MGT 3830 Chapter 3 study material 65

_____ are best described as industry-specific factors that separate one strategic group from another. A. Mobility barriers B. Excise duties C. Embargoes D. Learning effects

A. Mobility barriers

Competitive industry structure refers to elements and features common to A. all industries. B. successful industries. C. new industries. D. incumbent industries.

A. all industries.

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 of salaries.

A. firms within the same industry.

Competitive rivalry based solely on _____ is destructive to firms as it transfers most of the value created in the industry to the customers. A. price-cutting B. new product releases C. promotional campaigns D. product differentiation

A. price-cutting

_____ is best described as cooperation by competitors to achieve a strategic objective. A. Co-opetition B. Conglomeration C. Amalgamation D. Liquidation

A. Co-opetition

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.

In an industry, the threat of entry is high when A. capital requirements are low. B. expected returns are high. C. technological know-how is industry specific. D. switching costs are high.

A. capital requirements are low.

The relative bargaining power of suppliers is high when A. suppliers provide products that are differentiated. B. incumbent firms face low supplier switching costs. C. incumbent firms can credibly threaten to backward integrate into the industry. D. suppliers depend heavily on the industry for a large portion of their revenues.

A. suppliers provide products that are differentiated.

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

Which of the following would most likely not indicate that sellers are a strong competitive force in an industry? A. when the buyers' cost of switching to substitutes is low B. when the products and services they provide can be differentiated C. when the buyers of their products are customers who buy in small quantities D. when the components they supply affect buyers' product quality

A. when the buyers' cost of switching to substitutes is low

How do low interest rates affect a business? A. Firms tend to defer investments. B. Firms can easily borrow money to finance future growth. C. Consumer demand slows down. D. Business credit is harder to obtain.

B. Firms can easily borrow money to finance future growth.

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.

Which of the following is an implication of high exit barriers in an industry? A. The number of underperforming firms in the industry will be low. B. The industry will face excess capacity. C.The competitive pressure among existing firms will be low. D. The industry will be more attractive for new entrants.

B. The industry will face excess capacity.

Which of the following is an example of monopolistic competition? A. iron ore industry B. computer hardware industry C. express delivery industry D. beverages industry

B. computer hardware industry

Buyers are highly price sensitive when A. their purchase represents a small fraction of their procurement budget. B. they earn low profits or are strapped for cash. C. the quality of their products and services are highly affected by the quality of the inputs. D. the industry's products are highly characterized with non-price competition.

B. they earn low profits or are strapped for cash.

Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services? A. The competition in the industry is insignificant. B. The number of buyers in the industry is small. C. The firms can differentiate their product offerings. D. The entry barriers in the industry are extremely high.

C. The firms can differentiate their product offerings.

Which of the following firms will most likely not be a complementor to a firm that manufactures computers? A. a company that develops operating software B. a company that develops application software C. a company that manufactures its own brand of desktops and laptops D. a company that manufactures portable external disks

C. a company that manufactures its own brand of desktops and laptops

Which of the following is an implication of low interest rates? A. Cost of capital for firms will be high. B. Firms will invest less in future growth. C. Economic growth rate will fall. D. Consumer demand will increase.

D. Consumer demand will increase.

In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry? A. if the company is able to put up a credible threat of retaliation B. if the capital requirements in the industry are high C. if the customer switching costs in the industry are high D. if the industry has recently become deregulated

D. if the industry has recently become deregulated

An industry has many firms that compete in it. While products between competitors tend to be similar, they are by no means identical. As a consequence, managers selling a product with unique features tend to have some ability to raise prices. This type of industry is an example of A. oligopoly. B. monopoly. C. perfect competition. D. monopolistic competition.

D. monopolistic competition.

Which of the following statements is not true about the five forces in Porter's competitive analysis model? A. The relative strengths of the five forces that shape competition are context-dependent. B. The stronger the five forces in an industry, the greater the industry's profit potential. C. Competition in the model is described as the tug-of-war between the five forces to capture as much as possible of the economic value created in an industry. D. An analysis of the five forces provides the basis for how a firm should position itself to gain and sustain a competitive advantage.

B. The stronger the five forces in an industry, the greater the industry's profit potential.

Which of the following is a characteristic of a fragmented industry? A. The entry barriers are high. B. There are many small firms. C. Firms tend to have high profitability. D. Firms have substantial pricing power.

B. There are many small firms.

Which of the following is the best characterization of sociocultural forces? A. a firm's culture, norms, and values B. a society's culture, norms, and values C. a competitor's culture, norms, and values D. a focus group's culture, norms, and values

B. a society's culture, norms, and values

In the step-by-step process of industry analysis, identifying the underlying drivers of each force is followed by A. drawing a strategic group map. B. assessing the overall industry structure. C. identifying key players in each of the five forces. D. defining the relevant industry.

B. assessing the overall industry structure.

How can a firm change its industry structure from monopolistically competitive or oligopolistic to a near monopoly? A. by reducing the entry barriers in its industry B. by developing proprietary technology C. by implementing frequent price-cuts D. by decreasing its pricing power

B. by developing proprietary technology

Which of the following statements with regard to industry structures is true? A. They are stable over time, not dynamic. B. Having a large number of competitors generally equates to higher industry profitability. C. A consolidated industry tends to be more profitable than a fragmented one. D. Having few but large competitors increases the threat of strong competitive forces such as supplier or buyer power.

C. A consolidated industry tends to be more profitable than a fragmented one.

Which of the following statements about Porter's five forces model is accurate? A. The potential profit of a company is caused mostly by random factors instead of by industry-specific factors. B. Competition must be defined narrowly to focus on the closest competitors and plan ways increase profit potential. C. Competition must be defined in a broad way to incorporate all of the key factors that influence profit potential. D. The potential profit of a company is caused by two forces: threat of substitutes and rivalry among existing firms.

C. Competition must be defined in a broad way to incorporate all of the key factors that influence profit potential.

Which of the following is an accurate statement about near monopolies? A. Near monopolies are medium-sized firms that have some market power and thereby can influence the industry structure to a certain extent. B. Near monopolies are small firms in an industry that have differentiated products but little or no ability to raise their prices. C. Near monopolies are firms that have accrued significant market power and thereby are changing the industry structure in their favor. D. Near monopolies are a few large firms that dominate an industry and have differentiated products, high barriers to entry, and some degree of pricing power.

C. Near monopolies are firms that have accrued significant market power and thereby are changing the industry structure in their favor.

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

Which of the following is a feature of an oligopolistic industry structure? A. many small sellers B. standardized or undifferentiated products C. limited pricing power D. high entry barriers

D. high entry barriers

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.

Which of the following is a feature of a monopolistically competitive industry? A. differentiated products B. high entry barriers C. no pricing power D. a single firm

A. differentiated products

The final step in industry analysis is to A. draw a strategic-group map. B. identify the underlying drivers of the five forces. C. identify the key players in each of the five forces. D. define the relevant industry.

A. draw a strategic-group map.

Which type of industry structure is often analyzed using game theory? A. oligopolistic B. monopolistic C. perfectly competitive D. monopolistically competitive

A. oligopolistic

During periods of high industry growth A. price competition among firms frequently decreases. B. rivals are focused on taking market share away from one another. C. firms indulge in intense promotional campaigns. D. new product releases with minor modifications become common.

A. price competition among firms frequently decreases.

A firm's _____ relates to its ability to create value for customers (V) while containing the cost to do so (C). A. strategic position B. incumbency C. threat of entry D. attrition rate

A. strategic position

Which of the following strategies will be most detrimental to firms that are close rivals operating in an oligopolistic industry structure? A. competing against each other through product differentiation B. competing against each other through price-cutting C. competing against each other through new-product introductions D. competing against each other through lifestyle advertisements

B. competing against each other through price-cutting

In a firm's external environment, _____ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class. A. political trends B. demographic trends C. ecological trends D. economic trends

B. demographic trends

Companies in the same strategic group are _____ to each other. A. complementors B. direct competitors C. strategic partners D. shareholders

B. direct competitors

Industry convergence is a process whereby A. firms within the same industry start to satisfy different customer needs. B. formerly unrelated industries begin to satisfy the same customer need. C. excess capacity within an industry is reduced through horizontal mergers. D. firms within an industry start to target a narrow market segment.

B. formerly unrelated industries begin to satisfy the same customer need.

What are network effects? A. the positive cost effects that accrue for firms with larger output because they can spread fixed costs over more units B. the positive effect that one user of a product or service has on the value of that product or service for other users C. the positive effect that the high price of the entry ticket has on incumbent industries D. the positive cost effects that standardized commodities have on incumbent industries

B. the positive effect that one user of a product or service has on the value of that product or service for other users

Which of the following represents an economic factor in a firm's external general environment? A. the government regulations and laws in the country in which the firm exists B. the stage of the business cycle that the country is in C. the values and norms prevalent in the society in which the firm operates D. the bargaining power of the firm's suppliers and buyers

B. the stage of the business cycle that the country is in

The primary objective of Porter's five forces model is to A. replace a firm's competitive advantage with competitive parity. B. understand the profit potential of different 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 different industries.

When is the rivalry among existing competitors in an industry likely to be more intense? A. when the industry growth rate is high B. when firms make strategic commitments to compete in an industry C. when firms engage in non-price competition as opposed to price-cutting D. when the industry has low exit barriers

B. when firms make strategic commitments to compete in an industry

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.

What is the rule of thumb behind Porter's five forces model? A. The stronger the five forces, the greater the industry's profit potential—making the industry less attractive. B. The stronger the five forces, the lower the industry's profit potential—making the industry more attractive. C. The weaker the five forces, the greater the industry's profit potential—making the industry more attractive. D. The weaker the five forces, the lower the industry's profit potential—making the industry less attractive.

C. The weaker the five forces, the greater the industry's profit potential—making the industry more attractive.

A key feature of an oligopoly is that the competing firms A. are independent. B. have no pricing power. C. are interdependent. D. have no barriers to entry.

C. are interdependent.

A company is best described as a _____ to an existing company if customers value the existing company's product or service offering more when they are able to combine it with the other company's product or service. A. competitor B. shareholder C. complementor D. strategic equivalent

C. complementor

In the _____ developed by Michael Porter, competition 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. PESTEL framework B. VRIO framework C. five forces model D. value chain analysis

C. five forces model

In an industry, the rivalry among existing competitors is high when A. fixed costs are low and marginal costs are high. B. exit barriers are low. C. incumbent firms are highly committed to the business. D. industry growth is high.

C. incumbent firms are highly committed to the business.

Economies of scale are cost advantages that accrue for firms with A. high fixed costs. B. low employee turnover. C. larger output. D. high capital risks.

C. larger output.

Which of the following is a macroeconomic factor that can affect a firm's strategy? A. power of buyers B. power of suppliers C. levels of employment D. threat of substitutes

C. levels of employment

Which of the following do the sociocultural forces in a firm's external environment best represent? A. the interest rates prevalent in an economy B. the laws protecting small enterprises in a nation C. the family size of the firm's target market D. the rate of employee attrition within the firm

C. the family size of the firm's target market

Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly? A. Sellers in an oligopoly provide highly differentiated products; in monopolistic competition, the products sold are undifferentiated or standardized. B. In an oligopoly, the number of buyers is large; in monopolistic competition, the number of buyers is limited to three or four. C. Firms in an oligopoly have no pricing power; firms in a monopolistically competitive industry have the ability to raise prices. D. In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.

D. In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.

Which of the following is a primary feature of the five forces model? A. It is concerned exclusively about the intensity of rivalry among direct competitors. B. It takes into account a firm's internal resources, capabilities, and core competencies. C. It helps managers determine the changing speed of an industry or the rate of innovation. D. It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

D. It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

In which of the following situations is the power of suppliers high in an industry? A. Suppliers offer products that are undifferentiated. B. Suppliers can credibly threaten to backward integrate into the industry. C. Suppliers depend heavily on the industry for their revenues. D. Suppliers' industry is more concentrated than the industry it sells to.

D. Suppliers' industry is more concentrated than the industry it sells to.

Which of the following is most likely an implication of new firms entering an industry? A. The bargaining power of buyers will reduce. B. The industry's overall profit potential and sales will increase. C. The rivalry among existing competitors will reduce. D. The incumbent firms will spend more to satisfy their existing customers.

D. The incumbent firms will spend more to satisfy their existing customers.

What is most likely to happen when there is too much money in an economy? A. There are too many goods and services. B. There is a drop in interest rates. C. There is high economic growth. D. There is an increase in prices.

D. There is an increase in prices.

When applying the five forces model, the first step should ideally be A. drawing a strategic-group map. B. identify the underlying drivers of each force. C. assessing the overall industry structure. D. defining the relevant industry.

D. defining the relevant industry.

A fragmented industry is made into a consolidated industry through A. governmental deregulation. B. globalization. C. technological innovation and new legislation. D. horizontal mergers and acquisitions.

D. horizontal mergers and acquisitions.

In which of the following industry competitive structures do selling firms have the lowest pricing power? A. monopolistic competition B. monopoly C. oligopoly D. perfect competition

D. perfect competition

Which of the following forces was not originally a part of Michael Porter's fives forces model? A. threat of substitute products or services B. bargaining power of buyers C. rivalry among existing competitors D. strategic role of complements

D. strategic role of complements

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.

Why do companies use strategic group models? A. to reveal product differences between firms in the same industry B. to reveal potential areas of industry convergence between firms in different industries C. to reveal common threads between firms in different industries D. to reveal performance differences between clusters of firms in the same industry

D. to reveal performance differences between clusters of firms in the same industry

Which of the following features about a buyer indicates that the buyer has high bargaining power? A. when the buyer cannot credibly threaten to backwardly integrate into the industry B. when the buyer cannot purchase specific products from other sellers C. when the buyer faces high switching costs D. when the buyer operates in an industry where products are undifferentiated

D. when the buyer operates in an industry where products are undifferentiated