Chapter 6 – Competitive Rivalry and Competitive Dynamics
TRUE/FALSE
- The description of firms’ strategic actions as dynamic in nature suggests that actions taken by one firm cause responses from competitors.
ANS: T PTS: 1 DIF: med REF: p. 173
OBJ: 1 NOT: comprehension
- In competitive dynamics, actions taken by one firm seldom elicit responses from competitors.
ANS: F PTS: 1 DIF: med REF: p. 173
OBJ: 1 NOT: comprehension
- Expanding geographic scope in the global economy allows competitive rivalry to ease because of the larger potential customer base.
ANS: F PTS: 1 DIF: med REF: p. 174
OBJ: 1 NOT: comprehension
- Intensified rivalry within an industry results in decreased average profitability for the firms within it.
ANS: T PTS: 1 DIF: med REF: p. 174
OBJ: 1 NOT: comprehension
- Google continues to outperform its search engine competitors, despite experiencing intense competitive rivalry, which illustrates the potential for firms with effective business-level strategies.
ANS: T PTS: 1 DIF: hard REF: p. 176
OBJ: 1 NOT: application
- Competitive dynamics indicates that firms and their strategic actions are not mutually interdependent.
ANS: F PTS: 1 DIF: med REF: p. 176
OBJ: 1 NOT: comprehension
- Firms are mutually independent only when two or more firms jockey with one another in their pursuit of market position.
ANS: F PTS: 1 DIF: hard REF: p. 176
OBJ: 1 NOT: knowledge
- Market commonality increases the likelihood of competitive interaction in an industry.
ANS: F PTS: 1 DIF: med REF: p. 177
OBJ: 4 NOT: comprehension
- The relationship of Burger King and McDonald’s provides an example of multimarket competition where market commonality exists.
ANS: T PTS: 1 DIF: med REF: p. 177
OBJ: 4 NOT: application
- Multimarket competition refers to situations in which firms compete against each other in several or many product or geographic markets.
ANS: T PTS: 1 DIF: hard REF: p. 173|p. 177
OBJ: 2 NOT: knowledge
- Two firms that share markets but have little similarity in their resources would not be direct and mutually acknowledged competitors.
ANS: F PTS: 1 DIF: hard REF: p. 178
OBJ: 2 NOT: comprehension
- Ability refers to an attacking or responding firm’s knowledge of the competitive market characteristics.
ANS: F PTS: 1 DIF: hard REF: p. 180
OBJ: 3 NOT: knowledge
- Choosing not to respond to the competitive actions of large companies with great resources is a viable long-term option for small companies.
ANS: F PTS: 1 DIF: med REF: p. 180
OBJ: 5 NOT: comprehension
- First movers can gain a sustained competitive advantage when they reduce their costs through reverse engineering.
ANS: F PTS: 1 DIF: med REF: p. 182
OBJ: 4 NOT: comprehension
- According to the discussion in the textbook, it is unlikely that firms that are typically late movers have much organizational slack.
ANS: T PTS: 1 DIF: hard REF: p. 183
OBJ: 4 NOT: comprehension
- Large firms with significant market power who act like small firms (making strategic decisions and implementing them with speed) and are innovative are typically strong competitors and are likely to earn above-average returns.
ANS: T PTS: 1 DIF: med REF: p. 183|p. 184
OBJ: 4 NOT: comprehension
- Product quality is a universal theme and is a necessary, but not a sufficient condition for competitive success.
ANS: T PTS: 1 DIF: med REF: p. 185
OBJ: 4 NOT: comprehension
- Quality alone can assure a firm that it will achieve strategic competitiveness or earn above-average returns.
ANS: F PTS: 1 DIF: hard REF: p. 185
OBJ: 5 NOT: comprehension
- Quality begins at the bottom of the organization where employees must create values for quality that permeate the entire organization.
ANS: F PTS: 1 DIF: med REF: p. 185
OBJ: 4 NOT: comprehension
- High quality increases costs which damages profitability.
ANS: F PTS: 1 DIF: med REF: p. 185
OBJ: 4 NOT: comprehension
- A tactical competitive action involves a significant commitment of specific and distinctive organizational resources.
ANS: F PTS: 1 DIF: hard REF: p. 186
OBJ: 5 NOT: knowledge
- It is much easier for a competitor to implement strategic actions than tactical actions.
ANS: F PTS: 1 DIF: hard REF: p. 186
OBJ: 5 NOT: comprehension
- Firms with fewer resources are less likely to respond to tactical actions than to strategic actions in order to preserve resources for the most important competitive battles.
ANS: F PTS: 1 DIF: hard REF: p. 186
OBJ: 5 NOT: comprehension
- The more dependent a firm is on its market, the more aggressively it will defend it from another competitor.
ANS: T PTS: 1 DIF: med REF: p. 187
OBJ: 5 NOT: comprehension
- Firms in a slow-cycle market are shielded from strong rivalry and imitators.
ANS: T PTS: 1 DIF: med REF: p. 188
OBJ: 6 NOT: comprehension
- Compared with standard-cycle firms, fast-cycle firms have little loyalty to their products.
ANS: T PTS: 1 DIF: med REF: p. 191|p. 192
OBJ: 6 NOT: comprehension
- Unlike fast-cycle markets, the struggle for market share in standard-cycle markets is not intense.
ANS: F PTS: 1 DIF: med REF: p. 191|p. 192
OBJ: 6 NOT: comprehension
- Competitive advantages are not sustainable in fast-cycle markets.
ANS: T PTS: 1 DIF: easy REF: p. 190
OBJ: 6 NOT: knowledge
- Innovation substantially influences competitive dynamics as it affects the actions and responses of all companies competing in all market types.
ANS: T PTS: 1 DIF: med REF: p. 193
OBJ: 6 NOT: knowledge
- With 66% of its revenues derived from the North American tire replacement market, Cooper Tire & Rubber Co. has a low degree of market dependence.
ANS: F PTS: 1 DIF: med REF: p. 188
OBJ: 5 NOT: application
MULTIPLE CHOICE
- Competitive dynamics refers to a series of:
| a. | competitive actions taken by only one firm in a market. |
| b. | competitive actions taken by the market leader. |
| c. | competitive actions and competitive responses initiated among firms competing within a given market. |
| d. | competitive actions and competitive responses initiated among firms competing within numerous markets. |
ANS: C PTS: 1 DIF: hard REF: p. 173
OBJ: 1 NOT: knowledge
- Competitive rivalry exists ONLY when:
| a. | two or more firms establish their domains and do not challenge each other over those domains. |
| b. | two or more firms compete against one another in pursuit of an advantageous market position. |
| c. | two or more firms compete against international firms in pursuit of the world’s dominant market position. |
| d. | a firm is willing to accept its market position without regard to its competitors’ intentions. |
ANS: B PTS: 1 DIF: hard REF: p. 173
OBJ: 1 NOT: knowledge
- Multimarket competition occurs when firms:
| a. | sell different products to the same customer. |
| b. | have a high level of awareness of their competitors’ strategic intent. |
| c. | simultaneously enter into an attack strategy. |
| d. | compete against each other in several geographic or product markets. |
ANS: D PTS: 1 DIF: med REF: p. 173
OBJ: 1 NOT: knowledge
- In the global economy, rivalry is intensifying. Consequently:
| a. | dominant cultures are overwhelming those of emerging nations, making cultural diversity an issue mainly among developed nations. |
| b. | it is becoming more likely that industrialized nations will continue to dominate world markets, overwhelming emerging countries. |
| c. | strong brand names are especially important in opening new markets. |
| d. | only companies with cost-leadership strategies have a competitive advantage. |
ANS: C PTS: 1 DIF: hard REF: p. 174
OBJ: 1 NOT: comprehension
- Intensified rivalry within an industry results in ____.
| a. | increased hiring across the industry |
| b. | increased total revenues across the industry |
| c. | decreased average profitability across the industry |
| d. | increased entries into the industry |
ANS: C PTS: 1 DIF: med REF: p. 174
OBJ: 1 NOT: knowledge
- A method of reducing competitive rivalry may be to reduce the firm’s market commonality with other firms by doing all EXCEPT which of the following?
| a. | competing in a different geographic market |
| b. | competing in a different product segment |
| c. | competing in a different market segment |
| d. | competing in a different labor market |
ANS: D PTS: 1 DIF: hard REF: p. 177
OBJ: 1 NOT: comprehension
- Two companies that share markets, but who have little similarity in their resources are ____.
| a. | direct, mutually-acknowledged competitors |
| b. | neither direct nor mutually-acknowledged competitors |
| c. | competitors who are probably not engaged in intense rivalry |
| d. | competitors who have reached mutually-sustainable competitive advantage |
ANS: C PTS: 1 DIF: hard REF: p. 178
OBJ: 2 NOT: comprehension
- ____ relates to the incentives a firm has to attack a rival or to respond if attacked.
| a. | Motivation | c. | Responsiveness |
| b. | Awareness | d. | Ability |
ANS: A PTS: 1 DIF: med REF: p. 179
OBJ: 3 NOT: knowledge
- Both ____ and ____ affect the awareness and motivation of a firm to undertake actions and responses.
| a. | first mover advantages, corporate size |
| b. | market commonality, resource similarity |
| c. | management capabilities, competitive analysis |
| d. | speed of management decisions, management actions |
ANS: B PTS: 1 DIF: hard REF: p. 179
OBJ: 3 NOT: knowledge
- The larger the resource imbalance between the firm taking the competitive action and the other firms in the industry, the ____ of these other firms.
| a. | more fragmented the response will be |
| b. | the slower the response will be |
| c. | the larger the response will be |
| d. | more tactical the response will be |
ANS: B PTS: 1 DIF: med REF: p. 180
OBJ: 5 NOT: comprehension
- First movers are:
| a. | individuals who lead in the establishment of new industries. |
| b. | firms that are first to exit an industry that begins to enter a decline stage. |
| c. | firms that take an initial competitive action. |
| d. | individuals who move frequently as employment opportunities change in a locale. |
ANS: C PTS: 1 DIF: med REF: p. 182
OBJ: 4 NOT: knowledge
- The chief disadvantages of being a first mover is:
| a. | the high degree of risk. |
| b. | the high level of competition in the new marketplace. |
| c. | an inability to sustain a sustained competitive advantage. |
| d. | the difficulty of obtaining new customers. |
ANS: A PTS: 1 DIF: med REF: p. 182
OBJ: 4 NOT: comprehension
- A second mover is a (an):
| a. | firm that responds to a first mover’s competitive action, often through imitation. |
| b. | firm that leads a competitive action in an industry. |
| c. | individual who imitates others in an industry to ensure the progress of his/her career. |
| d. | individual who moves from a declining industry to a new expanding industry. |
ANS: A PTS: 1 DIF: med REF: p. 183
OBJ: 4 NOT: knowledge
- A benefit of being a second mover is:
| a. | an absence of the need to be the largest firm in the industry. |
| b. | that a firm may be able to respond to first movers’ competitive actions while avoiding the risks and development costs experienced by the first movers. |
| c. | the absence of any risk. |
| d. | the ability to lead the industry into new areas of product development and gain customer loyalty from its move. |
ANS: B PTS: 1 DIF: hard REF: p. 183
OBJ: 4 NOT: comprehension
- Late movers are those firms:
| a. | that do respond to a competitive action but only after considerable time has elapsed after the first mover’s action and the second mover’s response. |
| b. | that respond to a first mover’s competitive action often through imitation or a move designed to counter the effects of the action. |
| c. | that take an initial competitive action (either strategic or tactical). |
| d. | that stay in a declining industry. |
ANS: A PTS: 1 DIF: med REF: p. 183
OBJ: 4 NOT: knowledge
- All competitive advantages do not accrue to large-sized firms. A major advantage of smaller firms is that ____.
| a. | they are more likely to have organizational slack |
| b. | they can launch competitive actions more quickly |
| c. | they have more loyal and diverse workforces |
| d. | they can wait for larger firms to make mistakes in introducing innovative products |
ANS: B PTS: 1 DIF: med REF: p. 184
OBJ: 4 NOT: comprehension
- Which firm’s competitive actions are most likely to elicit response and imitation?
| a. | Firms that have a history as a strategic player that takes risky actions |
| b. | Firms that have a history of complex and unpredictable actions |
| c. | Firms that are price predators |
| d. | Firms that are market leaders |
ANS: D PTS: 1 DIF: med REF: p. 184
OBJ: 5 NOT: comprehension
- Quality involves:
| a. | either meeting or exceeding customer expectations in the goods and/or services offered. |
| b. | meeting the standards established by ISO 9000. |
| c. | an assured way to gain competitive advantage. |
| d. | an association only with differentiation strategies. |
ANS: A PTS: 1 DIF: med REF: p. 184
OBJ: 4 NOT: knowledge
- Quality is ____ strategic competitiveness.
| a. | necessary for | c. | sufficient for |
| b. | negatively related to | d. | not associated with |
ANS: A PTS: 1 DIF: med REF: p. 185
OBJ: 4 NOT: comprehension
- Which of the following is NOT an accurate statement with respect to quality? Quality is:
| a. | a universal theme in the global economy. |
| b. | a necessary but not sufficient condition for competitive success. |
| c. | in existence when a firm’s goods or services meet or exceed customers’ expectations. |
| d. | possible when customers support it. |
ANS: D PTS: 1 DIF: hard REF: p. 185
OBJ: 4 NOT: comprehension
- Because Hyundai Motor Company was instituting a drive for manufacturing quality in 1999, competitors could predict ____.
| a. | that Hyundai viewed quality as a sufficient condition for success |
| b. | that Hyundai was consuming its organizational slack and would encounter financial problems |
| c. | that Hyundai would not simultaneously launch aggressive competitive actions |
| d. | that Hyundai was building for a first-mover advantage |
ANS: C PTS: 1 DIF: hard REF: p. 185
OBJ: 4 NOT: application
- A competitive response is a (an):
| a. | move taken to counter the effects of an action taken by a competitor. |
| b. | move taken to initiate a strategic change in an industry. |
| c. | ineffective action for a firm to pursue. |
| d. | military concept that does not apply to business. |
ANS: A PTS: 1 DIF: med REF: p. 186
OBJ: 5 NOT: knowledge
- As compared to strategic actions, tactical actions usually have a:
| a. | more delayed effect. |
| b. | greater effect on the overall corporate strategy. |
| c. | well-timed effect on the firm’s corporate strategy. |
| d. | more immediate effect. |
ANS: D PTS: 1 DIF: med REF: p. 186
OBJ: 4 NOT: knowledge
- Which of the following would be an example of a strategic action?
| a. | Price cuts by Blockbuster Video |
| b. | Use of product coupons by a local grocer |
| c. | Entry into the European market by Wal-Mart |
| d. | Price increases by Continental Airlines |
ANS: C PTS: 1 DIF: med REF: p. 186
OBJ: 4 NOT: application
- Firms with few competitive resources are more likely to:
| a. | refuse to respond to competitive actions. |
| b. | respond to all competitive actions. |
| c. | respond to tactical actions. |
| d. | respond to strategic actions. |
ANS: C PTS: 1 DIF: med REF: p. 186
OBJ: 5 NOT: comprehension
- On the whole there are more competitive responses to:
| a. | strategic actions than to tactical actions. |
| b. | tactical actions than to strategic actions. |
| c. | buyer pressures than to supplier pressures. |
| d. | the demands of the top management team than to industry structural pressures. |
ANS: B PTS: 1 DIF: hard REF: p. 186
OBJ: 5 NOT: knowledge
- Companies initiate more competitive responses to ____ actions than to ____ actions.
| a. | tactical, strategic |
| b. | strategic, tactical |
| c. | business-level strategic, corporate-level strategic |
| d. | business-level strategic, operating-level strategic |
ANS: A PTS: 1 DIF: hard REF: p. 186
OBJ: 5 NOT: knowledge
- Competitors are more likely to respond to competitive actions that are taken by ____.
| a. | differentiators | c. | first movers |
| b. | larger companies | d. | market leaders |
ANS: D PTS: 1 DIF: med REF: p. 187
OBJ: 5 NOT: knowledge
- Walt Disney’s focus on ____ is typical of a slow-cycle market.
| a. | innovation | c. | proprietary rights |
| b. | total quality | d. | economies of scale |
ANS: C PTS: 1 DIF: med REF: p. 189
OBJ: 6 NOT: comprehension
- A company in a ____ is most likely to make heavy use of patents and copyrights.
| a. | slow cycle | c. | standard cycle |
| b. | medium cycle | d. | fast cycle |
ANS: A PTS: 1 DIF: med REF: p. 189
OBJ: 6 NOT: comprehension
- Sustained competitive advantage is most achievable in a ____ market.
| a. | slow-cycle | c. | standard-cycle |
| b. | medium-cycle | d. | fast-cycle |
ANS: A PTS: 1 DIF: med REF: p. 188
OBJ: 6 NOT: comprehension
- Goods or services in slow-cycle markets reflect:
| a. | organizations that serve a mass market. |
| b. | numerous first mover advantages. |
| c. | an inability to sustain a competitive advantage for long periods of time. |
| d. | competitive advantages that are shielded from imitation. |
ANS: D PTS: 1 DIF: hard REF: p. 188
OBJ: 6 NOT: comprehension
- Reverse engineering is characteristic of ____.
| a. | first movers. | c. | total quality management. |
| b. | fast-cycle markets. | d. | cost-leadership strategies. |
ANS: B PTS: 1 DIF: med REF: p. 190
OBJ: 6 NOT: knowledge
- Which of the following is an example of an organization considered to be in a standard-cycle market?
| a. | Boeing’s airplanes |
| b. | Procter & Gamble |
| c. | Caterpillar’s large-scale equipment |
| d. | McIlhenny’s Tabasco Sauce |
ANS: B PTS: 1 DIF: hard REF: p. 192
OBJ: 6 NOT: application
- Firms will be more loyal to their products in a ____ market than in the other types of markets.
| a. | standard cycle | c. | slow cycle |
| b. | fast cycle | d. | medium cycle |
ANS: A PTS: 1 DIF: med REF: p. 192
OBJ: 6 NOT: comprehension
- In order to compete effectively, standard-cycle firms need ____.
| a. | organizational slack | c. | first mover capability |
| b. | economies of scale | d. | total quality |
ANS: B PTS: 1 DIF: med REF: p. 192
OBJ: 6 NOT: knowledge
- Strategic actions elicit fewer competitive responses than tactical actions for all of the following reasons EXCEPT:
| a. | Strategic responses involve a significant commitment of resources. | c. | Strategic responses are easy to implement and reverse. |
| b. | The time needed for a strategic action to be implemented delays the competitor’s response. | d. | The time needed to assess the effectiveness of strategic actions delays the competitor’s response. |
ANS: C PTS: 1 DIF: hard REF: p. 186
OBJ: 5 NOT: comprehension
- Innovation has a dominant effect on competitive dynamics in ____ markets.
| a. | slow-cycle | c. | fast-cycle |
| b. | standard-cycle | d. | all competitive |
ANS: C PTS: 1 DIF: med REF: p. 191
OBJ: 6 NOT: knowledge
ESSAY
- What is market commonality?
ANS:
In general, competitors agree about the different characteristics of the individual markets that make up an industry. Most industries’ markets are somewhat related in terms of technologies used or core competencies needed to develop a competitive advantage. Market commonality is concerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each.
PTS: 1 REF: p. 176|p. 177 OBJ: 2
- What is resource similarity?
ANS:
Resource similarity is the extent to which the firm’s tangible and intangible resources are comparable to a competitor’s in terms of both type and amount. Firms with resource similarity are likely to have similar strengths and weaknesses and to use similar strategies. Assessing resource similarity can be difficult, particularly when critical resources are intangible, rather than tangible.
PTS: 1 REF: p. 177|p. 178 OBJ: 2
- Define awareness, motivation, and ability in reference to competitive behavior.
ANS:
Awareness, motivation and ability are the drives of competitive behavior. Awareness is the extent to which competitors recognize the degree of their mutual interdependence that results from market commonality and resource similarity. Awareness affects the extent to which the firm understands the consequences of its competitive actions and responses. Motivation concerns the firm’s incentive to take action or to respond to a competitor’s attack. If the firm does not believe a competitor’s action will result in losses for it, it will not have motivation to respond. Ability relates to each firm’s resources and the flexibility these resources provide. When a firm faces a competitor with similar resources, careful study of a possible attack is essential because a competitor with similar resources is likely to respond to competitive attack.
PTS: 1 REF: p. 179|p. 180 OBJ: 3
- What are the advantages and disadvantages of being a first mover, second mover, and late mover?
ANS:
First movers can gain market share and customer loyalty by being the first in the market. First movers also take more risks. However, first movers often are higher performers. Second movers, particularly those that are larger and faster, can also gain a competitive advantage and/or earn at least average returns because they imitate, but avoid much of the risk that first movers experience. In fact, some second movers may gain significant market share and outperform the first movers. They do so when they carefully observe the market’s reaction and are able to improve the product introduced by the first mover and correct its mistakes. Late movers (those that respond a long time after the original action was taken) tend to be lower performers and much less effective.
PTS: 1 REF: p. 182p. 183 OBJ: 4
- What factors contribute to the likelihood of a response to a competitive action?
ANS:
A firm is more likely to respond when the competitor’s action is tactical, rather than strategic. Strategic actions involve a significant commitment of resources and are difficult to implement and reverse, as well as requiring time to put into place. A firm is also more likely to respond to a competitor’s action when the competitor is the market leader. Successful actions by competitors are likely to be quickly imitated, even if not initiated by a market leader. Finally, competitors with high market dependence are likely to respond strongly to attacks threatening their market position.
PTS: 1 REF: p. 185|p. 188 OBJ: 5
- Name and describe the two types of competitive actions.
ANS:
This refers to strategic and tactical actions. Strategic actions take more time to implement, require many specific resources, and are difficult to reverse. By implication, tactical actions tend to be quicker to implement, require fewer resources, and can be reversed more easily. Strategic actions tend to receive strategic responses. Tactical actions tend to receive tactical responses. Strategic actions elicit fewer total competitive responses than do tactical actions. Responses to strategic actions will be slower than will responses to tactical actions.
PTS: 1 REF: p. 186 OBJ: 5
- Define slow-cycle, fast-cycle, and standard cycle markets.
ANS:
In slow-cycle markets the firm’s competitive advantage is shielded from imitation for long periods of time and imitation is costly. Competitive advantages are sustainable in slow-cycle markets. Successful firms in slow-cycle markets have difficult-to-understand and costly-to-imitate advantages resulting from unique historical conditions, causal ambiguity and/or social complexity. In fast-cycle markets imitation happens quickly and somewhat inexpensively. Competitive advantages are not sustainable. Reverse engineering and quick technology diffusion facilitate rapid imitation. In fast-cycle markets, innovation is critical and firms avoid “loyalty” to any product. Firms must focus on rapidly and continuously developing new competitive advantages. In standard-cycle markets, the firm’s competitive advantages are moderately shielded for imitation and imitation is moderately costly. Competitive advantages are partially sustainable if the firm can continuously upgrade the quality of its competitive advantage. Typically, these markets have large firms seeking high market share, striving for customer brand loyalty, and controlling their operations to give customers consistent experiences. Economies of scale are necessary for survival.
PTS: 1 REF: p. 188|p. 193 OBJ: 6
Chapter 7 – Cooperative Strategy
TRUE/FALSE
- Aerospace companies such as Boeing are likely to use cooperative alliances for access to complementary resources and capabilities.
ANS: T PTS: 1 DIF: med REF: p. 204
OBJ: 1 NOT: application
- Equity strategic alliances exist when two or more firms join together to create an independent firm.
ANS: F PTS: 1 DIF: hard REF: p. 204
OBJ: 3 NOT: knowledge
- Being (and having) a trustworthy partner increases the probability of alliance success.
ANS: T PTS: 1 DIF: med REF: p. 217
OBJ: 1 NOT: comprehension
- Although strategic alliances are growing in popularity with small and medium-sized firms, large companies tend to avoid them.
ANS: F PTS: 1 DIF: med REF: p. 201
OBJ: 1 NOT: knowledge
- Cooperation in slow-cycle markets is extremely rare, especially in emerging markets.
ANS: F PTS: 1 DIF: med REF: p. 202
OBJ: 2 NOT: comprehension
- Firms in slow-cycle markets can use cooperative strategies in the transition to more competitive markets.
ANS: T PTS: 1 DIF: med REF: p. 203
OBJ: 2 NOT: comprehension
- Mergers are the most popular cooperative strategy used in standard-cycle markets.
ANS: F PTS: 1 DIF: med REF: p. 204
OBJ: 2 NOT: comprehension
- Tacit collusion is illegal in the United States.
ANS: F PTS: 1 DIF: med REF: p. 210
OBJ: 3 NOT: knowledge
- Horizontal business-level strategic alliances have the greatest probability of creating sustainable competitive advantages.
ANS: F PTS: 1 DIF: med REF: p. 206
OBJ: 3 NOT: knowledge
- A horizontal complementary strategic alliance is an alliance in which firms share some of their resources and capabilities from the same stage of the value chain to create a competitive advantage.
ANS: T PTS: 1 DIF: med REF: p. 206
OBJ: 3 NOT: comprehension
- Because of U.S. legal restrictions concerning large acquisitions, American firms are unable to enter into diversifying alliances.
ANS: F PTS: 1 DIF: hard REF: p. 212
OBJ: 4 NOT: comprehension
- An alliance can be used to test whether the partners would benefit from a future merger.
ANS: T PTS: 1 DIF: med REF: p. 211
OBJ: 4 NOT: comprehension
- Complementary strategic alliances allow firms to expand into new product or market areas without an acquisition.
ANS: F PTS: 1 DIF: med REF: p. 211
OBJ: 4 NOT: knowledge
- The primary responsibility of the franchisor is to transfer capital to the franchisee.
ANS: F PTS: 1 DIF: med REF: p. 212
OBJ: 4 NOT: knowledge
- Strategic alliances can be used to respond to competitors’ attacks.
ANS: T PTS: 1 DIF: easy REF: p. 209
OBJ: 6 NOT: knowledge
- The cost minimalization management approach involves the firm’s use of formal contracts with partners.
ANS: T PTS: 1 DIF: med REF: p. 215|p. 217
OBJ: 8 NOT: comprehension
- International strategic alliances are less risky than domestic strategic alliances.
ANS: F PTS: 1 DIF: med REF: p. 213
OBJ: 5 NOT: comprehension
- When a firm is in the early stages of geographic diversification, cross-border alliances may be a good learning step before contemplating mergers.
ANS: T PTS: 1 DIF: med REF: p. 213
OBJ: 5 NOT: knowledge
- Distributed alliance networks are often the organizational structure used to manage international competitive strategies.
ANS: T PTS: 1 DIF: hard REF: p. 213
OBJ: 5 NOT: knowledge
- The failure rate of cooperative strategies is very low.
ANS: F PTS: 1 DIF: easy REF: p. 216
OBJ: 6 NOT: knowledge
- A major risk of cooperative strategies is that firms gain access to their partner’s partners.
ANS: F PTS: 1 DIF: hard REF: p. 207|p.215
OBJ: 7 NOT: comprehension
- A strategic control issue for McDonald’s is the location of franchised restaurants.
ANS: T PTS: 1 DIF: med REF: p. 212
OBJ: 7 NOT: application
- The Sustainability Consortium involves dozens of firms and was formed to deal with increasing pressure to reduce environmental and social impacts associated with global consumption through collaborations that increase understanding, standardization of best practices, and informed decision making.
ANS: T PTS: 1 DIF: med REF: p. 211
OBJ: 5 NOT: comprehension
- Stable alliance networks are best suited for firms needing to extend their competitive advantages into new markets.
ANS: T PTS: 1 DIF: med REF: p. 207|p. 208
OBJ: 4 NOT: knowledge
- Firms that use cooperative strategies successfully gain relational advantages that allow them to outperform rivals.
ANS: T PTS: 1 DIF: easy REF: 200
OBJ: 1 NOT: knowledge
MULTIPLE CHOICE
- The new trend of building alliances with competitors is referred to as ____.
| a. | competitive cooperatives | c. | consortia |
| b. | keiretse | d. | co-opetition |
ANS: D PTS: 1 DIF: med REF: p. 201
OBJ: 1 NOT: knowledge
- Research on the global aircraft industry demonstrates ____.
| a. | the difficulty of coordinating cross-border alliances when each partner is a potential competitor |
| b. | the fact that research and development costs make it difficult to undertake major projects without alliances |
| c. | the problems involved with sharing sufficient knowledge and resources to provide synergy without losing unique competitive advantages |
| d. | the challenges involved in dealing with multiple organizational and national cultures in an alliance |
ANS: B PTS: 1 DIF: med REF: p. 206
OBJ: 1 NOT: application
- The use of alliances:
| a. | is unlikely to yield success if partnering firms are headquartered in the same country. |
| b. | may be too restrictive to facilitate entry into new markets. |
| c. | usually increases the investment necessary to introduce new products. |
| d. | is increasing, especially among large global firms. |
ANS: D PTS: 1 DIF: hard REF: p. 200
OBJ: 1 NOT: comprehension
- A strategic alliance in which the partners do not own equal equity is called a(n):
| a. | equity strategic alliance. | c. | nonequity strategic alliance. |
| b. | joint venture. | d. | cooperative arrangement. |
ANS: A PTS: 1 DIF: med REF: p. 204
OBJ: 3 NOT: knowledge
- ____ are a common strategy for firms investing in China.
| a. | Joint ventures | c. | Cross-border strategic alliances |
| b. | Franchises | d. | Dynamic alliance networks |
ANS: C PTS: 1 DIF: hard REF: p. 213
OBJ: 3 NOT: application
- Which type of strategic alliance is best at passing tacit knowledge between firms?
| a. | Primary cooperative strategic alliances |
| b. | Joint ventures |
| c. | Equity strategic alliances |
| d. | Nonequity strategic alliances |
ANS: B PTS: 1 DIF: hard REF: p. 204
OBJ: 3 NOT: knowledge
- In a(n) ____ the firms involved typically own equal shares of a newly-created entity.
| a. | equality-based strategic alliance | c. | joint venture |
| b. | nonequity strategic alliance | d. | equity strategic alliance |
ANS: C PTS: 1 DIF: hard REF: p. 204
OBJ: 3 NOT: knowledge
