Creating Competitive Advantage (Marketing) Answer Key Part 5

126) Which of the following statements is most likely true of market follower strategies? A) Market followers have the resources to expand the market by developing new users, new uses, and more usage of its products. B) Market followers must expand internationally first to ensure distribution effectiveness, cost savings, and quality control. C) Market followers should conduct indirect attacks on competitors' weaknesses to gain market share quickly and inexpensively. D) Market followers benefit from pursuing subsegments of target markets due to their limited resources. E) Market followers must keep manufacturing costs and prices low or product quality and services high. Answer: E 127) Almost every industry includes firms that specialize in serving target subsegments called market ________. A) niches B) mavens C) baskets D) indicators E) mixes Answer: A 128) Market niching is profitable because the company ________. A) copies or improves on the leader's products and programs, usually with much less investment B) bears the cost of developing new products and markets, expanding distribution, and educating the market C) knows the needs of the target customer segment better than other firms that casually attempt to sell to the same segment D) either keeps its manufacturing costs and prices low or its product quality and services high E) can achieve economies of scale much faster by selling the same product to the global market Answer: C 129) Whereas the mass marketer achieves ________, the nicher achieves ________. A) low margins; low volume B) low volume; high margins C) high volume; high margins D) high volume; low margins E) high margins; high volume Answer: C 130) Computer mouse and interface device maker AdvTechPRO is only a fraction the size of software giant Terminal Time Software Inc. AdvTechPRO manufactures every variation of computer mouse imaginable (for left-handed people, wireless mice, shaped like actual mice, LED mice, etc.). Through skillful ________, the firm dominates the PC mouse market, with Terminal Time Software as its runner up. A) centralization techniques B) niching C) brand imaging D) vertical integration E) benchmarking Answer: B 131) Which of the following is most critical for successful niching? A) catering to global markets B) buzz marketing C) follow-up D) specialization E) mass appeal of one idea Answer: D 132) A market nicher can most likely specialize along all of the following lines EXCEPT ________. A) specific end users B) unique products C) customized services D) quality-price E) mass marketing Answer: E 133) The market subsegment that a company exclusively caters to may dry up, or it might grow to the point that it attracts larger competitors. This is why such companies practice ________. A) multiple niching B) mass marketing C) overall cost leadership D) low-price strategies E) dumping Answer: A Refer to the scenario below to answer the following question(s). Essential-Beauty is a rapidly growing firm that manufactures women's makeup, perfumes, and nail-care products. The company has established itself as a high-end cosmetic product brand available at most national drug stores. In the past, almost all of the advertising for EssentialBeauty has been in women's fashion magazines. The firm is now launching a new line of skin care products, ranging from facial cleansers to body lotion. These products are designed to be marketed to a broader audience, so the marketing team is exploring the effectiveness of different promotional mixes. 134) Before deciding to launch the new line of products, Essential-Beauty conducted extensive market research to make sure the products were optimally positioned. A complete marketing plan including mobile advertising, magazine advertising, event sponsorship, and sales promotions was established long before the products themselves were ready for market. In this case, Essential-Beauty was using ________. A) cost leadership B) entrepreneurial marketing C) intrepreneurial marketing D) formulated marketing E) operational excellence Answer: D 135) Companies with multiple products or businesses typically choose one marketing strategy for all their different businesses or products. Answer: FALSE 136) Formulated marketing focuses on the entrepreneurial aspects of marketing. Answer: FALSE 137) Entrepreneurial marketing exclusively involves developing formal marketing strategies and adhering to them closely. Answer: FALSE 138) Many large and mature companies get stuck in formulated marketing. They pore over the latest Nielsen numbers, scan market research reports, and try to fine-tune their competitive strategies and programs. Answer: TRUE 139) Gary Hirshberg started the Stonyfield Farm yogurt company. His marketing strategy: building a casual bond with customers using guerilla marketing. This is an example of formulated marketing. Answer: FALSE 140) According to the overall cost leadership competitive strategy, the company works hard to achieve the lowest production and distribution costs. Answer: TRUE 141) Firms competing in a given target market, at any point in time, are similar in their objectives and resources. Answer: FALSE 142) Market challengers can grow by further increasing their market shares. Answer: FALSE 143) Michael Porter suggested four basic competitive positioning strategies that companies can follow, three winning strategies and one losing one. Name and describe these four different strategies. Answer: Overall cost leadership is when the company works hard to achieve the lowest production and distribution costs. Differentiation is when the company concentrates on creating a highly differentiated product line and marketing program so that it comes across as the class leader in the industry. Focus is when the company puts its efforts on serving a few market segments well rather than going after the whole market. Middle-of-the-roaders are firms that do not pursue a clear strategy. These firms do the worst. 144) Name the three value disciplines. Answer: Research indicates that companies can pursue leadership positions by delivering superior value to their customers. There are three possible value disciplines that marketers can follow: operational excellence, customer intimacy, or product leadership. 145) Explain how a market follower can gain advantage from a market leader. Answer: The market leader often bears the huge expenses of developing new products and markets, expanding distribution, and educating the market. By contrast, the market follower can learn from the leader's experience. It can copy or improve on the leader's products and programs, usually with much less investment. 146) Why is niching profitable? Answer: The main reason a market nicher can succeed is that it ends up knowing the target customer group so well that it meets the group's needs better than other firms that casually sell to that niche. As a result, the nicher can charge a substantial markup over costs because of the added value. Whereas the mass marketer achieves high volume, the nicher achieves high margins. 147) Discuss formal and informal marketing strategies and give examples of companies that follow these strategies. Answer: Student answers will vary. Many large firms develop formal competitive marketing strategies and implement them religiously. However, other companies develop strategy in a less formal and orderly fashion. Some companies, such as Harley-Davidson, Virgin Atlantic Airways, and BMW's MINI unit succeed by breaking many of the rules of marketing strategy. Such companies don't operate large marketing departments, conduct expensive marketing research, spell out elaborate competitive strategies, and spend huge sums on advertising. Instead, they sketch out strategies on the fly, stretch their limited resources, live close to their customers, and create more satisfying solutions to customer needs. They form buyer's clubs, use buzz marketing, and focus on winning customer loyalty. It seems that not all marketing must follow in the footsteps of marketing giants such as Nike and P&G. 148) Discuss customer intimacy. Why is it important? Provide an example of a company that successfully abides by this value discipline. Answer: Student answers will vary. A company provides superior value by precisely segmenting its markets and tailoring its products or services to match exactly the needs of targeted customers. It specializes in satisfying unique customer needs through a close relationship with and intimate knowledge of the customer. It builds detailed customer databases for segmenting and targeting, and empowers its marketing people to respond quickly to customer needs. Customer-intimate companies serve customers who are willing to pay a premium to get precisely what they want. They will do almost anything to build long-term customer loyalty and to capture customer lifetime value. Examples include Nordstrom, Lexus, American Express, British Airways, and Ritz-Carlton hotels. 149) Compare and contrast the four competitive positions that are often used to describe market structures. Answer: Determining which competitive marketing strategy makes the most sense depends on the company's industry and on whether it is a market leader, challenger, follower, or nicher. A market leader has to mount strategies to expand the total market, protect market share, and expand market share. A market challenger is a firm that tries aggressively to expand its market share by attacking the leader, other runner-up companies, or smaller firms in the industry. The challenger can select from a variety of direct or indirect attack strategies. A market follower is a runner-up company that chooses not to rock the boat, usually from fear that it stands to lose more than it might gain. But the follower is not without a strategy and seeks to use its particular skills to gain market growth. A market nicher is a smaller firm that is unlikely to attract the attention of larger firms; it often becomes a specialist in some end use, customer size, specific customer, geographic areas, or service. 150) Discuss two ways a market challenger can best attack the chosen competitor and achieve its strategic objectives. Explain when a challenger should use these attacks and provide examples of companies that have used these methods. Answer: Student answers will vary. The market challenger may launch a full frontal attack, matching the competitor's product, advertising, price, and distribution efforts. It attacks the competitor's strengths rather than its weaknesses. The outcome depends on who has the greater strength and endurance. If the market challenger has fewer resources than the competitor, however, a frontal attack makes little sense. Thus, many new market entrants avoid frontal attacks, knowing that the market leaders can head them off with ad blitzes, price wars, and other retaliations. Rather than challenging head-on, the challenger can make an indirect attack on the competitor's weaknesses or on gaps in the competitor's market coverage. It can carve out toeholds using tactics that the established leaders have trouble responding to or choose to ignore. Red Bull is a successful example of an indirect attack. PepsiCo challenges Coca-Cola by launching a full frontal attack. 151) A company can become so ________ centered that it loses its even more important focus on maintaining profitable ________ relationships. A) customer; competitor B) competitor; customer C) market; customer D) market; competitor E) competitor; product Answer: B 152) Which of the following is a positive aspect of a competitor-centered company? A) It carries out its own customer relationship strategy. B) It bases its own moves on competitors' moves. C) It searches out competitors' weaknesses. D) It concentrates its resources on delivering superior value to target customers. E) It ends up seeking innovative ways to create more value for customers. Answer: C 153) Which of the following is a negative aspect of a competitor-centered company? A) It may end up simply matching industry practices. B) It fails to identify competitors' weaknesses. C) It becomes stable and unreactive. D) It fails to notice weaknesses in its own position. E) It fails to develop a fighter orientation. Answer: A 154) A company that focuses on customer developments in designing its marketing strategies and on delivering superior value to its target customers is a ________ company. A) market-centered B) cost-centered C) competitor-centered D) customer-centered E) product-centered Answer: D 155) A company that is in a good position to identify new opportunities is a ________ company. A) market-centered B) cost-centered C) competitor-centered D) product-centered E) customer-centered Answer: E 156) Which of the following does NOT apply to a customer-centered company? A) watching customer needs evolve B) deciding what customer groups are the most important to serve C) matching or extending industry practices D) focusing the resources on delivering superior value to target customers E) setting long-range strategies that make sense Answer: C 157) When companies watch both their buyers and their competitors, they are called ________ companies. A) product-centered B) market-centered C) customer-centered D) competitor-centered E) cost-centered Answer: B 158) Which is NOT one of the four orientations a company may have? A) customer B) product C) competitor D) market E) cost Answer: E 159) A product-oriented company focuses on ________. A) the competitors' products B) the customers' needs C) its own products D) the selling process E) the competitors and the customers Answer: C 160) Greener-grass Inc. is a lawn care company providing landscaping and lawn maintenance services to customers in and around Kansas City. The marketing team at Greener-grass carefully tracks the moves of competing companies, watching for shifting strategies and new promotions. The marketing team is also in constant touch with customers, using surveys and other feedback methods to find out what kind of services customers value the most. Greenergrass is most accurately described as having a ________ orientation. A) market B) product C) customer D) competitor E) leadership Answer: A 161) An advantage of a competitor-centered company is that it ends up simply matching or extending industry practices rather than seeking innovative new ways to create more value for customers. Answer: FALSE 162) A market-centered company most likely has a stronger competitor and customer focus than a customer-centered company. Answer: TRUE 163) What is the primary focus of a competitor-centered company? Answer: A competitor-centered company spends most of its time tracking competitors' moves and market shares and tries to find strategies to counter them. 164) What is the primary focus of a customer-centered company? Answer: A customer-centered company focuses more on customer developments in designing its strategies. By watching customer needs evolve, a customer-centered company can decide what customer groups and what emerging needs are the most important to serve. 165) Discuss the four evolving company orientations. Which orientation is considered most successful and why? Answer: In the first orientation, companies are product oriented, paying little attention to either customers or competitors. In the second orientation, they become customer oriented and start to pay attention to customers. In the third orientation, when they start to pay attention to competitors, they become competitor oriented. Today, companies need to be market oriented, paying balanced attention to both customers and competitors. Rather than simply watching competitors and trying to beat them on current ways of doing business, companies need to watch customers and find innovative ways to build profitable customer relationships by delivering more customer value than competitors do.