Marketing Management – 12th Edition – Kotler/Keller
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 Page: 343 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 Page: 343 Level of difficulty: Hard
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 Page: 343 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 Page: 344 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 Page: 344 Level of difficulty: Medium
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 Page: 345 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 Page: 346 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 Page: 346 Level of difficulty: Easy
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 Page: 348 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 Page: 348 Level of difficulty: Medium
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 Page: 348 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 Page: 349 Level of difficulty: Medium
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 Page: 350 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 Page: 351 Level of difficulty: Medium
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 Page: 353 Level of difficulty: Medium
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 Page: 354 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 Page: 355 Level of difficulty: Medium
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 Page: 356 Level of difficulty: Medium
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 Pages: 358–359 Level of difficulty: Medium
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 Pages: 360–361 Level of difficulty: Medium
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 Page: 362 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 Page: 362 Level of difficulty: Medium
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 Page: 364 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 Page: 365 Level of difficulty: Medium
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 Page: 342 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 Page: 343 Level of difficulty: Easy
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
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 Page: 346 Level of difficulty: Medium
70. Using a market approach, competitors are companies that satisfy the same customer need.
Answer: True Page: 346 Level of difficulty: Easy
A competitor map shows the sales volume of various competitors in a market space.
Answer: False Page: 346 Level of difficulty: Medium
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 Page: 350 Level of difficulty: Medium
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 Pages: 357–358 Level of difficulty: Medium
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
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
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
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-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 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
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
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
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 thrown-down 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
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
128. 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
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
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
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 Level of difficulty: Hard
141. 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
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 ice-cream 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
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 competitor-centered 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
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