strat management tb 3

Which of the following statements is true about strategic groups?

profitability varies between strategic groups

What does a competitive industry structure refer to?

- The number and size of competitors in an industry. • pricing power • differentiated vs. undifferentiated product • The height of entry barriers.

five macroeconomic factors that can affect a firm's strategy

- growth rate - interest rate - levels of employment - price stability (inflation and deflation) - currency exchange rates

high bargaining power of the buyer?

- low product differentiation

Steps in applying five forces model:

1. identify relevant industry 2. identify key players 3. indentify underlying factors of each force 4. assess industry structure 5. draw strategic group map

2 key insights from five forces model

1. important to look at an industry's broad spectrum, not just competition's performance 2. success is not primarily determined by industry factors, but the function of the five forces shapes the competition

which statement regarding industry structures is true?

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

an implication of low interest rates?

Consumer demand will increase.

a drawback of the five forces model?

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

five forces of the airline industry, what best explains the situation?

Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry.

a sociocultural factor in a firm's external environment?

The family size of the firm's target market

Which of the following is most likely an implication of new firms entering an industry?

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

which of the following is an economic factor in a firm's external environment?

The stage of the business cycle that the country is in

relationship between the state of an economy and its level of employment

a boom economy - low unemployment economic downturn - unemployment rises

In regard to any of the five forces that shape competition, it is important to note that their relative strengths are context-dependent. Elaborate on this statement with the help of a real world example.

a company that exists in mexico but sells in the us has different profit margins in the us than in mexico. different markets with different competitors

too much money in an economy will contribute to?

an increase in prices

A key feature of an oligopoly is that the competing firms _____.

are interdependent

Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a supermarket chain. It demands that All Needs create more shelf space in its stores for Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, it decides to produce its own range of cleaning agents with its own label "All Wash." In this scenario, All Needs Inc. has exercised its bargaining power as a buyer through _____.

backward integration

How can a firm change its industry structure from monopolistically competitive or oligopolistic to a near monopoly?

by developing proprietary technology

threat of entry is high when

capital requirements are low

Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers?

car manufactures require large-scale production to be cost-effective

Which of the following is a feature of a monopolistically competitive industry?

differentiated products

final step of industry analysis?

draw a strategic group map

Which of the following is a feature of an oligopolistic industry structure?

high entry barriers

a fragmented industry is turned into a consolidated industry through:

horizontal mergers and acquisitions.

n an industry, the rivalry among existing competitors is high when:

incumbent firms are highly committed to the industry

Which of the following is an implication of high exit barriers in an industry?

industry faces excess capacity

oligopolies are:

interdependent. actions of one influence actions of the others.

drawback of the five-forces model?

it includes only a point-in-time snapshot of a market. It cannot determine changing speed of an industry.

a characteristic of a fragmented industry?

many small firms

3T Inc. ?

network effects

competition in the five forces model is defined by

not the direct competitors, but the power of buyers, suppliers, threat of new entrants, and barriers to entry and exit

Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines?

overall increase in industry profitability

framework allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.

pestel model

during periods of high industry growth

price competition among firms frequently decreases

The relative bargaining power of suppliers is high when:

suppliers provide products that are differentiated

First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. Since the new software has different features and abilities, First Ledger Inc. has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents First Ledger Inc.'s _____.

switching costs

Which of the following external forces is a part of a firm's task environment?

the composition of the strategic group in which the firm belongs

How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces?

threat of new entrants will be low

objective of 5 forces model is to

understand profit potential of different industries

When is the rivalry among existing competitors in an industry likely to be more intense?

when firms make a strategic commitment to compete in an industry

which industry has the lowest pricing power?

when there's perfect competition

The threat of entry describes the risk that potential competitors will enter the industry. Potential new entry depresses industry profit potential in two major ways.

1. threat of entry would force incumbent firms to cut costs, reducing the profit potential of the industry 2. threat of entry would force incumbent firms to differentiate their services, creating additional customer value. Additional costs of these firms also reduced profitability of the industry

Which of the following strategies will be most detrimental to firms that are close rivals operating in an oligopolistic industry structure?

competing through price-cutting

Which of the following is an example of monopolistic competition?

computer hardware industry

When applying the five forces model, the first step should ideally be:

defining the relevant industry

Competitive rivalry based solely on _____ is destructive to firms as it transfers most of the value created in the industry to the customers

price-cutting