Preview Extract
Chapter 5 Competitive Landscape
1) What is the first step in creating a competitive framework?
A) identifying the company's competitors
B) gathering selected information about each competitor
C) analyzing the company's message to consumers
D) creating a unique product/service identity
Answer: A
Rationale:
Identifying the company's competitors is essential as it lays the foundation for understanding
the competitive landscape. Before any strategic planning can take place, a company needs to
know who its competitors are, what products or services they offer, their strengths and
weaknesses, market positioning, and strategies. This information is crucial for assessing the
company's competitive advantage and formulating effective strategies to thrive in the market.
2) Which of the following strategies must a company follow while creating a competitive
framework if it has numerous competitors?
A) It must conduct in-depth analyses of all its competitors, big and small.
B) It must select any one of its competitors to be representative of all its competitors.
C) It must treat all its competitors as a single, large competitor.
D) It must select a few important competitors upon which to concentrate.
Answer: D
Rationale:
When a company is faced with numerous competitors, conducting in-depth analyses of all of
them can be overwhelming and resource-intensive. Instead, by focusing on a select few key
competitors that have the most significant impact on the company's market share,
performance, and strategic direction, the company can allocate its resources effectively. This
focused approach allows for a deeper understanding of the competitive landscape and enables
the company to develop targeted strategies to gain a competitive advantage.
3) The market structure method of competition identification is based on the premise that
________.
A) most markets have a familiar structure
B) all players in a market have an equal market share
C) most markets are structured as monopolies
D) the market structure depends on profit margins
Answer: A
Rationale:
The market structure method operates under the assumption that most markets exhibit
recognizable structures, such as monopolistic competition, oligopoly, monopoly, or perfect
competition. This premise suggests that there are common patterns or arrangements of firms
within industries, which influence competitive dynamics. By understanding the prevailing
market structure, businesses can tailor their strategies to navigate competition effectively and
capitalize on market opportunities.
4) Maxx has 45% of the sports shoe market in China, and Seaw Shoes follows closely with
38%. Nekki Run has 12.4% of the market, Glow has 1.3%, and other assorted brands make
up the rest. If Glow manufactures sports shoes specially made for diabetics, who make up
about 5% of the population, then it is a ________ in the sports shoe market.
A) market leader
B) market follower
C) market challenger
D) market niche firm
Answer: D
Rationale:
Glow's specialization in manufacturing sports shoes for diabetics, targeting a specific
segment of the population (about 5% in this case), positions it as a niche firm within the
sports shoe market. This specialization allows Glow to serve a unique need within the market,
catering to a specific subset of consumers rather than competing directly with the broader
market leaders like Maxx and Seaw Shoes. Therefore, option D, market niche firm, is the
most suitable choice.
5) Maxx has 45% of the sports shoe market in China, and Seaw Shoes follows closely with
38%. 12.4% is owned by Nekki Run, 1.3% is owned by Glow diabetic shoes, and the
remaining by other assorted brands. Which of the following companies most likely dictates
the tempo and pricing of the sports shoe market in China?
A) Maxx
B) Seaw
C) Nekki Run
D) Glow
Answer: A
Rationale:
Maxx, with the largest market share of 45%, is in a dominant position within the sports shoe
market in China. As the market leader, Maxx has considerable influence over the tempo and
pricing of sports shoes. Its substantial market share allows it to set trends, establish pricing
standards, and dictate the overall direction of the market. Therefore, option A, Maxx, is the
most likely company to dictate the tempo and pricing of the sports shoe market in China.
6) Which of the following does a company use to decide the relative positions of its
competitors when using the market structure method of competition identification?
A) product range
B) annual revenue
C) market share
D) brand reputation
Answer: C
Rationale:
In the market structure method of competition identification, companies typically use market
share to determine the relative positions of their competitors. Market share reflects the
portion of total sales within a market that a company controls. It provides valuable insight
into the competitive landscape by indicating the dominance or strength of each competitor in
relation to others. Therefore, option C, market share, is used to decide the relative positions
of competitors.
7) Which of the following categories in a typical market structure usually has the least market
share?
A) market followers
B) market challengers
C) market niche firms
D) market leaders
Answer: C
Rationale:
Market niche firms usually cater to specialized segments of the market, which tend to be
smaller in size compared to broader market segments. As a result, market niche firms
typically have the least market share among the categories listed. While they may dominate
their specific niche, their share of the overall market is often smaller compared to market
leaders, followers, and challengers. Therefore, option C, market niche firms, usually has the
least market share in a typical market structure.
8) ________ fulfill market needs of specialty areas within a market.
A) Market followers
B) Market challengers
C) Market niche firms
D) Market leaders
Answer: C
Rationale:
Market niche firms are specialized in serving specific segments or niches within a broader
market. They cater to unique needs or preferences that are not adequately addressed by
mainstream products or companies. Therefore, they fulfill market needs of specialty areas
within a market.
9) Oaties is the market leader in the breakfast cereals category in the southwest region. The
company uses the market structure-market share method of competition identification. Which
of the following companies will Oaties NOT consider to be a direct competitor according to
this method?
A) Morningtown is the market leader in the pancakes segment, the main alternative to cereals
as a breakfast food.
B) Chocotreat is a rival company that specializes in making a patented chocolate-corn cereal.
C) Chuck's is a lesser-known company that has a small share of the breakfast cereal market.
D) Wholesome is a market niche firm that specializes in cereals manufactured from organic
sources.
Answer: A
Rationale:
According to the market structure-market share method, direct competitors are those
companies that operate within the same product category or serve similar customer needs.
Morningtown, despite being a leader in the pancakes segment, serves as an alternative
breakfast food rather than directly competing with Oaties in the breakfast cereal category.
Therefore, Oaties would not consider Morningtown a direct competitor.
10) According to the International Data Corporation, the market share, in the second quarter
of 2011, of the world's top five mobile vendors was as follows: Nokia: 24.2%; Samsung:
19.2%; LG: 6.8%; Apple: 4.5%; and ZTE: 4.5%. If the global market for mobile phones has a
typical market structure, which company is the main market challenger?
A) Nokia
B) Samsung
C) LG
D) Apple
Answer: B
Rationale:
In a typical market structure, the main market challenger is the company with the secondhighest market share. In this case, Samsung holds the second-highest market share of 19.2%,
making it the main market challenger to Nokia, which holds the highest market share.
Therefore, Samsung is the main market challenger in the global mobile phone market during
the specified period.
11) According to the International Data Corporation, the market share, in the second quarter
of 2011, of the world's top five mobile vendors was as follows: Nokia, with 24.2%; Samsung,
with 19.2%; LG, with 6.8%; Apple, with 4.5%; and ZTE, with 4.5%. Considering the fact
that Apple focuses on the aesthetics of its products and distinctive advertising, and targets the
affluent, tech-savvy segment, it is a ________ in the cell phone market.
A) market leader
B) market challenger
C) market follower
D) market niche firm
Answer: D
Rationale:
Apple's focus on aesthetics, distinctive advertising, and targeting of the affluent, tech-savvy
segment indicates a strategy geared towards serving a specific niche within the broader cell
phone market. By catering to this specific segment, Apple distinguishes itself from other
competitors and occupies a unique position, making it a market niche firm. Therefore, option
D is the correct choice.
12) Which of the following poses a direct competition to Monster.com, an online job portal?
A) Ma Foi, an offline, real-world job consultancy
B) Companies with their own online recruitment processes
C) Jobstreet, an Internet-based job consultancy
D) Real Jobs, a recruitment process outsourcing company
Answer: C
Rationale:
Jobstreet, being an Internet-based job consultancy similar to Monster.com, directly competes
with Monster.com in the online job portal market. Both platforms provide similar services
and cater to individuals seeking job opportunities online. Therefore, Jobstreet poses direct
competition to Monster.com.
13) A(n) ________ competitor for a particular company is an organization offering similar,
but not identical, products or services.
A) category
B) budget
C) brand
D) indirect
Answer: D
Rationale:
An indirect competitor is an organization that offers products or services that are similar to
those of a particular company but not identical. These competitors may target similar
customer needs or segments but may differ in certain aspects such as features, pricing, or
distribution channels. Therefore, option D, "indirect," is the correct choice.
14) Which of the following is the most accurate description of a direct competitor for a firm?
A) a firm that offers identical goods or services to the same market
B) a firm that sells complementary goods or services
C) a firm that offers identical goods or services to another market
D) a firm that sells similar, but not identical, goods or services
Answer: A
Rationale:
A direct competitor for a firm is one that offers identical goods or services to the same
market. These competitors directly compete for the same customers by providing similar
offerings. Option A accurately describes this scenario, making it the most accurate description
of a direct competitor.
15) Which of the following is the best example of an indirect competitor for a weight loss
club?
A) a prominent chain of sports clubs
B) a manufacturer of whole-wheat bread
C) a chain of herbal spas and wellness clinics
D) a hospital offering liposuction treatments
Answer: D
Rationale:
An indirect competitor for a weight loss club is an organization that offers alternative
methods or solutions to achieve weight loss goals. While options A, B, and C may promote
healthy lifestyles or wellness, option D, a hospital offering liposuction treatments, presents an
alternative approach to weight loss that is different from the services provided by a weight
loss club. Liposuction is a surgical procedure for removing fat deposits, which contrasts with
the methods typically offered by weight loss clubs such as diet plans, exercise programs, and
counseling. Therefore, option D is the best example of an indirect competitor for a weight
loss club.
16) In which of the following cases should a company consider direct competitors to be more
important than indirect competitors?
A) when considering competitors who pose a threat during the time horizon of a marketing
plan
B) when considering competitors who will pose a threat throughout a product's life cycle
C) when the product is part of a market that has a rapid rate of technological change
D) when considering a product that is in the early stages of the product life cycle
Answer: A
Rationale:
When considering competitors who pose a threat during the time horizon of a marketing plan,
it's crucial for a company to focus on direct competitors that directly compete for the same
customers and market share. Direct competitors have a more immediate impact on the
company's current strategies and objectives. Therefore, in such cases, direct competitors
should be considered more important than indirect competitors.
17) Dividing the revenue of each competitor by the total market size will calculate the
________.
A) market mix
B) market cap
C) market risk
D) market share
Answer: D
Rationale:
Dividing the revenue of each competitor by the total market size provides a measure of each
competitor's proportionate share of the market, known as market share. This calculation helps
assess the relative strength and position of each competitor within the market. Therefore,
option D, "market share," is the correct term for this calculation.
18) Which of the following is the most accurate description of a company's market share?
A) the number of shares divided by the share price
B) the market capitalization compared to outstanding shares
C) competitors' profit compared to the company's profit
D) company sales compared to total sales within the relevant industry
Answer: D
Rationale:
A company's market share is typically calculated by comparing the company's sales to the
total sales within the relevant industry. This measure provides insight into the company's
performance relative to its competitors and its overall position within the market. Options A,
B, and C are related to financial metrics but do not directly measure market share. Therefore,
option D is the most accurate description of a company's market share.
19) Industry analyst reports normally state the market share of a particular company. If this
information is not available, one can determine market share from ________.
A) the number of shares and the share price
B) product life cycle and market penetration
C) market size and total revenue
D) the product's stage in the product life cycle
Answer: C
Rationale:
If specific market share data for a company is not available, one can estimate market share by
comparing the company's total revenue to the total revenue of the entire market (market size).
By doing so, it's possible to derive an approximate market share for the company. Therefore,
option C, "market size and total revenue," is the correct choice for determining market share
when specific data is unavailable. Options A, B, and D are not directly related to determining
market share.
20) The ________ of an organization is its set of distinctive capabilities that give it a
distinctive edge or cost benefit over its competitors.
A) competitive equilibrium
B) competitive heterogeneity
C) competitive advantage
D) competitive altruism
Answer: C
Rationale:
Competitive advantage refers to the unique set of capabilities and resources that enable an
organization to outperform its competitors and achieve superior performance in the market.
These capabilities may include technological expertise, efficient processes, strong brand
reputation, or unique products/services. Therefore, option C, "competitive advantage," is the
correct term to describe this concept. Options A, B, and D do not accurately describe the
distinctive capabilities of an organization that give it an edge over competitors.
21) Why is a full SWOT analysis not essential when using a competitive comparison
framework to compare a company's principal competitors?
A) The market leaders have obvious superiority in most areas.
B) The opportunities and threats are similar for principal competitors.
C) The competition between principal rivals is based on equality of strengths but not
weaknesses.
D) Most principal competitors are well established in a market.
Answer: B
Rationale:
When conducting a competitive comparison framework, the focus is primarily on comparing
the strengths and weaknesses of principal competitors rather than conducting a
comprehensive analysis of all aspects covered in a SWOT analysis. Since opportunities and
threats are often external factors affecting the entire industry or market segment, they tend to
be similar for principal competitors. Hence, a detailed SWOT analysis may not be essential,
and focusing on comparative strengths and weaknesses would suffice.
22) In a typical SWOT analysis, which of the following refers to advantages that a company
possesses over its competitors as a result of internal factors?
A) strengths
B) weaknesses
C) opportunities
D) threats
Answer: A
Rationale:
Strengths in a SWOT analysis refer to internal advantages possessed by a company. These are
factors that contribute positively to the company's competitive position, such as resources,
capabilities, or market advantages, giving it an edge over competitors.
23) In a typical SWOT analysis, which of the following would be considered a strength for a
company?
A) a reputation for delivering innovative products
B) the exit of a competitor from the market
C) higher disposable incomes in the target market
D) relaxed government product safety regulations
Answer: A
Rationale:
A reputation for delivering innovative products is considered a strength in a SWOT analysis
because it reflects positively on the company's ability to meet customer needs and stay ahead
of competitors. It indicates a competitive advantage derived from the company's internal
capabilities and strategies.
24) In a typical SWOT analysis, which of the following would be considered a weakness of a
company?
A) the failure of a rival product
B) a lack of direct marketing experience
C) the arrival of a competitor in the market
D) stricter product safety regulations
Answer: B
Rationale:
A lack of direct marketing experience is identified as a weakness in a SWOT analysis because
it represents an internal limitation or deficiency within the company. This weakness can
hinder the company's ability to effectively promote its products or reach its target audience
compared to competitors who possess such expertise.
25) The charisma and superior strategy of a leader would be evaluated as a strength of a
company due to its ________.
A) customers
B) people
C) reputation
D) culture
Answer: B
Rationale:
The charisma and superior strategy of a leader are attributed to the people within the
company, particularly the leadership team. In a SWOT analysis, strengths related to the
qualities and capabilities of the workforce, including leadership, are categorized under
"people." These strengths contribute to the company's competitive advantage and its ability to
achieve its objectives.
26) In a typical SWOT analysis, which of the following would be considered an opportunity
for a company?
A) an expansion of the company's services
B) well-trained customer service staff
C) the exit of a competitor from the market
D) stricter product safety regulations
Answer: C
Rationale:
The exit of a competitor from the market presents an opportunity for a company as it
potentially reduces competitive pressure, opens up space for the company to capture market
share, and may allow the company to expand its customer base or increase its pricing power.
27) ________ is information gathered about a company's business rivals, with the intent of
discovering market opportunities.
A) Competitive research
B) Semiotics
C) Dialectical research
D) Hermeneutics
Answer: A
Rationale:
Competitive research involves gathering information about competitors in order to
understand their strategies, strengths, weaknesses, and market positioning. The primary goal
is to identify opportunities and threats in the market landscape.
28) Information created by others, often published in print or on the Web is known as
________.
A) secondary data
B) structured content
C) metadata
D) microcontent
Answer: A
Rationale:
Secondary data refers to information that is collected, compiled, and published by others,
such as government agencies, research institutions, or industry organizations. This data is
often available in various forms, including print publications, online databases, and reports.
29) Which of the following is an advantage of using secondary data as a source of market
information?
A) Using existing data saves a company time and money.
B) Using secondary data is always free of cost.
C) Primary data is generalized and prone to inaccuracy.
D) Secondary data are customized to a company's needs and are not available to others.
Answer: A
Rationale:
Using existing secondary data saves companies time and resources that would otherwise be
required to collect primary data through research efforts. While secondary data may incur
some costs, such as access fees for certain databases or publications, it is generally more costeffective compared to primary data collection methods.
30) Which of the following is the best source for industry-level information?
A) company collateral
B) press releases
C) trade publications
D) a company website
Answer: C
Rationale:
Trade publications are the best source for industry-level information as they often provide
comprehensive coverage of industry trends, market analysis, competitor insights, and
emerging technologies or developments within specific sectors. These publications are
tailored to professionals within the industry and offer valuable insights for strategic decisionmaking.
31) Which of the following is a disadvantage of using weblogs as a source of information
about competitors?
A) The information contained in blogs is expensive to obtain.
B) Blogs are written by customers and hence biased.
C) The information contained in blogs is not verifiable.
D) Blogs do not offer any information relevant to competitors.
Answer: C
Rationale:
Weblogs, or blogs, can be valuable sources of information, but one significant drawback is
that the content is often not verifiable. Unlike information from more traditional sources like
academic journals or official reports, the accuracy and reliability of blog content may vary, as
it is typically authored by individuals whose expertise and credibility may not be easily
assessed. Therefore, relying solely on blogs for competitor information may pose challenges
in terms of verifying the accuracy and validity of the information presented.
32) Which of the following is an example of secondary research carried out by a
manufacturer of cellular phones?
A) observational research carried out at retail outlets to discover why customers select
competitors' products
B) information on customers' likes and dislikes collected from third-party after-sales service
personnel
C) surveys carried out among the general public to find the most desired features in a cellular
phone
D) information obtained from competitors' weblogs to understand the products they
manufacture
Answer: D
Rationale:
Secondary research involves using existing data sources to gather information, and obtaining
information from competitors' weblogs falls under this category. In this case, the cellular
phone manufacturer is gathering information about competitors' products and strategies
without directly engaging with customers or conducting primary research. This allows them
to gain insights into the market without investing resources in data collection activities.
33) Which of the following sources provides unverified market information?
A) financial analysts
B) annual reports
C) business publications
D) weblogs
Answer: D
Rationale:
Weblogs, or blogs, often provide unverified market information because they are typically
authored by individuals without the rigorous fact-checking processes associated with more
traditional sources of information. While some blogs may offer valuable insights, the lack of
verification mechanisms means that the accuracy and reliability of the information presented
cannot always be guaranteed. Therefore, relying solely on weblogs for market information
may carry a higher risk of misinformation compared to sources such as financial analysts,
annual reports, or reputable business publications.
34) Which of the following is a source of secondary data for a firm that wants to gather
information about its competitors?
A) after-sales service personnel
B) company customers
C) distribution channels
D) company collateral
Answer: D
Rationale:
Company collateral refers to materials created by the company for promotional or
informational purposes, such as brochures, catalogs, product manuals, and presentations.
These materials often contain valuable information about the company's products, services,
and strategies, as well as comparative information about competitors. Therefore, accessing
company collateral can provide useful secondary data for understanding competitors and their
offerings.
35) Which of the following can be considered as company collateral?
A) catalogues offered by companies giving detailed product information
B) company-specific news covered in press releases by PR departments
C) blogs written by customers detailing recent product releases
D) interviews with CEOs found in trade publications
Answer: A
Rationale:
Company collateral typically includes materials produced by the company for marketing and
informational purposes. Catalogs offering detailed product information, such as
specifications, features, and pricing, are examples of company collateral. These materials are
designed to promote the company's products or services and provide potential customers with
relevant information to aid in their purchasing decisions.
36) Which of the following is an example of primary research carried out by a television
manufacturer?
A) referring to online articles reviewing various televisions of a particular category
B) observing stock market information released publicly to quantify the success of
competitors
C) carrying out a survey among the general public to find the most desired features in a
television
D) reading competitors' weblogs to understand the products manufactured by them
Answer: C
Rationale:
Primary research involves collecting new data directly from original sources to address
specific research objectives. Carrying out a survey among the general public to identify the
most desired features in a television is an example of primary research for a television
manufacturer. By directly engaging with potential customers, the manufacturer can gather
insights into consumer preferences, which can inform product development and marketing
strategies.
37) Which of the following is true regarding customers as primary sources for competitive
research?
A) They are an easy source in consumer markets since consumers can be asked directly.
B) They are an easy source for business markets since most data is published in magazines or
on the Internet.
C) Retailers provide useful customer information, especially in business markets.
D) Service professionals are a good source of information regarding the selection process of
customers.
Answer: A
Rationale:
Customers can serve as valuable primary sources for competitive research, especially in
consumer markets, because they can be directly asked about their preferences, experiences,
and perceptions. Consumer feedback obtained through surveys, interviews, focus groups, or
observation can provide firsthand insights into customer needs, satisfaction levels, and
preferences, which are essential for understanding competitive dynamics and informing
strategic decisions.
38) Which of the following is a source of primary data for a firm?
A) company collateral
B) customer feedback
C) annual reports
D) trade publications
Answer: B
Rationale:
Primary data refers to original data collected firsthand by the firm for a specific purpose or
research objective. Customer feedback obtained through surveys, interviews, feedback forms,
or direct interactions constitutes primary data. This information is directly gathered from
customers and is not previously available or published elsewhere.
39) Which of the following is a source of primary market data?
A) business publications
B) trade magazines
C) government census data
D) after-sales service personnel
Answer: D
Rationale:
Primary market data is collected firsthand from original sources for a specific research
purpose. After-sales service personnel, such as customer service representatives or technical
support staff, can provide firsthand insights and information gathered directly from customers
regarding their experiences, preferences, complaints, and feedback. This information is
valuable for understanding market dynamics and customer needs.
40) Which of the following is/are not a useful source of competitor information due to
nondisclosure agreements with competitors?
A) customers in consumer markets
B) business publications
C) retailers in consumer markets
D) government census data
Answer: C
Rationale:
Retailers in consumer markets may not be a useful source of competitor information due to
nondisclosure agreements with competitors. Retailers typically have agreements or contracts
with suppliers and competitors that restrict the sharing of sensitive business information, such
as pricing strategies, sales data, or product details. As a result, they may not be able to
provide comprehensive insights into competitors' strategies and operations.
41) The market structure method of competition identification is useful for finding direct
competitors.
Answer: True
Rationale:
The market structure method involves analyzing the characteristics of different market
players, such as their market share, product offerings, and target audience. Direct competitors
are those who offer similar products or services to the same target market, making this
method particularly effective in identifying them.
42) The market follower has the second-largest market share in a particular market, following
the market leader.
Answer: False
Rationale:
The term "market follower" refers to a company that intentionally chooses not to lead the
market but rather follows the strategies and actions of the market leader. This does not imply
that the market follower necessarily has the second-largest market share; they could have any
position in the market share hierarchy depending on their strategies and market dynamics.
43) In the market structure method, niche firms generally have the smallest market shares.
Answer: True
Rationale:
Niche firms typically cater to a specialized segment of the market with unique needs or
preferences. As a result, they often have smaller market shares compared to larger, more
mainstream competitors. The market structure method helps identify these niche firms along
with their respective market shares.
44) An organization offering products different from those offered by another organization
cannot be considered competition for that company.
Answer: False
Rationale:
Competition in markets isn't solely based on offering identical products or services. Even
organizations offering different products or services can compete with each other if they
fulfill similar customer needs or cater to the same target market. Understanding the broader
market landscape involves recognizing these indirect or potential competitors as well.
45) A direct competitor is an organization offering nearly identical products or services to the
same market.
Answer: True
Rationale:
Direct competitors are those organizations that offer similar products or services, targeting
the same customer base or market segment. They often compete directly with each other for
market share, customers, and resources. Identifying direct competitors is crucial for
businesses to strategize effectively and differentiate themselves in the market.
46) When considering only those competitors who pose a threat during the time horizon of
the marketing plan, a company focuses on direct competitors.
Answer: True
Rationale:
Direct competitors are those who offer similar products or services and directly compete for
the same market share. When devising a marketing plan, it's crucial to focus on competitors
that pose an immediate threat within the specified time frame, making direct competitors the
primary concern.
47) In the early part of a product's life cycle, it faces greater competition from indirect
competitors than from direct competitors.
Answer: False
Rationale:
In the early stages of a product's life cycle, direct competitors typically pose the most
significant threat as they offer similar products targeting the same market segment. Indirect
competitors may become more prominent as the product matures, but initially, direct
competition is generally more intense.
48) A product based on new technology faces greater competition from indirect competitors
in the initial phases of its life cycle.
Answer: True
Rationale:
Products based on new technology often face indirect competition from substitute products or
alternative solutions, especially in the early stages of their life cycle when consumer
awareness and adoption are limited. Indirect competitors may offer different solutions to
fulfill similar needs, posing significant competition to new technological products.
49) Markets with rapid rates of technological change should consider indirect competitors as
well as direct ones.
Answer: True
Rationale:
Rapidly evolving technological markets often witness the emergence of new players offering
innovative solutions or alternative technologies. These indirect competitors can disrupt
traditional market dynamics and pose a significant threat to existing businesses. Therefore,
it's essential for companies in such markets to consider both direct and indirect competitors to
adapt effectively.
50) Dividing the revenue of each competitor by the total market size will calculate the market
share.
Answer: False
Rationale:
Market share is typically calculated by dividing a company's revenue (or units sold) by the
total market revenue (or units sold). It provides a measure of a company's portion of the total
market. Dividing each competitor's revenue by the total market size does not give an accurate
representation of market share, as it overlooks individual company performance relative to
the market.
51) Opportunities and threats are similar for the principal competitors in a market.
Answer: True
Rationale:
Opportunities and threats arise from external factors such as market trends, economic
conditions, regulatory changes, and competitive landscape. Principal competitors in a market
generally operate within the same external environment, facing similar opportunities and
threats that can impact their performance and strategies.
52) In a SWOT analysis, the strengths and weaknesses refer to a company's internal market
environment.
Answer: True
Rationale:
Strengths and weaknesses are internal factors that pertain to the company itself, including its
resources, capabilities, processes, and performance. Analyzing strengths and weaknesses
helps a company understand its competitive advantages and areas needing improvement,
providing insights into its internal market environment.
53) In a SWOT analysis, the opportunities and strengths refer to a company's internal market
environment.
Answer: False
Rationale:
Opportunities and strengths are distinct components of a SWOT analysis. While strengths and
weaknesses focus on internal factors, opportunities and threats are external factors.
Opportunities are favorable external conditions that a company can capitalize on, while
threats are external challenges that may hinder its performance.
54) A large number of customers is always a strength for a company.
Answer: False
Rationale:
While having a large customer base can be advantageous for a company in many cases, it's
not always a strength. The quality of the customer base, their loyalty, purchasing power, and
the company's ability to effectively serve them are also critical factors. Sometimes, managing
a large customer base can present challenges such as scalability issues, increased support
demands, or diluted brand focus.
55) Industry analysts are a source of secondary market data.
Answer: True
Rationale:
Industry analysts gather and analyze data related to specific markets, industries, or sectors.
Their reports, studies, forecasts, and market analyses are considered secondary market data,
as they are compiled from existing sources rather than collected firsthand by the company.
Industry analysts provide valuable insights into market trends, competitive dynamics, and
industry performance, making them a crucial source of information for businesses.
56) The website of a competitor is a good source of competitive information.
Answer: True
Rationale:
Competitors often provide valuable insights into their products, services, pricing strategies,
marketing tactics, and market positioning through their websites. Analyzing a competitor's
website can reveal information about their strengths, weaknesses, opportunities, and threats,
aiding in competitive analysis and strategy development.
57) Using secondary sources of information reduces the time taken for competitive research.
Answer: True
Rationale:
Secondary sources of information, such as industry reports, market studies, articles, and
databases, provide readily available data compiled by others. Utilizing these sources can
significantly reduce the time and effort required for competitive research, as it involves
accessing and analyzing existing information rather than conducting original research.
58) Trade publications are useful sources of secondary information.
Answer: True
Rationale:
Trade publications focus on specific industries, markets, or sectors, providing in-depth
analysis, news, trends, and insights relevant to businesses operating within those domains.
These publications often feature articles, reports, case studies, and interviews with industry
experts, making them valuable sources of secondary information for competitive analysis and
market research.
59) Observational techniques are methods used to obtain primary information about
competitors from customers in a business market.
Answer: False
Rationale:
Observational techniques involve directly observing competitors' actions, behaviors, and
activities, rather than gathering information from customers. These methods may include
mystery shopping, tracking competitors' advertising campaigns, observing their product
displays, or monitoring their online activities. Observational techniques provide firsthand
insights into competitors' strategies and tactics.
60) Non-disclosure agreements can reduce the effectiveness of primary research in business
markets.
Answer: True
Rationale:
Non-disclosure agreements (NDAs) are legal contracts that restrict the disclosure of
confidential information shared between parties. In business markets, obtaining primary
information about competitors often involves interactions with customers, suppliers, partners,
or industry insiders. If these parties are bound by NDAs, they may be unable or unwilling to
share valuable insights or sensitive data, limiting the effectiveness of primary research
efforts.
61) Explain "market leader" according to the market structure model.
Answer: Market Leader: Most markets have a market leader on top with a large amount of
market share, often about 40 percent (the exact amount varies from market to market). The
market leader often dictates the tempo and pricing of the market.
62) How is the market structure model used to determine direct competitors?
Answer: An easy way to use the market structure method to spot direct competitors is to
determine the market share for each competitor regularly seen in the primary distribution
channel. In consumer markets, one would study the competitors regularly seen in the stores or
other locations where the organization's products or services are offered. In business markets,
one would study the competitors regularly seen in deals with potential customers.
63) Define direct and indirect competitors.
Answer: A direct competitor is an organization offering nearly identical products or services
to the same market. Often, the competitors are arch rivals. An indirect competitor is an
organization offering similar, but not identical products or services.
64) How can the rate of technological change be used to identify principal competitors?
Answer: Markets with rapid rates of technological change should consider indirect
competitors as well as direct ones. The consumer electronics industry, with its high rate of
change, should consider competition more broadly than say, the food industry, with slower
rates of change.
65) How is the market share of a specific company determined?
Answer: Industry analyst reports that estimate the size of the market are frequently available.
Those same industry analyst reports often also state the market shares for each main
competitor. If not, then dividing the revenue of each competitor by the total market size will
calculate the market share.
66) Why are the opportunities and threats facing a principal competitor not compared in
competitive comparison framework? How are the strengths and weaknesses of a competitor
analyzed if the marketing plan of an organization demands a four quadrant SWOT analysis?
Answer: The competitive comparison framework does not compare opportunities and threats
directly, because these are often very similar across the principal competitors, resulting in
little additional insight. If the marketing plan format of the organization demands a typical
SWOT four quadrant diagram, it is a simple matter to append market opportunities and
threats to the strengths and weaknesses.
67) Explain how the people in an organization can be an area of strength for the organization.
Answer: Dynamic, visionary leaders can be an overwhelming strength for an organization.
Not only does their superior strategy lead the company in the right direction, their charisma
can propagate throughout the organization, resulting in the entire company pulling together.
68) Why are a company's annual reports a good source of secondary information for
analyzing competition?
Answer: Public companies must issue financial reports, such as annual reports and 10-K
forms, to the Securities and Exchange Commission (SEC) on a regular basis. As a result, it is
easier to find financial data on public companies than it is for private ones. Annual reports
can aid competitive analysis through their financial information, of course, and also with their
introductory letters from the CEO, which can offer insights into future directions for the
company.
69) How can social media content be used as a source of competitor information? What is the
main problem with this source?
Answer: Weblogs (blogs) and other social networking tools (like Twitter streams) are used by
many companies to share their opinions on the market. Competitors' social media can give
insight into their support issues and often hint at future service and product releases. Just like
with any other nonverified source of information (professional journalists typically insist on
multiple sources to verify their sources; bloggers do not), execute due diligence and check the
source before using the information. Many blogs are reputable, but many others are not.
70) Explain customers as a source of primary data with respect to consumer and business
markets.
Answer: In consumer markets, direct research, using the focus group, ethnographic, or
observational techniques, with customers who purchased products from competitors can be
useful to learn why they did so. In business markets, many companies require customers to
sign NDAs (nondisclosure agreements), barring customers from speaking with competitors
about the company's products, thus making this type of research more difficult.
71) Explain annual reports as sources of competitor information with respect to consumer and
business markets.
Answer: Public companies must issue financial reports, such as annual reports and 10-K
forms, to the Securities and Exchange Commission (SEC) on a regular basis. As a result, it is
easier to find financial data on public companies than it is for private ones. Annual reports
can aid competitive analysis through their financial information, of course, and also with their
introductory letters from the CEO, which can offer insights into future directions for the
company.
• Public companies: In the past, one had to be a company stockholder to obtain annual
reports. Now, financial reports are routinely available on the company's website, generally
filed under "investor relations."
• Private companies: Private firms, which do not issue publicly traded stock, do not have the
obligation to publicly release the same kind of information as publicly held companies. As a
result, gathering data for privately held firms is often more difficult.
72) Explain the four primary areas under which a company should analyze its strengths and
weaknesses as part of the competitive comparison framework.
Answer: The popular SWOT analysis (strengths, weaknesses, opportunities, and threats)
interprets the internal (company strengths and weaknesses) and external (market
opportunities and strengths) marketing environment. The competitive comparison framework
compares the strengths and weaknesses of principal competitors. The framework does not
compare opportunities and threats directly, because these are often very similar across the
principal competitors, resulting in little additional insight. If the marketing plan format of the
organization demands a typical SWOT four quadrant diagram, it is a simple matter to append
market opportunities and threats to the strengths and weaknesses. An organization's strengths
and weaknesses, as the names imply, are areas where it is superior or inferior, respectively, to
its competitors. One can gain insight into competitors by evaluating strengths and weaknesses
in four primary areas: people, culture, company reputation, and customers.
• People: Dynamic, visionary leaders can be an overwhelming strength for an organization.
Not only does their superior strategy lead the company in the right direction, their charisma
can propagate throughout the organization, resulting in the entire company pulling together.
• Culture: A company's culture is defined as the set of shared experiences, beliefs, and norms
that characterize an organization. Organizations with achievement oriented cultures, where
optimism and "can-do" attitudes rule, are generally much better set up for success than those
with pessimistic or indifferent cultures.
• Company reputation: Positive reputations are earned by doing the right thing over extended
periods of time. Reputations set companies apart from their competitors.
• Customers: Loyal, happy customers are a source of strength for a company. Their loyalty
ensures a steady income stream as they purchase new products and services from the
company. They share their happiness with word of mouth recommendations to others,
boosting sales from nonusers of the brand. Some customers, like those of Harley-Davidson
and Apple, even tattoo the brand's logo on their arms.
73) Describe the structure of a typical, non-fragmented market with examples for each
segment.
Answer:
• Market Leader: Most markets have a market leader on top with a large amount of market
share, often about 40 percent (the exact amount varies from market to market). The market
leader often dictates the tempo and pricing of the market. For example, Hertz is the
acknowledged market leader of the rental car market.
• Market Challenger: Just below the market leader is the market challenger. The challenger is
the established number two in the market, often with about 30 percent of the market share.
For example, Avis is the acknowledged market challenger of the rental car market.
• Market Follower: Following the market challenger is the market follower, a company that
follows the lead of the market leader and challenger. For example, companies like Dollar
Rent a Car could be viewed as market followers, because they generally follow the lead of
Hertz and Avis.
• Market Niche Firms: At the bottom is a wide variety of market niche firms that fulfill
market needs of specialty areas within the market, often with only a few share points each.
For example, niche firms in the rental car market include a wide spectrum of offerings to
accommodate different tastes, from exotic car rentals to Rent-A-Wreck.
74) Explain the three factors companies use to identify principal competitors.
Answer:
• Time horizon: Narrow down the list of competitors to those posing a threat in the time
horizon of the marketing plan, typically one year. The list will generally contain direct
competitors, with the occasional indirect competitor added to the list to reflect current trends.
• Product/service life cycle: Reduce the number of competitors to those relevant for the
product or service's stage in its product life cycle. In the early stages of the product life cycle,
indirect competition is more of a threat. Direct competition is more relevant once the product
matures.
• Rate of technological change: Markets with rapid rates of technological change should
consider indirect competitors as well as direct ones. The consumer electronics industry, with
its high rate of change, should consider competition more broadly than say, the food industry,
with slower rates of change.
75) Describe the different sources of primary data.
Answer:
• Customers: In consumer markets, direct research with customers who purchased products
from competitors can be useful to learn why they did so. Apply the focus group,
ethnographic, or observational techniques covered earlier in this book. In business markets,
many companies require customers to sign NDAs (nondisclosure agreements), barring
customers from speaking with competitors about the company's products, thus making this
type of research more difficult.
• Distribution channels: In consumer markets, retailers work with customers every day and
can provide useful feedback as to why customers select competitors' products. In business
markets, this method is not as fruitful because many channel members have NDAs with
competitors as part of the distribution agreement. If the organization employs a sales force to
sell into major accounts, interviews with them can provide insight into the market.
• After-sales service personnel: In consumer markets, complex services and products often
demand service after the initial sale. People providing this service can give valuable
feedback, based on the contact they have with customers and their likes and dislikes about the
product or service. For example, automobile manufacturers gather feedback from automotive
service personnel to understand their customers better. In business markets, after-sales service
personnel (called field service representatives) are routinely asked to provide feedback.
Test Bank for Marketing Planning
Stephan Sorger
9780132544702
