Deck 16: Strategic Elements of Competitive Advantag

Question 1

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

Answer 1

True

Question 2

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

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

Answer 2

A

Question 3

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 eventually does not actually 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 elements 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

Answer 3

A

Question 4

In the tech world, about 90% of the world's nearly one billion PCs use 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 5

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 6

New entrants to an industry bring all of the following except:

A)new capacity.
B)desire to gain market share.
C)desire to gain market position.
D)new approaches to customer needs.
E)decline in per-unit product costs.

Question 7

Which of the following is not identified by Porter as one of the five forces that explains competition in an industry?

A)threat of new entrants
B)threat of substitute products or services
C)bargaining power of suppliers
D)bargaining power of competitors
E)the competitive rivalry among current members

Question 8

Apple's success with the iPhone prompted Samsung and others to enter the market. This is an example of the "perfect competition."

Question 9

Walmart refuses to stock CDs bearing parental advisory stickers for explicit lyrics or violent imagery. Recording artists who want their recordings available at Walmart have the option of altering lyrics and song titles or deleting offending tracks. Likewise, artists are sometimes asked to change album cover art if Walmart 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 10

Several factors can create intense rivalry among firms. These factors include all of the following factors except:

A)firms focus on market share at the expense of others.
B)firms feel pressure due to fixed costs and produce at full capacity.
C)lack of differentiation in products and services.
D)upward pressure on prices and profitability.
E)absence of switching costs for customers.

Question 11

Factors which determine suppliers' ability to gain leverage over industry firms include all of the following except:

A)large numbers and relatively few in number.
B)suppliers' products or services are important to user firms.
C)suppliers' products or services are highly differentiated.
D)alternative products do not threaten suppliers' business.
E)buyers preferences are highly differentiated.

Question 12

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 13

Microsoft's extensive base of Windows operating systems and applications presented a formidable entry barrier for many years.

Question 14

Intel achieved success by using the "Intel Inside" advertising campaign and logo that appears on many brands of PCs. This is an example of a barrier to entry classified as:

A)new capacity.
B)product differentiation.
C)competitor response.
D)new approaches to customer needs.
E)distribution channels.

Question 15

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

Question 16

Volkswagen Auto Group of America markets both the VW and Audi nameplates in the United States; in 2014, unit sales for the group totaled nearly 550,000 vehicles. However, the VW brand has been hampered by perceptions of hit-and-miss quality.

Question 17

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 18

Dell's factories can assemble a complete PC in three 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 19

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

Question 20

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 21

The development of the MP3 file format for music was accompanied by the increased popularity of peer-to-peer (p-to-p)file swapping among music fans.

Question 22

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 23

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

Question 24

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

Question 25

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 26

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

Question 27

There have been considerable changes that have taken effect since Porter presented his theories. One such impact is due to the tremendous technological advancement. In light of these changes, examine what potential impact technology has on some of his theories.

Question 28

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 price. This is an example of:

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

Question 29

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.

Question 30

Established firms do not enjoy cost advantages independent of scale economies that present a barrier to entry.

Question 31

If rivalry among firms forces companies to rationalize costs, it is a negative force.

Question 32

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

Question 33

Michael E. Porter, a leading theorist of competitive strategy, developed a five forces model to explain competition in an industry. List these forces and describe the impact of the threat of new entrants.

Question 34

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 35

Germany's Mittelstand companies have been extremely successful pursuing:

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

Question 36

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 37

In the shipbuilding industry, Polish and Chinese shipyards offer simple, standard vessel types at low prices that reflect low production costs. This represents generic strategy related to:

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

Question 38

The issue of sustainability is central to this strategy concept:

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

Question 39

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

Question 40

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

Question 41

In the case of Volkswagen, dealers are its key consumers while individual car buyers are the key consumers of the dealers.

Question 42

Intel's loose brick was its narrow focus on complex microprocessors for PCs.

Question 43

Building layers of advantage is one of the elements of Hamel and Prahalad's framework for:

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

Question 44

Intel's loose brick was:

A)it's narrow focus on complex microprocessors for PCs.
B)demand for non-PC products.
C)getting into the smartphone market.
D)unbeatable in computer market.
E)developing new chips incorporating 3D technology.

Question 45

The key to maintaining competitive advantage, according to Dr. W.E. Deming 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 46

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.

Question 47

Cost leadership is a sustainable source of competitive advantage only if no barriers exist that prevent competitors from achieving the same low costs.

Question 48

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 49

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 50

In addition to the five forces model of industry competition, Michael Porter has developed a framework of so-called generic business strategies. Explain these generic strategies, describing their aims and application.

Question 51

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

Question 52

Caterpillar's attention was focused elsewhere when Komatsu made its first entry into the Eastern Europe and gained grounds. This is an example of:

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

Question 53

Canon introduced the first full-color copiers and the first copiers with "connectivity"-the ability to print images from such sources as video camcorders and computers. This Canon example shows how an innovative marketing strategy-with fresh approaches to the product, pricing, distribution, and selling leads to overall competitive advantage in the marketplace. This strategy can be classified under:

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

Question 54

What does the phrase factor condition refer to? How can these factors be inherited or created? Describe Porter's categories of factor conditions.

Question 55

Many firms have gained competitive advantage by disadvantaging rivals through:

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

Question 56

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 57

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

Question 58

Describe how competitive advantage can be created via strategic intent, giving examples of successful approaches of competitors.

Question 59

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 60

Competitive advantage exists when there is a match between a firm's distinctive competencies and the factors critical for success within its industry.

Question 61

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.

Question 62

What are demand conditions? Why is the nature of home demand conditions for the firm's or industry's products and services important?

Question 63

A nation's banking system, health care system, transportation system, and communications system, as well as the availability and cost of using these systems are considered as ________ resources available for competitive advantage of a business.

A)knowledge
B)physical
C)human
D)infrastructure
E)capital

Question 64

The automobile industry has become fiercely competitive on a global basis. The initial success of foreign automakers in the United States was due to all of the following reasons except:

A)reluctance of U.S. manufacturers to design high-quality cars.
B)inability of U.S. manufacturers to manufacture high-quality cars.
C)reluctance of U.S. manufacturers to make inexpensive small cars.
D)bigger cars meant bigger profits for U.S. manufacturers.
E)U.S. manufacturers did not realize drivers' preferences.

Question 65

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 66

The town of Impruneta in the Italian province of Florence, is a source of high-quality terracotta; the high iron content of the area's clay means that the finished pieces can withstand temperatures as low as ‒20 degrees Fahrenheit. Many artisan pieces are rolled by hand, including those imported in the United States by Seibert & Rice. This is an example of ________ resources available for competitive advantage of a business.

A)knowledge
B)physical
C)human
D)infrastructure
E)capital

Question 67

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 68

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 69

"Factor conditions" refers to a country's endowment with resources which may have been created or inherited.

Question 70

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 71

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 72

It is the number of domestic rivals, intensity of the competition, as well as the quality of the competitors that make the difference.

Question 73

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 74

The Komatsu/Caterpillar saga illustrates the fact that global competitive battles can be shaped by factors other than the pursuit of generic strategies. Explain this statement giving examples and impact on competitive strategies.

Question 75

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 76

Del Vecchio, the Italian entrepreneur's business principles include all but one of the following:

A)"Made in Italy" is important.
B)cutting costs to keep production at home.
C)investing in automation.
D)hiring qualified personnel.
E)investing in Robots, not workers.

Question 77

How do chance events play a role in shaping the competitive environment?

Question 78

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 79

Taiwan's Acer prospered by following founder Stan Shih's strategy of approaching the world computer market from the periphery. By the time Acer was ready to target the United States in earnest, it was already the number one PC brand in key countries in Latin America, Southeast Asia, and the Middle East. 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 80

The nature of firm strategy, structure, and rivalry is the final determinant of a nation's diamond. What does this statement refer to? How does domestic rivalry differ from foreign rivalry? Please explain in detail.