Deck 16: Strategic Elements of Competitive Advantage

Question 1

Analyzed in terms of Porter's five forces model, online music file sharing services represent a threat to the music industry in the form of a substitute product.

Answer 1

True

Question 2

Volkswagen Auto Group of America markets both the VW and Audi nameplates in the United States.The VW brand has been hampered by perceptions of hit-and-miss quality.

Answer 2

True

Question 3

Maytag has been called "the Rolls-Royce of washers and dryers," and it can be said that it
has achieved a competitive advantage by means of differentiation.

Answer 3

True

Question 4

The essence of marketing strategy is successfully relating the strengths of an organization to its environment.

Question 5

Michael Porter's five forces model and Rugman and D'Cruz's flagship model are both based on the concept of corporate individualism.

Question 6

Competition in an industry tends to drive rates of return on invested capital up towards the level of "perfect competition."

Question 7

In Michael Porter's model, "buyers" refers to manufacturers (e.g., GM)and retailers (e.g.Wal-Mart), rather than consumers.

Question 8

Rugman and D'Cruz's development of the flagship model was influenced by their study of Japanese keiretsu.

Question 9

A useful way of gaining insight into competitors is through industry analysis.

Question 10

"Switching costs" are one of the barriers to entry in Porter's five forces model.

Question 11

Michael Porter's four generic strategies for achieving competitive advantage are product differentiation, price leadership, promotion power, and distribution efficiency.

Question 12

According to the generic strategy framework, cost leadership is a sustainable source of competitive advantage if barriers exist that prevent competitors from achieving the same low costs.

Question 13

If suppliers have enough leverage over industry firms, they can raise prices high enough to significantly influence the profitability of their organizational customers.

Question 14

Michael Porter's generic strategy framework is derived from the basic types of competitive advantage and the scope of the target market served.

Question 15

Rivalry among firms refers to all the actions taken by firms in the industry to improve their positions and gain advantage over each other.

Question 16

Product differentiation and brand loyalty "raise the bar" for would-be industry entrants who would be required to make substantial investments in research or advertising.

Question 17

Cost leadership advantage is based on a firm's position as the industry's low-cost leader in a broad market.

Question 18

Analyzed in terms of Porter's five forces model, Wal-Mart's ability to dictate terms to the music industry is one indication of the retail giant's supplier power.

Question 19

Microsoft and Intel are two companies that illustrate the concept of "bargaining power of suppliers" in Porter's five forces model of industry competition.

Question 20

Unique product attributes represent a barrier to industry entry known as differentiation.

Question 21

According to Richard D'Aveni's model of "hypercompetition," successful companies are the ones that find sustainable competitive advantages.

Question 22

The central concept of the strategic intent model of competitive advantage is an obsession of winning.

Question 23

The strong rivalry in the U.S.market between Dell, Gateway, Hewlett-Packard, Apple, and other computer companies has helped make the United States a world leader in personal computers.

Question 24

Research by Morgan Stanley indicates that the United States is home to more companies with global competitive advantage than any other country.

Question 25

According to Michael Porter, chance plays no role in determining the competitive advantage of nations.

Question 26

A major difference between the flagship model and Porter's is that Porter's is based on the notion of corporate individualism and individual business transactions.

Question 27

In the strategic intent model of competitive advantage, Canon's successful entry into the photocopier market is an example of changing the rules of engagement.

Question 28

Intel's focus on designing complex, expensive microprocessors for PCs enabled competitors to develop cheaper chip sets for non-PC electronics devices.In the strategic intent model of competitive advantage, this is an example of "loose bricks."

Question 29

Benetton's success in the global fashion industry illustrates the flagship model.

Question 30

The "layers of advantage" approach to global competitive innovation is based on using know-how developed by other companies.

Question 31

"Active competition for demanding customers in the home market keeps companies under pressure to constantly innovate." This statement is an integral part of Hamel and Prahalad's concept of "strategic intent."

Question 32

According to D'Aveni, in today's business environment, short product life cycles, short product design cycles, new technologies, and globalization undermine market stability; thereby an acceleration of competitive forces takes place.

Question 33

The Swatch Group is the world's second largest watchmaker.This shows that in the low-cost segment, brands compete on price and value.

Question 34

In 1989, Jollibee, the most popular fast-food operator in the Philippines, got an unexpected boost when the threat of a military coup prompted McDonald's to temporarily suspend operations.

Question 35

The Komatsu-Caterpillar saga is just one example of how more than the pursuit of generic strategies can shape global competitive battles.

Question 36

Rugman and D'Cruz cite Benetton as an example of a flagship firm that excels at building partnerships.

Question 37

Key suppliers, key customers, and key consumers are all elements of a flagship company's partner network.

Question 38

The digital revolution rendered Sony's core competencies in analog audio technology obsolete.

Question 39

"Active competition for demanding customers in the home market keeps companies under pressure to constantly innovate." This statement is consistent with Michael Porter's thesis regarding the competitive advantage of nations.

Question 40

"Hypercompetition" is a term that describes a business environment of escalating rivalry characterized by rapid product innovation and short product life cycles.

Question 41

Building layers of advantage, searching for loose bricks, changing the rules of competitive engagement, and collaborating are elements of Hamel and Prahalad's framework for:

A)quality advantage.
B)positioning.
C)competitive innovation.
D)marketing management.
E)innovation leadership.

Question 42

Francisco Martínez is CFO of Comercial Mexicana SA, a retail chain in Mexico.Commenting on Wal-Mart's entry into Mexico, Mr.Martínez notes, "I buy 20,000 plastic toys, and Wal-Mart buys 20 million.Who do you think gets them cheaper?" Which strategic principles are evident in this comment?

A)Wal-Mart's buyer power and cost leadership
B)Wal-Mart's barriers to entry and differentiation
C)Wal-Mart's loose bricks and switching costs
D)Wal-Mart's focused differentiation and supplier power
E)Wal-Mart's discount policies for customers

Question 43

Dell's factories can assemble a complete PC in 3 minutes.With a build-to-order strategy at the heart of its business model, Dell's sales staff maintains close ties with customers.This approach represents which aspect of the Porter's five forces model?

A)rivalry among competitors
B)bargaining power of buyers
C)threat of substitute products
D)threat of new entrants
E)bargaining power of suppliers

Question 44

Rugman and D'Cruz have developed an alternative framework to Porter's five forces model.The framework, based on business networks, is called:

A)the differentiation model.
B)strategic intent.
C)the flagship model.
D)the hypercompetition model.
E)the Rugman & D'Cruz model.

Question 45

Jaguar produced so few cars that it couldn't get volume discounts from components suppliers.Jaguar managers sometimes could not even determine the "fair" price for a particular part.In terms of Porter's competitive forces framework, Jaguar's strategic disadvantage stemmed from low:

A)buyer power.
B)supplier power.
C)threat of new entrants.
D)threat of substitute products.
E)access to distribution channels.

Question 46

Maytag has been called "the Rolls-Royce of washers and dryers." Maytag markets Neptune, a high-tech machine, at a substantially higher than regular washer prices.This is an example of:

A)cost leadership.
B)differentiation.
C)cost focus.
D)focused differentiation.
E)consumer focus.

Question 47

Gillette markets its flagship MACH3 razor in more than 100 countries around the world.The MACH3 is available virtually everywhere that consumers shop for personal-care products; because of its advanced 3-blade design, the MACH3 typically costs more than other wet-shaving systems.Which generic strategy is evident in Gillette's global marketing effort of MACH3?

A)cost leadership
B)differentiation
C)cost focus
D)focused differentiation
E)consumer focus

Question 48

Which of the following generic strategies best captures the way Harley-Davidson has achieved competitive advantage in the global motorcycle industry?

A)cost leadership
B)differentiation
C)cost focus
D)focused differentiation
E)cost differentiation

Question 49

Suppose you are a sales representative for Advanced Micro Devices (AMD)in Japan.You are trying to convince Toshiba to buy your company's superfast Opteron microprocessor for its new laptop computer.Toshiba's representative seems interested, but finally does not place an order.Confidentially, the representative tells you that he is afraid that Intel will withhold shipments of its Pentium 4 if he does business with AMD.Thinking about Intel's role in this scenario, which of the following element of the five forces model is evident here?

A)barriers to entry
B)bargaining power of suppliers
C)bargaining power of buyers
D)threat of substitute products
E)threat of new entrants

Question 50

Porter's four generic strategies for achieving competitive advantage are:

A)price determination, cost leadership, product differentiation, distribution savings.
B)cost leadership, product differentiation, cost challenger, product challenger.
C)price leadership, product differentiation, price challenger, cost differentiation.
D)cost leadership, product differentiation, cost focus, focused differentiation.
E)cost leadership, product differentiation, consumer differentiation, focused differentiation.

Question 51

Which of the following is not an element of Rugman and D'Cruz's flagship model?

A)key suppliers
B)key customers
C)key consumers
D)selected competitors
E)focused differentiation

Question 52

According to Porter, the nature of the interaction between potential industry entrants, buyers, substitute products, suppliers, and rival firms determines:

A)whether or not the government will launch an antitrust investigation.
B)the industry's profit potential in terms of long-run return on invested capital.
C)whether a country can generate a balance of payments surplus.
D)whether a country can create a comparative advantage in the production of differentiated products.
E)whether a country can generate income by innovation.

Question 53

The flagship model is evident in the strategies of all but one of the following businesses.

A)Ford
B)Volkswagen
C)IKEA
D)Benetton
E)Microsoft

Question 54

Wal-Mart refuses to stock CDs bearing parental advisory stickers for explicit lyrics or violent imagery.Recording artists who want their recordings available at Wal-Mart have the option of altering lyrics and song titles or deleting offending tracks.Likewise, artists are sometimes asked to change album cover art if Wal-Mart deems it offensive.Considering the elements of the five forces model this is an example of:

A)buyer power.
B)supplier power.
C)threat of new entrants.
D)threat of substitute products.
E)access to distribution channels.

Question 55

Hundreds of small companies such as Martin-Logan and Mark Levinson compete in the high-end audiophile segment of the consumer electronics industry.If analyzed in terms of Porter's generic strategies framework, such companies might be said to be pursuing competitive advantage via:

A)cost leadership.
B)differentiation.
C)cost focus.
D)focused differentiation.
E)consumer differentiation.

Question 56

Building layers of advantage, searching for loose bricks, changing the rules of competitive engagement, and collaborating are elements of the competitive advantage framework developed by:

A)W.E.Deming.
B)Hamel and Prahalad.
C)Porter.
D)Drucker.
E)D'Aveni.

Question 57

In the tech world, about 90% of the world's nearly one billion PCs run on Microsoft's operating systems and 80% use Intel's microprocessors.This represents which aspect of the Porter's five forces model?

A)bargaining power of suppliers
B)bargaining power of buyers
C)threat of substitute products
D)rivalry among competitors
E)threat of new entrants

Question 58

The key to maintaining competitive advantage, according to Dr.W.E.Deming as well as your textbook authors, is:

A)being committed to constant improvement.
B)being first to market with all products.
C)outsourcing key components.
D)challenging all market leaders.
E)stressing low-price advantage in all areas.

Question 59

Germany's Mittelstand companies have been extremely successful pursuing ________.

A)cost leadership
B)differentiation
C)cost focus
D)focused differentiation
E)cost differentiation

Question 60

Which of the following is not identified by Porter as one of the possible types of barriers to entry in an industry?

A)loose bricks
B)switching costs
C)economies of scale
D)product differentiation
E)access to distribution channels

Question 61

According to Michael Porter's research on the competitive advantage of nations, human, physical, knowledge, capital, and infrastructure resources are all components of a country's:

A)factor conditions.
B)demand conditions.
C)strategy, structure, and rivalry.
D)related and supporting industries.
E)global conditions.

Question 62

The ________ framework was developed by Professor Richard D'Aveni to describe a business environment in which no form of competitive advantage can be sustained for long because of escalating and accelerating competitive forces.

A)five forces model
B)generic strategies
C)strategic intent
D)hypercompetition
E)factor conditions

Question 63

According to strategy expert Richard D'Aveni, the actions taken by Swatch in the global watch industry illustrate hypercompetitive dynamic maneuvering in which arena?

A)cost/quality
B)timing and know-how
C)entry barriers
D)deep pockets
E)Olympics

Question 64

Mitsubishi Heavy Industries Ltd.and other Japanese companies manufacture airplanes under license to U.S.firms and also work as subcontractors for aircraft parts and systems.This type of effort is known as:

A)searching for loose bricks.
B)collaborating.
C)building of layers of advantage.
D)changing the rules of engagement.
E)innovating.

Question 65

Intel's focus on designing complex, expensive microprocessors for PCs enabled competitors to develop cheaper chip sets for non-PC electronics devices.In the strategic intent model of competitive advantage, this is an example of:

A)building layers of advantage.
B)loose bricks.
C)changing the rules of engagement.
D)collaborating.
E)none of the above

Question 66

Sony's PlayStation 3 (PS3)has a powerful chip that provides new levels of realism; PS3 also contains a Blu-Ray DVD player.However, the less complex, less expensive Nintendo Wii has been outselling Sony's game system by a margin of 3-to-1.Based on D'Aveni's model this is reflective of:

A)cost/quality.
B)timing and know how.
C)entry barriers.
D)loose bricks.
E)deep pockets.

Question 67

When company management decides that it is unwilling to follow the "conventional wisdom" and instead finds a new way to gain competitive advantage, it might be said to be:

A)searching for loose bricks.
B)changing the rules of engagement.
C)collaborating.
D)building layers of advantage.
E)innovating.

Question 68

Chance events play a role in shaping the competitive environment.Chance events are occurrences which include all but one of the following:

A)major technological breakthroughs.
B)wars and their aftermath.
C)oil crisis.
D)currency fluctuations.
E)annual business meeting.

Question 69

In the terminology of the strategic intent framework for competitive advantage, a firm that establishes advantages in a number of different areas has:

A)attribute diversity.
B)marketing breadth.
C)comparative advantage.
D)layers of advantage.
E)a "double diamond."

Question 70

An approach to competitive advantage that exploits weaknesses in competitors' narrow-focus strategies is called a ________ strategy.

A)loose bricks
B)collaboration
C)layers of advantage
D)supplier power
E)generic

Question 71

According to the hypercompetition model of competitive advantage, which of the following allows the firm to create an entirely new product or market?

A)know-how advantage
B)timing advantage
C)outflanking
D)switching costs
E)countermoves

Question 72

The rivalry between Dell, Hewlett-Packard, Gateway, Compaq, and Apple forces all the players to undertake all of the following except:

A)develop new products.
B)improve existing products.
C)lower costs and prices.
D)develop new technologies.
E)change the rules of engagement.

Question 73

In the global watch industry, the success of the Swatch brand resulted in a manufacturing renaissance for Switzerland.In the strategic framework known as hypercompetition, Swatch's success is an example of interactions in which arena?

A)cost/quality
B)timing and know how
C)entry barriers
D)deep pockets
E)sporting events

Question 74

In the 1950s, Sony licensed the technology for the transistor from Bell Labs and proceeded to become the world's leading manufacturer of portable radios.Which strategy was Sony using to gain competitive advantage?

A)collaboration
B)layers of advantage
C)changing the rules
D)loose bricks
E)engagement

Question 75

The "double-diamond" approach to national competitive advantage is a conceptual framework associated with:

A)Michael Porter.
B)Gary Hamel and C.K.Prahalad.
C)Richard D'Aveni.
D)Alan Rugman.
E)Antonio Perez.

Question 76

Jollibee operates some 1,500 restaurant locations in Philippines, more than McDonald's.Even Jollibee's marketing vice president concedes that McDonald's provided the basic blueprint for their restaurants.However, at Jollibee, sweet and spicy flavors predominate in the burgers and chicken dishes, and their menu offerings are much more varied than competitors.This is an example of which component of competitive innovation?

A)collaboration
B)layers of advantage
C)loose bricks
D)generic
E)supplier power

Question 77

Which of the following is not one of the four arenas in which dynamic strategic interactions are played out in hypercompetitive industries?

A)cost/quality
B)timing and know-how
C)entry barriers
D)deep pockets
E)buyer and supplier power

Question 78

Caterpillar's attention was focused elsewhere when Komatsu made its first international entry into the Eastern European Market.Based on the strategic intent framework, this is an example of:

A)changing the rules.
B)collaborating.
C)comparative advantage.
D)layers of advantage.
E)loose bricks.

Question 79

When managers at Matsushita realized that cost advantages in TV production were often fleeting, they added quality and reliability advantages, thus establishing:

A)loose bricks.
B)a "double diamond."
C)attribute diversity.
D)layers of advantage.
E)buyer power.

Question 80

According to Michael Porter's research on the competitive advantage of nations, Switzerland's large synthetic dye industry and the success of the Swiss pharmaceuticals can be explained in terms of:

A)factor conditions.
B)demand conditions.
C)strategy, structure, and rivalry.
D)related and supporting industries.
E)formation of the European Union.