Major oil producers, for example, carry on
exploration, oil drilling, oil refining, chemical manufacture, and service-station
operation. Vertical integration often lowers costs, and the company gains a larger
share of the value-added stream. In addition, vertically integrated firms can
manipulate prices and costs in different parts of the value chain to earn profits
where taxes are lowest. There can also be disadvantages. The high costs in certain
parts of the value chain and a lack of flexibility are often cited as negatives. For
additional information, see chapter section. Students may provide their own
example; give any special directions necessary to ensure commonality of
response.
Page: 346
Level of difficulty: Hard
105
In general, a company should monitor three variables when analyzing
competitors. List and briefly characterize those three variables?
Suggested Answer: The three variables are: (1) share of market—the
competitor’s share of the target market; (2) share of mind—the percentage of
customers who named the competitor in responding to the statement, “Name the
first company that comes to mind in this industry”; and, (3) share of heart—the
percentage of customers who named the competitor in responding to the
statement, “Name the company from which you would prefer to buy the product.”
For additional information and characterization, see chapter section.
Page: 348
Level of difficulty: Hard
106.
The market leader must work hard to stay on top of its market. Three strategies
can be crafted to achieve this objective. Describe these three strategies and any
relevant sub-strategies that are necessary for accomplishing the primary objective.
Suggested Answer: The three primary strategies that may be used by the market
leader are: (1) expanding the total market by attracting new customers and by
stimulating more usage of product; (2) defending market share (see the six sub-
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strategies as outlined in the chapter section); and, (3) expanding market share.
For additional information on each of the above, see the chapter section.
Pages: 350–355
Level of difficulty: Hard
107.
Assume that your organization has chosen to pursue a market leader strategy of
the flank defense. Describe what such a strategy might be.
Suggested Answer: Although other strategies are important, the market leader
must erect outposts to protect a weak front or possibly serve as an invasion base
for counterattack. This, then, becomes the basis for the flank defense. Students
may add additional information; see chapter section for details.
Page: 354
Level of difficulty: Medium
108.
Assume that you are the marketing manager for a market challenger that is
seeking to attack the market leader with an encirclement attack. Describe the
encirclement attack and evaluate probable success using this strategy.
Suggested Answer: The encirclement maneuver is an attempt to capture a wide
slice of the enemy’s territory through a “blitz.” It involves launching a grand
offensive on several fronts. Encirclement makes sense when the challenger
commands superior resources and believes a swift encirclement will break the
opponent’s will. For additional information, see chapter section.
Page: 357
Level of difficulty: Hard
109. Characterize the four broad strategies often employed by market followers to
meet their competitors.
Suggested Answer: These broad strategies include: (1) counterfeiter—the
counterfeiter duplicates the leader’s product and package and sells it on the black
market or through disreputable dealers; (2) cloner—the cloner emulates the
leader’s products, name, and packaging, with slight variations; (3) imitator—the
imitator copies some things from the leader but maintains differentiation in terms
of packaging, advertising, pricing, or location; and, (4) adapter—the adapter takes
the leader’s products and adapts or improves them. For additional information and
characterization, see chapter section.
Pages: 360–361
Level of difficulty: Hard
110.
The market nicher is a specialist. Characterize five niche specialist roles that can
be assumed by the market nicher.
Suggested Answer: The niche specialist roles that can be assumed by the market
nicher include: (1) end-user specialist—specializes in serving one type of end-use
customer; (2) vertical-level specialist—specializes at some vertical level of the
production-distribution value chain; (3) customer-size specialist—concentrates on
selling to either small, medium-sized, or large customers; (4) specific-customer
specialist—the firm limits its selling to one or a few customers; (5) geographic
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specialist—firm sells only in a certain locality, region, or area of the world; (6)
product or product-line specialist—firm carries or produces only one product line
or product; (7) product-feature specialist—firm specializes in producing a certain
type of product or product feature; (8) job-shop specialist—firm customizes its
products for individual customers; (9) quality-price specialist—the firm operates
at the low- or high-quality ends of the market; (10) service specialist—firm offers
one or more services not available from other firms; and, (11) channel
specialist—firm specializes in serving only one channel of distribution. For
additional information, see chapter section.
Page: 364
Level of difficulty: Hard
APPLICATION QUESTIONS
Multiple Choice
111.
Which of the following companies saw sales plummet from a peak of $7.1 billion
in 1996 to about $4 billion in 2003 in part because of fierce competition in the
fashion jeans business?
a. Wrangler’s
b. Arizona Jeans
c. Levi Strauss
d. Canyon River Blues
e. Lee Jeans
Answer: c
Page: 341
Level of difficulty: Medium
112.
A market segment’s attractiveness varies with the height of its entry and exit
barriers. Which of the following forces as described by Michael Porter would
most likely be the force being examined if the above situation were to be
considered by a marketing manager?
a. Threat of intense segment rivalry.
b. Threat of new entrants.
c. Threat of substitute products.
d. Threat of buyers’ growing bargaining power.
e. Threat of suppliers’ growing bargaining power.
Answer: b
Pages: 342–343
Level of difficulty: Medium
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113.
During the 2004 holiday season ________ from discounters Wal-Mart, Target,
and even electronics vendors such as Best Buy and Circuit City has pummeled the
toy chains and sent some of them into bankruptcy.
a. creative advertising
b. global alliances
c. pricing pressure
d. regulation pressure
e. superior management knowledge
Answer: c
Page: 343
Level of difficulty: Medium
114.
Marketing managers must be keenly aware of ________—a focus on current
competitors rather than latent ones—or risk becoming extinct.
a. marketing myopia
b. channel myopia
c. promotion myopia
d. competitor myopia
e. consumer myopia
Answer: d
Page: 344
Level of difficulty: Medium
115.
Each marketing manager needs to be aware of the industry in which they
compete. Industries can be classified according to all of the following EXCEPT
________.
a. degree of usage of promotion
b. number of sellers
c. degree of product differentiation
d. degree of vertical integration
e. degree of globalization
Answer: a
Pages: 344–346
Level of difficulty: Hard
116.
The oil and steel industries have unique industrial structure. Which of the
following industry structural types is usually associated with the oil and steel
industries?
a. Pure monopoly
b. Monopolistic competition
c. Pure competition
d. Pure oligopoly
e. Differentiated oligopoly
Answer: d
Page: 344
Level of difficulty: Hard
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Chapter 11: Dealing with Competition
117.
All of the following are considered to be exit barriers in a marketplace that must
be considered by the marketing manager EXCEPT ________.
a. emotional barriers
b. high vertical integration
c. government restrictions
d. lack of alternative opportunities
e. economies of scale
Answer: e
Page: 345
Level of difficulty: Medium
118.
According to concepts associated with the idea of a strategic group, which of the
following appliance industry competitors would most aptly be described as being
a member of a strategic group that has a narrow line, lower manufacturing costs,
very high service, and a high relative price of its products?
a. Maytag
b. General Electric
c. Whirlpool
d. Sears
e. Wal-Mart
Answer: a
Page: 347
Level of difficulty: Hard
119.
When a buyer thinks of performance running shoes, the first name that comes to
mind is Nike. Which of the following variables for analyzing competition would
most aptly apply given the statement above?
a. Share of market
b. Share of mind
c. Share of heart
d. Share of pocketbook
e. Share of innovation
Answer: b
Page: 348
Level of difficulty: Medium
120.
Chevrolet competes with Ford, not with Ferrari. Which of the following
statements (characterizations) of competitors most aptly fits with the competitive
situation faced by Chevrolet when it seeks optimum selection of competitors?
a. Compete with strong competitors.
b. Compete with distant competitors.
c. Compete with parallel competitors.
d. Compete with bad competitors.
e. Compete with close competitors.
Answer: e
Pages: 348–349
Level of difficulty: Hard
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121.
Apex Corporation is considered to be a market follower in its industry. About
what percentage of a hypothetical market structure would be controlled by market
followers such as Apex?
a. 40 percent
b. 30 percent
c. 25 percent
d. 20 percent
e. 10 percent
Answer: d
Page: 349
Level of difficulty: Medium
122.
When a regional computer-manufacturing firm began to seek out customers who
lived outside of its traditional market boundaries, the firm was employing which
of the following new customer expansion strategies to expand its total market?
a. Market-penetration strategy
b. New-market segment strategy
c. Geographic-expansion strategy
d. Product differentiation strategy
e. Latent demand strategy
Answer: c
Page: 350
Level of difficulty: Easy
123.
When your competitor delivers more for less, two strategies can be employed to
meet this threat. Such a situation was recently faced by Kmart. Which of the
following combinations would be most appropriate to meet the challenge throwndown by the competitor?
a. Market penetration or product innovation
b. Expansion or standardization
c. Adaptation or innovation
d. Differentiation or execution
e. Computerization or implementation
Answer: d
Page: 351
Level of difficulty: Hard
124.
Which of the following methods for defending market share should be employed
by Caterpillar to hold off competitors when Caterpillar learned that many
competitors were lacking in delivering on parts commitments to customers?
a. Full-line strategy
b. Good financing
c. Zero tolerance for production errors
d. Product innovation
e. Superior service
Answer: e
Page: 352
Level of difficulty: Medium
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Chapter 11: Dealing with Competition
125.
In satisfying customer needs, a ________ marketer discovers and produces
solutions customers did not ask for but to which they enthusiastically respond.
Sony is a good illustration of such a marketer.
a. responsive
b. anticipative
c. combative
d. manipulative
e. creative
Answer: e
Page: 353
Level of difficulty: Hard
126.
Firms that occupy second, third, and lower ranks in an industry can adopt two
postures in responding to competition. First, they can attack the leader and other
competitors in an aggressive bid for further market share. Second, they can
________.
a. play ball and not “rock the boat” (market followers)
b. relinquish their own share to industry leaders (market capitulators)
c. not worry about the immediate future and focus on long-term results (market
maturation)
d. form alliances with enemies (market organizational constriction)
e. give up and quit (market abandonment)
Answer: a
Page: 355
Level of difficulty: Medium
127.
To industry leader Boeing, European Airbus is a serious market challenger that
has made rapid gains in the commercial aircraft market in the last few years.
Which of the following has been cited as the chief strategy being employed by
Airbus in its battle with Boeing?
a. Styling.
b. Price discounting.
c. Bribery of purchasing agents.
d. An innovative new product line equipped with modern features.
e. Partnerships with Boeing rivals.
Answer: d
Page: 356
Level of difficulty: Medium
When Avis used the campaign theme, “We’re only second. We try harder.” to
battle rival Hertz, Avis was using a market challenger strategy called ________.
a. lower priced goods
b. price discount
c. product innovation
d. intensive advertising promotion
e. improved services
Answer: e
Page: 359
Level of difficulty: Hard
128.
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129.
Tasteeos, Fruit Rings, and Corn Flakes sell for nearly $1 a box less than leading
cereal brands. Which of the following market follower strategies is being
employed by the cereal manufacturer responsive for the above market entries?
a. Counterfeiter
b. Cloner
c. Imitator
d. Adapter
e. Reverse-innovator
Answer: b
Page: 361
Level of difficulty: Medium
130.
All of the following suggestions have been provided by Adam Morgan for
improving small brands success in competing with larger rivals EXCEPT
________.
a. break with your immediate past
b. build a “lighthouse identity”
c. assume thought leadership of the category
d. create symbols of reevaluation
e. deeply discount products and services
Answer: e
Page: 360
Level of difficulty: Medium
Short Answer
131.
According to information provided in Michael Porter’s model that describes
segment structural attractiveness, the threat of mobility can be encountered. In
which of the five forces described by Porter would such a threat occur?
Suggested Answer: This threat would occur as a threat of new entrants.
Page: 342
Level of difficulty: Medium
132.
According to information provided in Michael Porter’s model that describes
segment structural attractiveness, the suppliers’ growing bargaining power is a
real threat. What is considered to the best defense for such a threat?
Suggested Answer: The best defenses to this threat are to build win-win relations
with suppliers or use multiple supply sources.
Page: 343
Level of difficulty: Medium
133.
According to information presented in the text, what form of pressure supplied by
Wal-Mart and others forced many toy retailers into bankruptcy in the 2004
holiday season?
Suggested Answer: The type of pressure applied by Wal-Mart and others to toy
retailers during the 2004 holiday season was price pressure.
Page: 343
Level of difficulty: Easy
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Chapter 11: Dealing with Competition
134.
Restaurants and beauty parlors are examples of a form of competition known as
monopolistic competition. Characterize monopolistic competition.
Suggested Answer: Many competitors are able to differentiate their offers in
whole or in part. Competitors focus on market segments where they can meet
customer needs in a superior way and command a price premium.
Page: 344
Level of difficulty: Medium
135.
Competitors often face entry, exit, and mobility barriers in a market space. If you
were a organization facing an exit barrier in a market, what type of barrier would
you be facing?
Suggested Answer: Exit barriers can be legal or moral obligations to customers,
creditors, and employees; government restrictions; low asset-salvage value due to
overspecialization or obsolescence; lack of alternative opportunities; high vertical
integration; and emotional barriers.
Page: 345
Level of difficulty: Medium
136.
Assume that you are required by your manager to construct a competitor map that
has three concentric rings. What would be the names (subjects) of the three
concentric rings in your map?
Suggested Answer: The three rings are generally labeled as: (1) inner ring
describes consumer activities in this competitive industry such as what the
product or consumer does (e.g., takes a picture, purchases film, purchases
accessories); (2) the second ring lists direct competition; and, (3) the third ring
lists indirect competition. For additional details, see chapter section or Figure
11.2 in the text.
Page: 346
Level of difficulty: Medium
137.
You have been asked to form a strategic group in your industry. What is a
strategic group? What two important insights should emerge from your
formulation process?
Suggested Answer: A strategic group is a group of firms following the same
strategy in a given target market. Two insights will emerge from the formulation
process: (1) the height of the entry barriers differs for each group formed; and, (2)
if a company successfully enters a group, the members of that group become its
key competitors. For additional information, see chapter section and Figure 11.3.
Page: 347
Level of difficulty: Hard
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138. If your company monitors competitive “share of mind,” what is your company
monitoring?
Suggested Answer: The “share of mind” is the percentage of customers who
named the competitor in responding to the statement, “Name the first company
that comes to mind in this industry.”
Page: 348
Level of difficulty: Medium
139.
Your marketing manager has asked you to develop a new customer strategy for
your company. Additionally, you have been asked to develop, specifically, a
market-penetration strategy to assist in gaining new customers. Describe a
market-penetration strategy in this context.
Suggested Answer: The market penetration strategy in this context would seek to
get new customers from those customers who might use the product but as yet do
not.
Page: 350
Level of difficulty: Medium
140.
Considering how Caterpillar has become dominant in the construction-equipment
industry despite charging a premium price and being challenged by a number of
able competitors, several policies combine to explain Caterpillar’s success. What
are those policies?
Suggested Answer: Caterpillar’s success has been built on: (1) premium
performance; (2) extensive and efficient dealership system; (3) superior service;
(4) full-line strategy; and, (5) good financing.
Pages: 352–353
141.
Level of difficulty: Hard
As a brand manager, you have decided to implement a preemptive defense to
meet an anticipated competitive challenge. Describe the preemptive defense.
Suggested Answer: A preemptive defense is a more aggressive maneuver that
has as its purpose to attack before the enemy starts its offense. A company can
launch a preemptive defense by waging a guerrilla action across the market; it can
send out signals to dissuade competitors from attacking; it can introduce a stream
of new products. For additional details, see chapter section.
Page: 354
Level of difficulty: Medium
142.
If you were asked to develop a mobile defense for your products that are likely to
come under attack from a market challenger, what would you suggest?
Suggested Answer: In mobile defense, the leader stretches its domain over new
territories that can serve as future centers for defense and offense through market
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Chapter 11: Dealing with Competition
broadening and market diversification. For additional information on these two
strategies, see the chapter section.
Page: 354
Level of difficulty: Medium
143.
Consider that you have been placed in the role of being a market challenger.
Where (toward which opponents) can you attack?
Suggested Answer: You can attack: (1) the industry leader; (2) firms of your own
size that are not doing the job and are underfinanced; or (3) small local and
regional firms. See chapter section for additional information.
Page: 356
Level of difficulty: Easy
144.
When a market challenger uses a frontal attack, what is the principle of force?
Suggested Answer: In a pure frontal attack, the attacker matches its opponent’s
product, advertising, price, and distribution. The principle of force says that the
side with the greater manpower will win.
Page: 356
Level of difficulty: Easy
145.
Your marketing manager has chosen the bypass attack as means of responding to
an industry leader. Describe the ideas contained in the bypass attack.
Suggested Answer: The bypass attack is an indirect assault. It means bypassing
the enemy and attacking easier markets to broaden one’s resource base. For
additional information, see chapter section.
Page: 357
Level of difficulty: Medium
146.
There are several specialized market challenger attack strategies. One of these has
been used successfully by Baskin-Robbins to establish its position in the icecream industry. List and briefly characterize this attack strategy.
Suggested Answer: The strategy used by Baskin-Robbins is the product
proliferation strategy where the company launches a larger product variety than
competitors, thus giving the consumer more choice.
Page: 359
Level of difficulty: Hard
147.
If your company was labeled as an imitator (market follower), what would your
primary strategies for meeting competition be?
Suggested Answer: According to information provided in the text, the imitator
copies some things from the leader but maintains differentiation in terms of
packaging, advertising, pricing, or location. The leader does not mind the imitator
as long as the imitator does not attack the leader aggressively.
Page: 361
Level of difficulty: Medium
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148.
As a market follower, you have been labeled as a counterfeiter. Characterize your
label.
Suggested Answer: The counterfeiter duplicates the leader’s product and
package and sells it on the black market or through disreputable dealers.
Page: 360
Level of difficulty: Medium
149.
A marketing manager declares that an end-user specialist is needed by his firm.
What is an end-user specialist?
Suggested Answer: An end-user specialist is a form of market nicher. This firm
specializes in serving one type of end-use customer such as a value-added
reseller. For additional information, see chapter section.
Page: 364
Level of difficulty: Hard
150.
You are about to change the emphasis of your organization from a competitorcentered company to a customer-centered one. What are the advantages to making
such a switch?
Suggested Answer: The advantages of the customer-centered company are that it
is in a better position to identify new opportunities and set a course that promises
to deliver long-run profits. By monitoring customer needs, it can decide which
customer groups and emerging needs are the most important to serve, given its
resources and objectives.
Page: 365
Level of difficulty: Medium
324