Chapter 9 – Dealing with the Competition

Multiple Choice Questions

5
p. 242 B 1. Healthwise Farms is a small, midwestern company that produces and markets dried
fruit. Its owner wants to expand its product mix by adding a line of granola cereals.
According to Michael Porter, which of the following statements poses a barrier to
Healthwise Farms’s entry into the cereal industry?
10 A. The target market for cereal is declining.
B. The cereal industry contains strong and aggressive competition.
C. The market segment for granola is too small to be profitable.
D. The target market for healthy cereals is not well defined.
E. The cereal industry is too fragmented.
15
p. 242 A 2. John Hamann makes and markets Ma Ma Hamann’s vinegars. His product line
includes Red Raspberry & Thyme, Mint & Honey, and Orange & Raisin vinegars.
He sells through mail order, but is thinking of expanding his distribution. According
to Michael Porter, which of the following statements would be a barrier to Hamann’s
20 entry into a national market?
A. Every gourmet store and supermarket is stocked with a number of similar kinds
of gourmet vinegars.
B. Vinegar, like all culinary products, is in a declining market because people are
cooking less.
25 C. The target market for gourmet vinegar is large and widely dispersed.
D. Consumers are time-poor and are not receptive to new product promotions.
E. Various federal agencies will monitor the company’s every move when the
vinegars move from its present local distribution to a national distribution.

30 p. 243 D 3. 3M holds the patent on an adhesive that is a key component in the manufacture of
fine veneered furniture. If a company that manufactures reproductions of Victorian
furniture wants to use a low-heat adhesive that is quick to dry and will not damage
the expensive veneers, it must buy from 3M. According to Michael Porter, what is a
furniture manufacturer’s best defense against this supplier force?
35 A. offer to pay 3M more money to guarantee a constant supply
B. develop its own adhesive
C. use a horizontal integration strategy
D. build a win-win relationship with 3M
E. use a combination of the above
40
p. 245 A 4. Pepsico’s Gatorade, Coca-Cola’s Powerade, and Monarch Company’s All Sport are
your three choices if you want a sports drink. Gatorade has more than an 80 percent
share of the market, All Sport has about 1.3 percent of the market, and Powerade has
the rest. The three companies produce products that are close substitutes for each
45 other and collectively are an example of a(n):
A. industry
B. market facilitator
C. market segmenter
D. market expander
50 E. generic niche

1
 2 Part II – ANALYZING MARKETING OPPORTUNITIES - Chapter 9
p. 246 B 5. Pepsico’s Gatorade, Coca-Cola’s Powerade, and Monarch Company’s All Sport are
the three choices if you want a sports drink. Gatorade has more than an 80 percent
share of the market, All Sport has about 1.3 percent of the market, and Powerade has
the rest. Gatorade’s market dominance acts as a(n):
5 A. impregnable market position
B. barrier to entry
C. counteroffensive position
D. flanking position
E. vertical integration tool
10
p. 245 D 6. Industries are classified according to:
A. the size of their customer base
B. their target market strategies
C. their organizational cultures
15 D. their degree of vertical integration
E. all of the above

p. 246 E 7. Mulch for putting under plants to prevent weed growth is a commodity. Mulch is
manufactured by only a few large companies. It is sold to smaller distribution
20 companies that bag the mulch and sell it under a variety of brand names. Companies
that produce mulch find it hard to ask more than the going price. The industry
structure for the companies that produce mulch is:
A. a pure monopoly
B. monopolistic competition
25 C. pure competition
D. a differentiated oligopoly
E. a pure oligopoly

p. 246 D 8. When you are asked to name companies in the cereal industry, you will probably
30 name Kellogg’s, Post, General Mills, and Quaker. Each of them produces a corn
flake type cereal, a raisin bran type cereal, and many other similar products. Each
company uses pricing, sales promotions, and advertising to distinguish itself from
the others. The cereal industry would be classified as:
A. a pure monopoly
35 B. monopolistic competition
C. pure competition
D. a differentiated oligopoly
E. a pure oligopoly
p. 246 B 9. Nike, Reebok, Adidas, New Balance, Avia, and others manufacture athletic shoes.
40 While some may say that all athletic shoes are alike, if you want a pair of Air
Jordans, you have to buy the Nike brand. In this way, Nike focuses on a particular
market segment and charges a premium price. The other athletic shoe manufacturers
have similar marketing strategies. The athletic shoe industry would be classified as:
A. a pure monopoly
45 B. a monopolistic competition
C. a pure competition
D. a differentiated oligopoly
E. a pure oligopoly

50 p. 246 C 10. Consumers can buy lumber at lumberyards, do-it-yourself stores, and other similar
places. Consumers perceive all lumber to be the same. Since they perceive no
Copyright 2003 © Prentice Hall. All Rights Reserved
 Dealing with the Competition 3
differences among the producers, consumers assume the price will be the same. In
terms of consumer perception, the lumber industry is:
A. a pure monopoly
B. a monopolistic competition
5 C. a pure competition
D. a differentiated oligopoly
E. a pure oligopoly

p. 246 C 11. Levi jeans sold well in French retail outlets, but its French distributor decided its
10 market could be expanded if it sold jeans in vending machines. The basic idea of the
machine was that it would contain one style of jeans in about twenty of the most
popular sizes. The price was roughly equivalent to $50 U.S. dollars. The plan was a
failure because people don’t buy jeans without examining them and trying them on.
The failure of this marketing strategy illustrates how a(n) _____ barrier can ruin
15 even the best of plans.
A. exit
B. entry
C. mobility
D. cost structure
20 E. promotional

p. 246 D 12. Ships Ahoy, a manufacturer of collectible operating ship models, is struggling
because the number of people who want to collect ship models is declining to the
point where it is no longer profitable for Ships Ahoy to continue in operation.
25 Unfortunately, there still exists a large customer-base that requires expensive
servicing due to the “life-time free service” policy of the company. Its CEO is
demanding that its loyal customers not be abandoned. The moral obligation to its
customers that the CEO feels will act as a(n) ____ barrier.
A. cost structure
30 B. vertical integration
C. marketing
D. exit
E. distribution

35 p. 246 B 13. A manufacturer of cast-iron cooking ware sells its products through three retail
stores that it operates near the manufacturing plant. It wants to expand its market by
selling its products through mail order catalogs. A cast-iron skillet weighs seven
pounds. A set of cast-iron pans can easily weigh over 25 pounds. Which of the
following statements describes the potential success of its market expansion efforts?
40 A. Its market expansion strategy will fail because of mobility and exit barriers.
B. Its market expansion strategy will fail because of cost structure and mobility
barriers.
C. Any expansion will fail because it has engaged in vertical differentiation.
D. Its market expansion strategy will fail due to the length of its distribution
45 channel.
E. Its market expansion strategy efforts will succeed because there are no barriers
to its success.

p. 247 E 14. Tyson chicken is sold in a number of supermarkets. To help maintain the quality of
50 the meat it sells, Tyson has purchased several poultry farms, as well as mills to

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 4 Part II – ANALYZING MARKETING OPPORTUNITIES - Chapter 9
produce special feed for the birds. What would be a disadvantage associated with
this vertical integration?
A. a smaller share of the value-added stream
B. the loss of the ability to manipulate prices
5 C. an increase in overall variable costs
D. a loss of control over costs
E. a lack of flexibility

p. 247 A 15. Marketing research showed Benjamin Moore owned the most recognizable paint
10 brand in Canada. However, the problem was that nobody seemed to know where to
buy the paint even though the Benjamin Moore brand of paint is sold by more paint
retailers than any other brand. As a result of the research, Benjamin Moore, the
paint manufacturer, opened Benjamin Moore paint stores. Benjamin Moore used:
A. vertical integration
15 B. retailer-managed inventory
C. horizontal integration
D. research-focused competition
E. tactical grouping

20 p. 247 B 16. In a recent promotional campaign, Kodak advertised that it sold magic because its
cameras were a way to capture time. With this advertising theme, Kodak had a(n)
_____ concept of competition.
A. product
B. market
25 C. industry
D. oligopoly
E. sales

p. 248 D 17. A(n) _____ is a group of firms using the same marketing mix to target the same
30 markets
A. industry
B. market
C. pure monopoly
D. strategic group
35 E. joint venture

p. 248 C 18. Competition may emerge between strategic groups as a result of:
A. increased advertising
B. increased product quality
40 C. an appeal to overlapping customer groups
D. decreased distribution
E. vertical integration

p. 248 A 19. Once a company has identified its competitors and their strategies, the next step in
45 analyzing the competition is to:
A. determine competitors’ objectives
B. analyze competitors’ strengths and weaknesses
C. anticipate competitors’ responses when their market share is attacked
D. choose which competitors to attack
50 E. determine whether the competition uses an offensive or a defensive strategy

Copyright 2003 © Prentice Hall. All Rights Reserved

 Dealing with the Competition 5
p. 248 E 20. Which of the following statements is the primary reason why a company should
assess its competitor’s strengths and weaknesses?
A. An assessment of the competitor’s strengths will reveal its objectives.
B. The assessment will provide insight into competitor’s perspectives on the market
5 and its probable strategies.
C. An assessment of the competitor’s weaknesses will reveal how quickly it will
respond to new products.
D. An assessment is a sure way to determine what competitor’s responses will be to
the company’s own offensive strategy.
10 E. A competitor’s resources and capacities determine how well it will be able to
accomplish its objectives.

p. 250 E 21. Marketing research showed that Benjamin Moore owned the most recognizable
paint brand in Canada. Benjamin Moore paint has high _____ in Canada.
15 A. share of market
B. market potential
C. economic potential
D. share of heart
E. share of mind
20
p. 250 D 22. The Wine Council of Ontario and the British Columbia Wine Institute have banded
together to create a campaign to make Canadian wine the wine Canadians prefer to
buy. The Wine Council of Ontario and the British Columbia Wine Institute are
trying to improve the _____ for Canadian wine.
25 A. share of market
B. market potential
C. economic potential
D. share of heart
E. share of mind
30
p. 250 D 23. In monitoring its competition, Benjamin Moore might want to analyze its _____ by
asking customers in paint stores what brand of paint they would prefer to buy.
A. share of market
B. market potential
35 C. economic potential
D. share of heart
E. share of mind

p. 250 C 24. According to Bruce Henderson, which of the following statements regarding
40 competitive relations is true?
A. If a single major factor is critical to success, competitive equilibrium will still be
stable.
B. The more similar competitors are, the more stable their competitive equilibrium
will be.
45 C. If multiple factors are critical to success, competition may seek differential
advantages over others.
D. The fewer the number of competitive variables that are critical, the larger the
number of competitors.
E. If competitors are nearly identical, and make their living selling the same
50 products, then their competitive equilibrium is stable.

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 6 Part II – ANALYZING MARKETING OPPORTUNITIES - Chapter 9
p. 250 E 25. Regarding competitive conditions, Bruce Henderson believes:
A. if a company has 3 times the market share of a competitor, the company should
press its advantage to eliminate the smaller competitor
B. conflict will be minimized in markets where competitive differentiation is
5 difficult to maintain, as everyone will come to look like everyone else
C. competitive equilibrium is stable in markets with one key major competitive
factor
D. competitive equilibrium is stable in markets for competitors that have nearly
identical strategies
10 E. the number of critical competitive variables impacts the number of competitors
in a market

p. 251 D 26. ____ is the art of finding out how and why some companies can perform tasks better
than other companies.
15 A. Competitor value analysis
B. Customer value analysis
C. Industry analysis
D. Benchmarking
E. Environmental assessment
20 p. 251 A 27. The benchmarking process begins with the:
A. determination of what functions to benchmark
B. identification of the key performance variables to measure
C. identification of the best-in-class companies
D. selection of the companies to benchmark
25 E. identification of all companies in the industry

p. 252 A 28. The first step in designing the competitive intelligence system is to:
A. identify the vital types of competitive information, along with the best sources,
and to assign someone to manage the process
30 B. select the process and tools for collecting the data
C. choose the number of competitive factors to track and which competitors or
direct competitors to measure
D. check the information for validity and reliability, then interpret, organize, and
distribute it
35 E. do a competitive analysis to determine what information is the most readily
available

p. 253 B 29. Edgar Ruffin owns an orchard and a small retail outlet where he sells peaches and
products related to peaches. There are several other orchards in the area that are
40 about the same size and run similar operations. Ruffin could use a(n) _____ to
identify his enterprise’s strengths and weaknesses in relation to his competitors.
A. share of heart, share of mind, and market analysis
B. customer value analysis
C. environmental assessment
45 D. social audit
E. strategic group analysis

p. 253 E 30. The first step in consumer value analysis is to:

A. assess how customers in a specific segment rate the company’s performance
50 against a specific competitor
B. monitor customer values for change

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 Dealing with the Competition 7
C. ask customers to rate the importance of different attributes related to the
marketing mix
D. have customers describe the performance of the company doing the analysis and
its competitors
5 E. identify the major attributes that customers value

p. 254 E 31. Mountain West is the world’s largest producer of lava rock, which, among other
uses, is used in gas grills in place of charcoal. Because Mountain West is the
acknowledged market leader, it:
10 A. must find ways to expand its total market demand
B. leads all the others in the industry in distribution coverage
C. must remain constantly vigilant against flanking attacks
D. leads all the others in the industry in promotional intensity
E. is accurately described by all of the above
15
p. 254 D 32. Hallmark Cards is continually coming out with new cards for new occasions. It has
cards for celebrating adoptions, divorces, new jobs, new pets etc.. The company
recently added flower arrangements to its product line. Why does Hallmark keep
expanding its product line?
20 A. to acquire a broader distribution coverage than its competition
B. as a part of a diversification growth strategy
C. as a part of its guerrilla warfare strategy
D. to keep its market-leader position
E. to do all of the above
25
p. 255 C 33. Which of the following is NOT a typical market leader strategy?
A. a geographical-expansion strategy
B. a market-penetration strategy
C. a flanking strategy
30 D. a new-market segment strategy
E. a product development strategy

p. 255 D 34. In Canada, Carlton Cards is the market leader, but Hallmark is gaining market share.
One of the strategies Carlton Cards has used to protect its position is to develop a
35 line of inspirational cards that are displayed at checkout counters. These cards are
intended to be impulse purchases. Carlton Cards hopes to reach people who might
send a card if it were easy to buy, but currently don’t. Carlton Cards is using a
_____ strategy.
A. market-penetration
40 B. segmental flanking
C. mobile defense
D. market development
E. diversification

45 p. 255 A 35. Lassonde is the market leader in the Canadian apple juice market. The company
produces a wide variety of brands such as, Rougemont, Oasis, Fruite, Doux-Mellow,
Oasis Health Break, Rouge Valley, and Nature's Best . This market leader is using a
_____ strategy.
A. market-penetration
50 B. vertical integration
C. horizontal integration
Copyright 2003 © Prentice Hall. All Rights Reserved
 8 Part II – ANALYZING MARKETING OPPORTUNITIES - Chapter 9
D. market diversification
E. harvesting

p. 255 D 36. In a magazine for car enthusiasts, the leading manufacturer of clay-based cat litter
5 advertised that the litter was perfect for cleaning up oil spills on the driveway or in
the garage. This is an example of a market leader using a _____ strategy.
A. market penetration
B. guerrilla
C. product development
10 D. new-market segment
E. flanking

p. 256 B 37. Pepsico’s Gatorade, Coca-Cola’s Powerade, and Monarch Company’s All Sport are
the three choices if you want a sports drink. Gatorade has more than an 80 percent
15 share of the market, All Sport has about 1.3 percent of the market, and Powerade has
the rest. Pepsico can use a _____ defense strategy for its market leader, Gatorade.
A. flanking
B. position
C. mobile
20 D. preemptive
E. counteroffensive

p. 259 E 38. When a new fast-food restaurant moves into an area where there is a McDonald’s,
company policy requires that McDonald’s do nothing for the first six weeks the new
25 establishment is open in order to let the novelty wear off. Then, McDonald’s
defense strategy is heavy advertising, coupons, 2-for-1 sales, and other price
reduction strategies to recapture its customers. This is an example of a _____
defense strategy.
A. flank
30 B. position
C. mobile
D. preemptive
E. counteroffensive

35 p. 260 D 39. Total refrigerated juice sales in Canada in 2000 were over $296 million, three-
quarters of which were orange juice sales. Tropicana is the market leader of orange
juice in Canada by a significant margin. Lassonde is the market leader in the
Canadian apple juice market by an equally significant margin. After Tropicana
introduced Tropicana apple juice into the Canadian market, Lassonde launched a
40 non-concentrated orange juice line using a _____ strategy.
A. flanking defense
B. market-follower
C. market-niche
D. counteroffensive
45 E. planned contraction

p. 260 C 40. A company that is using a market broadening strategy in which it changes its
product offering from an Internet service provider to a communications resource is
using a _____ defense strategy.
50 A. flanking
B. position

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 Dealing with the Competition 9
C. mobile
D. preemptive
E. counteroffensive

5 p. 260 D 41. A company must be careful when using a market broadening strategy. It can lead to
situations in which the company is guilty of violating the _____ and risks losing any
benefits the strategy might have produced.
A. 80/20 rule
B. rule of equity
10 C. flanking principle
D. principle of mass
E. iceberg principle

p. 260 C 42. A market diversification strategy can be a _____ defense strategy.

15 A. flanking
B. position
C. mobile
D. preemptive
E. counteroffensive
20
p. 260 C 43. When LTV Corporation, a U.S. steel producer, began manufacturing and selling
monorails, it was an example of a _____ defense strategy.
A. flanking
B. position
25 C. mobile
D. preemptive
E. counteroffensive

p. 260 E 44. After entering the Quebec market, Home Depot soon became the market leader.
30 Then, the Building Box, a home improvement chain owned by Montreal-based
Réno-Dépôts, challenged Home Depot for the same market. To defend itself, Home
Depot launched an ad campaign featuring a graphic hammer that floats around the
store, smashing down prices on featured products. The tag line is, "Lower Prices.
Nailed." The hammer graphic is also visible on store signage and in the Home Depot
35 catalogue. The Building Box's TV, print and web efforts all center on an
outrageously clumsy foam mascot called Hammer Head. Home Depot admitted one
of the objectives of its new campaign is to baffle shoppers. What kind of a defense
strategy did Home Depot use?
A. a geographical flanking strategy
40 B. a position strategy
C. a mobile strategy
D. a preemptive strategy
E. a counteroffensive strategy

45 p. 260 A 45. A strategic withdrawal is an example of a _____ defense strategy.

A. planned contraction
B. position
C. mobile
D. preemptive
50 E. counteroffensive

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 10 Part II – ANALYZING MARKETING OPPORTUNITIES - Chapter 9
p.260 A 46. When Seagram divested itself of several low-priced brands including Lord Calvert
whisky and Wolfschmidt vodka, so it could focus on its premium brands like Chivas
Regal and Glenlivet, it was implementing a ______ defense strategy.
A. contraction
5 B. position
C. mobile
D. preemptive
E. counteroffensive

10 p. 262 B 47. Which of the following statements about a market leader who wants to pursue a
market growth strategy is true?
A. Share-gaining companies typically do not perform as well as their competitors in
new–product activity.
B. Share-gaining market leaders risk the possibility of provoking antitrust action.
15 C. Companies that increase marketing expenditures faster than the rate of market
growth typically do not achieve share gain.
D. Companies that cut prices more deeply than the competitors achieve significant
market gains.
E. All of the above statements about market leaders who want to pursue a market
20 growth strategy are true.

p. 265 D 48. Robert Dolan found that competitive rivalry and price-cutting are most intense in
industries with:
A. low fixed costs
25 B. stagnant primary demand
C. high inventory costs
D. strong branding strategies
E. all of the above

30 p. 265 C 49. Which of the following is NOT an example of an attack strategy?

A. flank
B. encirclement
C. mobile
D. bypass
35 E. guerrilla

p. 265 C 50. Kimberly Clark was using a(n) _____ attack strategy when it introduced Huggies
and grabbed a large portion of P&G’s disposable diaper market share. Huggies was
a much better fitting diaper than P&G’s Pampers.
40 A. flank
B. encirclement
C. frontal
D. bypass
E. guerrilla
45

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 Dealing with the Competition 11
p. 265 A 51. Royal Crown Cola introduced the first diet soft drink, Diet Rite Cola. It was a
success, but Royal Crown was not financially strong enough to protect its market
position. It lost its diet soda market share when Coca-Cola used a(n) _____ attack
strategy and introduced Tab, a diet cola.
5 A. frontal
B. encirclement
C. bypass
D. guerrilla
E. flank
10
p. 265 E 52. In Canada, the dominant player in the doughnut category is Oakville, Ontario based
Tim Hortons. Tim Hortons has almost 2,000 outlets in North America. Krispy
Kreme with about 200 outlets in the United States decided to open six new stores in
British Columbia because that area does not have as many Tim Hortons as other
15 provinces. Krispy Kreme used a:
A. product-development strategy
B. market-penetration strategy
C. segmental flanking strategy
D. a mobile offensive strategy
20 E. geographical flanking strategy

p. 265 A 53. A flank attack strategy can be directed along two strategic dimensions. They are:
A. geographical and segmental
B. functional and technical
25 C. consumer and competitor
D. market attractiveness and growth potential
E. offensive and defensive

p. 266 B 54. Shoppers Drug Mart was once the leading pharmacy in Canada. To recapture the
30 market-leader position, the retailer launched an advertising blitz in which it
positioned itself as caring the most about its customers' overall health and well
being. The giant retailer launched a "Take Care of Yourself" ad campaign in which it
alluded to the “big box stores” (Zellers, Wal-Mart, Costco and Loblaws) where
customers procure products, but which do not offer any “caring service”. It
35 instructed all of its employees to replace, “Have a nice day,” with “Take care of
yourself,” and created in-store signage that emphasized the store’s caring image.
What kind of a market-challenger approach did Shoppers Drug Mart offer?
A. a frontal strategy
B. an encirclement strategy
40 C. a bypass strategy
D. a guerrilla strategy
E. a flank strategy

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 12 Part II – ANALYZING MARKETING OPPORTUNITIES - Chapter 9
p. 266 C 55. Minolta replaced Canon as the market leader in the 35MM SLR market by
introducing the technologically advanced auto-focusing Maxxum camera. Canon’s
market share dropped to almost 20 percent while Minolta’s grew to beyond 30
percent. Minolta used a(n) _____ attack strategy.
5 A. frontal
B. encirclement
C. bypass
D. guerrilla
E. flank
10
p. 267 C 56. Technological leapfrogging is a _____ attack strategy.
A. frontal
B. encirclement
C. bypass
15 D. guerrilla
E. flank

p. 268 D 57. Guerilla warfare:

A. is more expensive to implement than a frontal attack
20 B. is practiced by larger companies against smaller ones
C. involves all elements of the marketing mix except price
D. must be backed by a stronger attack if the challenger hopes to beat the opponent
E. is accurately described by all of the above

25 p. 268 C 58. Canadian movies don’t do well, even in Canada. One movie that did dowell was
Men With Brooms, a movie about the sport of curling. The movie earned the all-time
highest recorded opening weekend for an English language feature in national
release. To make this happen, Toronto-based Alliance Atlantis and Robert Lantos'
Serendipity Point Films ran ads for the movie during the Winter Olympics and
30 launched an e-mail campaign through the Canadian Curling Association. This is an
example of:
A. a cloning strategy
B. a counteroffensive strategy
C. guerilla warfare
35 D. a market-follower strategy
E. a flanking offensive

p. 269 B 59. Ebay.com is an Internet auction that at any point in time has approximately ten
million items listed for sale. Now others, including Amazon.com, provide similar
40 auction services on a smaller scale. What type of a follower strategy are the Amazon
auction site and others like it using?
A. counterfeiter
B. cloner
C. imitator
45 D. adapter
E. modifier

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 Dealing with the Competition 13
p. 269 D 60. Walker Ornamental makes garden statuary, which it distributes all over the U.S.
One of its most successful items is their 3-foot diameter terra cotta planters which
are long-lasting, but very heavy. A Japanese company has used similar molds to
create lightweight 3-foot diameters plastic planters that have a much shorter lifetime,
5 but are just as decorative. Walker sells to municipalities, theme parks, and other
commercial users. The Japanese manufacturer sells to consumers. What sort of
follower strategy is the Japanese company using?
A. counterfeiter
B. cloner
10 C. imitator
D. adapter
E. modifier

p. 270 A 61. When compared to most U.S. steel producers, Nucor Steel is a small operation, but it
15 is the market leader in the steel joist industry. Nucor Steel uses a _____ strategy.
A. market-nicher
B. market-follower
C. preemptive offense
D. market-challenger
20 E. mobile defense

p. 273 E 62. The companies with the greatest chance of success are those which have developed
a(n) _____ orientation.
A. industry
25 B. employee
C. competitor
D. supplier
E. customer

30
True-False Questions

p. 242 T 63. In Michael Porter’s model for determining market attractiveness, the first three
elements, or forces, relate directly to competition.
35
p. 242 T 64. A company is more likely to be harmed by its potential competitors than by its
current competitors.

p. 246 F 65. The oil industry is an example of a differentiated oligopoly.

40
p. 246 T 66. Camera manufacturers, Canon and Nikon, operate in a differentiated oligopoly
industry structure.

p. 246 T 67. McDonald's and Red Lobster are engaged in monopolistic competition.
45
p. 246 T 68. Strong firms competing against companies that are just barely meeting variable costs
should lower the exit barriers for the weaker competitors.

p. 247 F 69. A firm that acquired one of its international competitors would be practicing vertical
50 integration.

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 14 Part II – ANALYZING MARKETING OPPORTUNITIES - Chapter 9
p. 247 F 70. In general, the typical product concept of competition provides a broader set of
competitors than does a market concept.

P. 248 T 71. A strategic group is a group of firms in an industry following the same or similar
5 strategies along key dimensions.

p. 250 F 72. A company monitoring “share of heart” is concerned about the percentage of
customers who can name the company when asked about the product line.

10 p. 250 F 72. If competitors are nearly identical, and make their living in the same way, their
competitive equilibrium will be stable.

p. 251 T 73. Benchmarking is the art of learning from companies that perform certain tasks, such
as customer service, better than others companies can perform it.
15
p. 251 F 74. With all other things being equal, the smaller the number of competitive variables
that are critical, the greater the number of competitors.

p. 252 T 75. Once your competitor's garbage has left the firm’s premises, the garbage is legally
20 considered abandoned property.

p. 253 T 76. A customer value analysis (CVA) reveals a firm's strengths and weaknesses relative
to various competitors.

25 p. 256 T 77. Planned obsolescence is a commonly used market-leader strategy.

p. 259 T 78. When Oakley, a well-known manufacturer of sunglasses, began making athletic
shoes, it was an example of a counteroffensive defense strategy against Nike
because Nike had introduced a line of sunglasses.
30
p. 260 F 79. Coca-Cola set up bottling operations in South Africa, which it abandoned a decade
later. This divestment is an example of a mobile defense strategy.

p. 260 T 80. Nike introduced a line of sportswear sunglasses to challenge the number one
35 position of Oakley, the world’s largest manufacturer of sunglasses. Nike used a
frontal attack strategy.

p. 265 F 81. When Marla buys Tigress perfume for $4.99 a bottle just because it smells like her
favorite perfume which retails at $49.99 a bottle, she is encouraging the cheaper
40 perfume manufacturer to adopt a flanking strategy.

p. 270 F 82. Large firms do not engage in niche marketing.

45 Essay Questions

p. 246 83. Just like any other organization, the Trappist monks at a monastery in Georgia need
to support themselves. Their initial foray into the market place was a bookbindery
that was fairly successful. However, business at the bindery tended to slump in the
50 fall. The brothers needed another source of income, so they decided to make and

Copyright 2003 © Prentice Hall. All Rights Reserved

 Dealing with the Competition 15
market fruitcakes. They’ve hired you to talk about what entry and mobility barriers
they might face. What do you tell them?

Answer: High capital requirements for a professional kitchen with the right cooking
5 equipment would be a barrier. The issue of economies of scale should be discussed.
Of course, licensing requirements are an issue because of the number of agencies
that must approve food production, etc. The availability of first-class raw materials
at an affordable price and distributors of these items are also areas of potential
concern. Building a reputation as a producer of delicious fruitcakes may also be a
10 barrier if the brothers cannot afford the needed promotion. In terms of mobility
barriers, if the brothers wanted to diversify and sell their fruit cakes on supermarket
shelves rather than just at the monastery, they would have to contend with the
existing store bakeries, slotting allowances, and competition for shelf space.

15 p. 251 84. Explain the value of benchmarking as an important competitive tool.

Answer: Benchmarking is the art of learning from companies that perform certain tasks better
than other companies. The goal of benchmarking is to copy or improve upon the
“best practices” used by the competition. To keep costs under control, a company
20 should focus on benchmarking those critical tasks that deeply affect customer
satisfaction, company cost, and where substantially better performance is known to
exist.

p. 251 85. The antique business is a highly competitive business. Information can make an
25 antique retailer successful; lack of information typically results in failure. An
antique retailer like John Fletcher must be able to recognize and buy an unsigned
Granville Redmond painting before his competitors can. Fletcher must know what
the competition is doing, what the newest trends are, and potential problem areas.
Fletcher has asked you to help develop a strong competitive intelligence system
30 using what you have learned in your degree program. Explain to him the four key
steps in setting up such a system and how the Internet can be part of that setup.

Answer: The first step calls for identifying vital types of competitive information, identifying
the best sources of this information, and assigning personal to manage the system.
35 In a small business like Fletcher’s, this person will more than likely be Fletcher. The
next step is the collection of data on a continuous basis. The Internet is creating a
vast new arsenal of capabilities. Companies place volumes of information on their
web sites, providing details to attract customers, partners, and suppliers. Fletcher
can have access to this information with a touch of a mouse. Also, trade associations
40 can provide a wealth of information on trends and potential fraudulent antiques. The
third stage is the evaluating and analysis of the information. The final step is
disseminating and responding to the information. The information is of limited
value unless Fletcher shares it with his employees.

45 p. 253 86. It’s important to understand the value of a market before investing the money and
effort to capture it. Explain how to conduct a customer value analysis and how it
relates to the gathering of competitive intelligence.

50 Answer: The major steps in the customer value analysis are:

· Identify the major attributes that a customer values.
Copyright 2003 © Prentice Hall. All Rights Reserved
 16 Part II – ANALYZING MARKETING OPPORTUNITIES - Chapter 9
· Assess the quantitative importance of the different attributes.
· Assess the company’s and competitors’ performances on the different customer
values against their rated importance. This lets the customers describe how they
perceive the company and its competition.
5 · Examine how customers in a specific segment rate the company’s performance
against a specific competitor on an attribute-by-attribute basis. This step also
provides important competitive intelligence.
· Monitor customer values over time. This step allows a company to periodically
redo its customer value analysis and reassess how it stands against its competitors.
10
p. 269 87. Discuss the following statement: “A company that is a market follower has no
marketing strategy of its own.”

Answer: This statement is false. A market follower must have a strategy for holding on to
15 current customers and winning a fair share of new customers. Each market follower
tries to bring distinctive advantages to its target market. The market follower has to
develop a growth strategy that does not invite competitive retaliation. Four broad
strategies are common. The first is referred to as the Counterfeiter. With this
marketing strategy, the follower duplicates the leader’s product and package, and
20 sells it on the black market or through disreputable dealers. The Cloner strategy is a
subset of the Counterfeiter strategy. With the Cloner strategy, the market follower
emulates the leader’s products, names, and packaging with slight variations. The
third strategy is the Imitator. With this strategy, the follower copies some things
from the leader, but maintains differentiation in terms of packaging, advertising,
25 pricing, etc. The fourth commonly used strategy by market followers is the Adapter
strategy. With this strategy, the market follower takes the leader’s products and
adapts or improves them.

30 MINI-CASE 9-1
According to industry analysts, the launch of Best Buy stores in Canada in 2002 promised an
industry shakeout the likes of which the electronic industry had never witnessed before. Best Buy
was the largest retailer of electronics in the U.S. when it decided to expand to Canada. In 2000, Best
Buy eclipsed Circuit City in the U.S. with sales of $13 billion compared to $9.57 billion for Circuit
35 City. Best Buy grew in the U.S. by taking market share from independents and smaller competitors.
When Best Buy announced its expansion, Future Shop, a chain of electronics stores, had 18 percent
of the Canadian market and dominated the industry. Other retailers in the industry were Sears
Canada with 8.6 percent of the market, Staples with 5.5 percent of the market, plus Radio Shack, The
Brick, and Leon’s, all vying for the rest of the market.
40

p. 250 A 88. Refer to Mini-Case 9-1. Even though it is not a leader in the electronics retailing
industry, Canada Radio Shack is the leading retailer in the country in the sale of cell
45 phones. This describes Canada Radio Shack’s:
A. share of market
B. market potential
C. economic potential
D. share of heart
50 E. share of mind

Copyright 2003 © Prentice Hall. All Rights Reserved

 Dealing with the Competition 17

p. 255 C 89. Refer to Mini-Case 9-1. Which of the market-leader strategies did Best Buy use in
2002 with its move to Canada?
A. market-penetration strategy
5 B. diversification strategy
C. geographical-expansion strategy
D. market development strategy
E. preemptive offensive strategy

10 p. 255 C 90. Refer to Mini-Case 9-1. After learning of Best Buy’s planned expansion, Future
Shop announced plans to open 33 new stores in smaller, urban areas in Canada.
What kind of market-leader strategy was Future Shop using?
A. market-penetration strategy
B. diversification strategy
15 C. geographical-expansion strategy
D. market development strategy
E. preemptive offensive strategy

p. 259 E 91. Refer to Mini-Case 9-1. Just prior to Best Buy’s appearance in Canada, Future Shop
20 required its employees to take training courses to learn how to better serve
customers’ needs, revamped its 88 stores, and launched a loyalty program in
partnership with Air Canada. What kind of a defense strategy was Future Shop
using?
A. flank defense
25 B. guerilla warfare
C. counteroffensive defense
D. contraction defense
E. preemptive defense

30 p. 265 A 92. Refer to Mini-Case 9-1. Which of the market-challenger strategies did Best Buy use
to take the market in the United States from Circuit City?
A. flank attack strategy
B. preemptive offensive strategy
C. encirclement attack strategy
35 D. contraction offensive strategy
E. mobile offensive strategy

p. 268 C 93. Refer to Mini-Case 9-1. To launch its new stores in New York City, Best Buy used
_____. It dispatched hundreds of employees into the streets on scooters and in PT
40 Cruisers to hand out free tickets to a Sting concert compliments of Best Buy.
A. a mobile offensive
B. a counteroffensive
C. guerilla warfare
D. a preemptive strike
45 E. a flank defense strategy

Copyright 2003 © Prentice Hall. All Rights Reserved

 18 Part II – ANALYZING MARKETING OPPORTUNITIES - Chapter 9
p. 270 B 94. Refer to Mini-Case 9-1. Radio Shack Canada has around a three percent share of the
Canadian electronics market. Analysts predict Radio Shack will continue to thrive
because it focuses on “the bits and bytes of the electronic market and
communications.” Its electronic products are there because customers expect to find
5 them at Radio Shack when they come into buy cell phones and direct-to-home
satellite dishes. In terms of the Canadian market, Radio Shack uses a:
A. counteroffensive strategy
B. market-nicher strategy
C. market-challenger strategy
10 D. market-follower strategy
E. mobile offensive

MINI-CASE 9-2
Roy Lindale has retired and moved to the Gulf Coast. He wants to open a wholesale nursery
15 that sells seedlings, potted plants, and shrubbery to retailers and distributors. Due to climatic
conditions in the area, there are already five wholesale nurseries within a 100-mile radius of the
location Lindale has selected for his nursery. He has been advised that he needs to use a customer
survey to determine how his five potential competitors were perceived on five attributes. The
following chart shows the results of the analysis. (10=best; 1=worst):
20
Competitors

Attributes A B C D E

25 Product quality 9 10 7 7 6
Product variety 9 5 6 7 10
Price 8 9 5 7 9
Botanical knowledge 10 8 7 7 8
Service 9 8 6 7 7
30
p. 249 A 95. Refer to Mini-Case 9-2. The overall strongest competitor appears to be:
A. A
B. B
C. C
35 D. D
E. E

p. 249 C 96. Refer to Mini-Case 9-2. The overall weakest competitor appears to be:
40 A. A
B. B
C. C
D. D
E. E
45
p. 249 E 97. Refer to Mini-Case 9-2. The competitor with the least distinctive profile is:
A. A
B. B
C. C
50 D. D
E. E

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 Dealing with the Competition 19

p. 249 B 98. Refer to Mini-Case 9-2. Which of the competitors is least vulnerable to attack on a
value (price-quality) basis?
A. A
5 B. B
C. C
D. E
E. None of the above is vulnerable to attack on a value basis.

10 p. 249 A 99. Refer to Mini-Case 9-2. Lindale hopes to compete on the basis of customer service.
Which of his potential competitors will provide him with the greatest level of
competition?
A. A
B. B
15 C. C
D. D
E. E

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