Exam 5: Competitive Rivalry and Dynamics

Akamai Technologies is a dominant player in the content delivery network (CDN) market. Akamai is not very diversified (i.e., is dependent on the CDN market). If rival CDN providers such as Limelight Networks and Level 3 Communications lower their basic CDN service prices, what would be Akamai's likely response?

The larger the resources of a firm taking a competitive action compared with the resources of the other firms in the industry, the ____ the response will be of these other firms.

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

Large firms are likely to initiate more competitive actions along with more strategic actions during a given period.

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

Canon's desktop copier was a disruptive innovation for the then larger photocopier industry dominated by Xerox (Chapter 5 Opening Case).

A firm can predict that a competitor whose products suffer from poor quality is likely to be less aggressive in its competitive actions until those quality problems are corrected.

In the Chapter 5 Strategic Focus, rivals such as Amazon, Oracle, HP and Dell in the cloud computing market are competing in a_________________.

Boeing's decision to commit the resources required to build the super-efficient 787 midsized jetliner is an example of a tactical action.

Case Scenario 3: The Pet Food Industry. The pet food industry is comprised primarily of six market segments: dry dog food, dry cat food, moist dog food, moist cat food, canned dog food, and canned cat food. Five large firms dominate the market and each has some market share in all segments, and the leading share in at least one segment. The largest firm participates solely in the pet food industry, while the next four firms are actually subsidiaries of some of the world's largest food and consumer products companies. Top management of these larger firms have made public statements that suggest they each see themselves as future leaders of the pet food industry. All five have acquired comparable skills in terms of manufacturing and marketing. Two small firms also participate in the industry, but these players are relatively weak and compete in just two of the six segments; the pet food industry is the only industry in which they operate. Inputs to the industry are basic commodities and there is no real threat of substitute products except across segments and price points. The industry is growing slowly, barely keeping up with the rate of inflation. Barriers to entry are enormous when pet food companies can gain scale economies in production coupled with aggressive marketing, though even then these coordinated actions may only yield average industry profitability. Any firm can increase its market share only to the extent that another firm's share is decreased. -(Refer to Case Scenario 3) The pet food industry provides an example of

Which of the following is TRUE of Wal-Mart?

The ability of Disney to maintain its competitive advantage through proprietary rights to its characters would be severely weakened if

Firms with high market commonality and highly similar resources are direct and mutually acknowledged competitors.

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 __________.

Case Scenario 2: 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 Case Scenario 2) 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.

Disney is an example of a firm in a slow-cycle market because its animated characters are shielded from imitation by copyrights and trademarks.

Patent laws and regulatory requirements such as required FDA (Food and Drug Administration) approval to launch new products shield pharmaceutical companies' positions in this slow-cycle market.

An organization with high profitability, such as Wal-Mart, will be able to develop high organizational slack.

The need for quality products and services is so high that quality alone can assure a firm that it will achieve strategic competitiveness and earn above-average returns.

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