Exam 5: Competitive Rivalry and Competitive Dynamics

Multimarket competition occurs when firms

Which pair of firms has the LEAST resource similarity?

Wal-Mart initially used a focused cost leadership strategy to compete only in small communities by using sophisticated logistics systems and efficient purchasing practices to gain a competitive advantage. The response of local competitors was _______ because they __________.

____ relates to the gains or losses a firm will experience if it attacks a rival or responds to an attack by a rival.

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

First movers can gain a sustained competitive advantage when they reduce their costs through reverse engineering.

Canon's desktop copiers couldn't collate, enlarge, or do grayscale replication and as such failed as a disruptive innovation (Chapter 5 Opening Case).

Case Scenario : Romulac, Inc. Romulac Inc. (RI), a subsidiary of a large successful manufacturing conglomerate, supplies a key component in the assembly of residential cooling systems (air conditioning units, etc.). There has been tremendous consolidation in RI's industry, to the point where only five suppliers of this particular component account for nearly 90% of U.S. industry sales. Paralleling this trend, its customers - comprised of makers of branded residential air conditioning units like Carrier and Trane - have seen similar levels of consolidation in their own industry. Half of these firms produce all their components in-house, while the balance purchases them from specialized component manufacturers like RI. RI's business is extremely capital intensive, and their 40% share of the market allows them to also be the most profitable domestic player. Strong competitors exist in Europe and Asia. Although like RI, these foreign players' strongholds are their home regions, with negligible presence outside of the region. Some of the larger Asian manufacturers have signaled an interest in more aggressively pursuing the lucrative U.S. market. RI is presently considering a $400 million dollar investment in a new plant, which will create a component that is much quieter, more efficient, and is likely to satisfy future regulatory standards. While the core technology for the new component is very old, RI's engineering and design skills have allowed them to retain their low cost-advantage, even though the component will represent a significant improvement over products currently provided by its competition. -(Refer to the above Case Scenario) Develop an argument as to why RI should try to be a first-mover with this new technology.

Case Scenario : Plasco. Plasco is a $3 billion U.S.-based manufacturer of flexible plastic products like trash cans, reheatable and freezable food containers, and a broad range of other plastic storage containers designed for home and office use. Historically, Plasco has been the category killer for most of its products and has devoted tremendous resources to new product development on an ongoing basis - this research intensity has allowed the company to release, on average, a new product every day over the past five years. Despite its past strength and high brand awareness, Plasco's profitability has been eroded by dramatic increases in the cost of plastic resin, the primary input into its plastic products. Moreover, the retail channel has experienced rapid consolidation resulting in a shift in the balance of power from branded manufacturers like Plasco, to strong retailers like Wal-Mart, who in turn have been unwilling to help Plasco absorb the higher resin costs. Enhancing Wal-Mart's power is the fact that it can always turn to alternative high-volume sources of consumer plastic products like Sterlite. Further hampering Plasco's recovery is the emergence of feisty little foreign competitors like Zig Industries, a $250 million Israeli firm that has begun to take part of Plasco's market share in plastic toolboxes. Ironically, Plasco was the first company to offer plastic toolboxes some 20 years ago. This innovation changed the market dramatically and Plasco's first mover strategy rewarded it with a rapidly growing new segment and a dominant market position. Today, Plasco's toolboxes are viewed as rather boring, while Zig's products are ingeniously designed to catch the customer's eye in the aisle (better merchandising the product) and capture their interest (and pocketbook) with many new and novel features. Zig is also able to provide this new line of toolboxes at between 10% to 15% less than Plasco. -(Refer to the above Case Scenario) Although Plasco was the first mover in plastic toolboxes several years ago, its competitor Zig has gained market share by building brand loyalty to its boxes which are viewed as more attractive and have novel features. The characteristics of this market are most similar to a standard-cycle market.

In order to compete effectively, standard-cycle firms need all of the following EXCEPT

Quality affects the degree of rivalry in that firms lacking quality are likely to me more aggressive in their competitive actions until the quality problems are corrected.

It is much easier for a competitor to implement strategic actions than tactical actions.

A competitive action is a strategic or tactical action taken by a firm to gain or defend a competitive advantage or improve its market position.

The drivers of competitive behavior are awareness of the competitor, motivation to take action or respond, and the organization's ability in terms of resources and flexibility.

Case Scenario : Romulac, Inc. Romulac Inc. (RI), a subsidiary of a large successful manufacturing conglomerate, supplies a key component in the assembly of residential cooling systems (air conditioning units, etc.). There has been tremendous consolidation in RI's industry, to the point where only five suppliers of this particular component account for nearly 90% of U.S. industry sales. Paralleling this trend, its customers - comprised of makers of branded residential air conditioning units like Carrier and Trane - have seen similar levels of consolidation in their own industry. Half of these firms produce all their components in-house, while the balance purchases them from specialized component manufacturers like RI. RI's business is extremely capital intensive, and their 40% share of the market allows them to also be the most profitable domestic player. Strong competitors exist in Europe and Asia. Although like RI, these foreign players' strongholds are their home regions, with negligible presence outside of the region. Some of the larger Asian manufacturers have signaled an interest in more aggressively pursuing the lucrative U.S. market. RI is presently considering a $400 million dollar investment in a new plant, which will create a component that is much quieter, more efficient, and is likely to satisfy future regulatory standards. While the core technology for the new component is very old, RI's engineering and design skills have allowed them to retain their low cost-advantage, even though the component will represent a significant improvement over products currently provided by its competition. -(Refer to the above Case Scenario) Develop an argument as to why RI should hold back and be a second mover with the new technology.

A company in a ____ industry is LEAST likely to make heavy use of patents and copyrights.

Reverse engineering is characteristic of

Wal-Mart's aggressive pricing strategy is a strategic action that plays a major role in how it competes.

"Competitive dynamics" indicates that firms and their strategic actions are independent.

Two firms, such as Fed Ex and UPS that have similar resources and common markets would be direct and mutually acknowledged competitors.