CH 3

85) While implementing strategic group mapping for the U.S. domestic airline industry, two strategic groups become apparent: low-cost, point-to-point airlines (Virgin Atlantic, Alaska Airlines, JetBlue, and Southwest Airlines) versus differentiated airlines using a hub-and-spoke system (American, Delta, and United). Which of the following statements is true about these two strategic groups? A) Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines. B) American, United, and Delta Airlines will be affected differently by Porter's five competitive forces. C) Alaska Airlines and Delta Airlines will be affected by the external environment in very similar ways. D) Competitive rivalry between Virgin Atlantic and Delta Airlines is likely to be higher than that between American, Delta, and United.

A) Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines.

12) Which of the following external forces is a part of a firm's task environment? A) the composition of the strategic group to which the firm belongs B) the interest rates prevalent in the economy in which the firm operates C) the inflation level in the economy in which the firm operates D) the recent innovations in process technology, including lean manufacturing

A) the composition of the strategic group to which the firm belongs

20) In 2008, BlackBerry's market cap peaked at $75 billion. By 2017 this valuation had fallen more than 90 percent, to $3.9 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry's decline? A) BlackBerry failed to offer strong security features for its device. B) BlackBerry failed to change its device into one that could perform multiple tasks effectively. C) BlackBerry failed to adapt to a groundswell that involved workers bringing mobile devices to work. D) BlackBerry failed to produce an efficient emailing system using a keyboard.

B) BlackBerry failed to change its device into one that could perform multiple tasks effectively.

27) The primary objective of Porter's five forces model is to A) understand valuable, rare, and hard-to-imitate resources. B) understand the profit potential of industries. C) reduce the gap between the value of a firm's product and its cost of production. D) break down a firm's value chain activities into primary and support.

B) understand the profit potential of industries.

11) The ________ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment. A) VRIO framework B) SWOT analysis C) BCG matrix D) PESTEL framework

D) PESTEL framework

30) A firm's strategic position is likely to be strong when A) the entry barriers within the industry it operates in are low and the exit barriers are high. B) its suppliers and vendors can easily forward integrate and buyers can backward integrate. C) all the five forces in Porter's model are strong. D) the gap between the value the firm's product generates and the cost to produce it is large.

D) the gap between the value the firm's product generates and the cost to produce it is large.

10) Firms within the same industry automatically belong to the same strategic group.

F

3) A small coffee shop faces significant potential competition because of the low capital requirements compared with business environments such as universities and laboratories.

T

5) Because competitors in oligopolistic industries are so interdependent, it is especially important for managers in those firms to monitor and respond to changes their competitors make.

T

6) A video-streaming service provider such as Netflix is a complement to a manufacturer of streaming video devices such as Roku.

T

7) A company that owns failing movie theaters could leverage existing assets by turning the buildings into performance spaces and conference sites.

T

8) When smartphone manufacturers began including cameras and voice recorders in their products, that was an example of industry convergence.

T

21) How is a firm's task environment different from its general environment? A) Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment. B) Managers have no direct effect over external factors in the task environment; they have some influence over external forces in the general environment. C) Managers have no direct effect over external factors in the task environment; they have influence over all external forces in the general environment. D) Managers have influence over all external factors in the task environment; they have no direct effect over external forces in the general environment.

A) Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.

74) Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines? A) The overall industry profitability will increase. B) The threat of strong competitive forces such as supplier power will increase. C) The industry will face excess capacity in the future. D) The structure of the industry will change from consolidated to one that is fragmented.

A) The overall industry profitability will increase.

44) How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces? A) Threat of new entrants will be low. B) Bargaining power of suppliers will be high. C) Availability of complements will be low. D) Threat of substitute products and services will be high.

A) Threat of new entrants will be low.

78) A strategic group will typically include A) firms within the same industry. B) customers belonging to a particular socioeconomic class. C) firms employing similar number of employees, irrespective of their industries. D) employees within a firm earning the same amount in salary.

A) firms within the same industry.

72) Which of the following is a drawback of Porter's five forces model? A) The model describes competition narrowly as a firm's closest competitors. B) Managers cannot determine the changing speed of an industry or the rate of innovation. C) It fails to provide a basis for deriving implications for a firm's strategic position within an industry. D) The model fails to consider that threat of substitutes can come from outside a given industry.

B) Managers cannot determine the changing speed of an industry or the rate of innovation.

79) Companies in the same strategic group are ________ to each other. A) strategic allies B) direct competitors C) merger partners D) stakeholders or shareholders

B) direct competitors

49) Which of the following fundamental insights was provided by Porter's five forces framework from the completion of the Alta Velocidad Española (AVE)? A) A strong threat of substitutes decreases the rivalry among existing competitors. B) All the five forces must work together to have a meaningful impact. C) Any of the five forces on its own, if sufficiently strong, can extract industry profitability. D) Competition must be defined more narrowly to remain confined to the industry's closest competitors.

C) Any of the five forces on its own, if sufficiently strong, can extract industry profitability.

83) Which of the following statements is true about strategic groups? A) It is not possible to have two different strategic groups within the same industry. B) Rivalry within the same strategic group tends to be lower than rivalry between different strategic groups. C) Profitability varies between different strategic groups. D) Companies within the same strategic group are complementors to each other.

C) Profitability varies between different strategic groups.

81) Addams Coaches Inc. is a bus line with service to several major cities. It has several competitors that each offer service to one or two cities, and based on its current outlays, it cannot match or beat those competitors on price. Because of long-term contracts and an increase in the cost of gasoline, it is not possible to reduce expenditures at this time. Which of these strategies should Addams pursue instead? A) Create a strategic group through mergers. B) Compete based on inter-group rivalry, not intra-group rivalry. C) Pursue a differentiated strategy. D) Close the business until the cost of gas decreases.

C) Pursue a differentiated strategy.

82) Golden Harvest is a restaurant located inside a five-star hotel. It caters mainly to customers who are concerned about quality dining rather than the prices. In this scenario, which of the following will be a part of Golden Harvest's strategic group? A) a nearby fast-food restaurant B) a food kiosk in an adjacent subway station C) a premium rooftop restaurant in the same city D) a mobile food cart parked opposite to the five-star hotel

C) a premium rooftop restaurant in the same city

28) In the five forces model developed by Michael Porter, ________ is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes. A) a stakeholder B) regulation C) competition D) a barrier to entry

C) competition

80) Hammer and Nails, Local Motion, DIY Palace, and Handy Paradise are all hardware stores that compete against each other through everyday low pricing and discounts on bulk purchases. All four stores cater to the needs of highly price-sensitive customers. Thus, together these stores form a A) focus group. B) command group. C) strategic group. D) cross-functional group.

C) strategic group.

48) When fashion magazines face competition from fashion blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger? A) the emergence of entry barriers B) the bargaining power of suppliers C) the availability of complements D) the threat of substitutes

D) the threat of substitutes

1) For-profit businesses operating in long-standing fields such as energy and transportation usually operate in an environment of price stability.

F

2) Sleeprite Mattresses Inc. wants to become the largest and most profitable mattress supplier in a three-state area. To do this, Sleeprite should try to create the smallest possible difference between the value that its mattresses create and the expense that the company must spend to produce the mattresses.

F

4) Federal and regional laws prevent incumbent firms from dramatically lowering prices or otherwise retaliating when a new entrant joins an industry.

F

9) A local manufacturer that wants to be a global manufacturer faces few mobility barriers because it has not yet invested in supply chains, which can become outdated and expensive.

F