Strategic Ch.3

Competitive pressures stemming from buyer bargaining power tend to be weaker in which of the following circumstances? A. Most consumers vary the brands they choose for their cookware and kitchen gadgets. B. There is a global decline in the demand for CD players. C. The investment banking industry offers highly differentiated products. D. The Internet offers a huge amount of information on a variety of products. E. Heinz owns a metal-can manufacturing subsidiary to cut back on supplier costs.

C. The investment banking industry offers highly differentiated products.

The most powerful and widely used tool for diagnosing the principle competitive pressures in a market is: A. the five forces framework. B. PESTEL. C. the driving forces model. D. strategic group mapping. E. competitor analysis.

A. the five forces framework

The higher the switching costs for industry members, the more it can: A. limit supplier bargaining power. B. enhance supplier bargaining power. C. enhance the quality of parts and components being supplied, and in effect reduce defect rates. D. provide important cost savings for the collaborative supplier-seller relationship. E. limit the supply of products and/or services.

B. enhance supplier bargaining power.

Whether supplier-seller relationships in an industry represent a strong or weak source of competitive pressure is a function of: A. whether the profits of suppliers are relatively high or low. B. the average number of suppliers that each seller/industry member purchases from. C. how aggressively rival industry members are trying to differentiate their products. D. whether demand for supplier products is high and they are in short supply. E. whether the prices of the items being furnished by the suppliers are rising or falling.

D. whether demand for supplier products is high and they are in short supply

Competing companies deploy whatever means necessary to strengthen market position, including all of the following EXCEPT: A. marketing tactics including special sales promotions such as introducing new or improved features or increasing the number of styles to provide greater product selection. B. differentiating their products by offering better performance features than rivals. C. improving innovation to increase product performance and quality. D. making efforts to expand dealer networks. E. reducing distribution capabilities and market presence.

E. reducing distribution capabilities and market presence.

Which of the following is NOT a major question to ask in thinking strategically about industry and competitive conditions in a given industry? A. How many companies in the industry have good track records for revenue growth and profitability? B. What strategic moves are rivals likely to make next? C. What are the industry's key factors for future competitive success? D. Is the outlook for the industry conducive to providing attractive profitability? E. What are the driving forces in the industry, and what impact will these changes have on competitive intensity and industry profitability?

A. How many companies in the industry have good track records for revenue growth and profitability?

Which of the following is NOT one of the five typical sources of competitive pressures? A. The power and influence of industry driving forces B. The bargaining power of suppliers and seller-supplier collaboration C. The threat of new entrants into the market D. The attempts of companies in other industries to win customers over to their own substitute products E. The market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry

A. The power and influence of industry driving forces

Which of the following factors represents the strategically relevant political factors in the macro-environment that will influence the performance of all firms across the board? A. The strength of the federal banking system B. The exogenous forces related to the general environmental demand C. Social factors that could fuel a political agenda and create greater transparency D. Bailouts and energy policies that are industry-specific E. Tax policy, fiscal policy, and tariffs providing impetus for anti-trust matters

A. The strength of the federal banking system

In which of the following circumstances are competitive pressures associated with the bargaining power of buyers NOT relatively strong? A. The supply of soccer balls increases during the World Cup season. B. Consumers can easily compare different smartphones' features over the Internet before buying them. C. Apple designs and manufactures its chip processors rather than buying them from IBM. D. Dairy products are usually standardized and therefore differentiated only by price. E. Buyers tend to delay purchases of expensive goods, such as home entertainment systems, until they are on sale.

A. The supply of soccer balls increases during the World Cup season.

Which of the following conditions acts to weaken buyer bargaining power? A. When buyers are unlikely to integrate backward into the business of sellers B. When buyers purchase the item frequently and are well-informed about sellers' products, prices, and costs C. When the costs incurred by buyers in switching to competing brands or to substitute products are relatively low D. When the products of rival sellers are weakly differentiated and buyers have considerable discretion over whether and when they purchase the product E. When buyers are few in number and/or often purchase in large quantities

A. When buyers are unlikely to integrate backward into the business of sellers

Using the five forces model of competition to determine the character and strength of the competitive forces within a given industry involves: A. building the picture of competition in three steps: (1) identify the different parties involved, along with specific factors that bring about competitive pressures; (2) evaluate how strong the pressures stemming from each of the five forces are (strong, moderate or weak); and (3) determining whether the collective impact of the five competitive forces is conducive to earning attractive profits in the industry. B. building the picture of competition in two steps: (1) determining which rival has the biggest competitive advantage and (2) assessing whether the competitive advantages possessed by various industry members allow most industry members to earn above-average profits. C. evaluating whether competition is being intensified or weakened by the industry's driving forces and key success factors. D. assessing whether the collective impact of all five forces is weak enough to allow industry members to go on the offensive or use a defensive strategy to insulate against fierce competitive pressures. E. gauging the overall strength of competition based on how many industry rivals are operating with a competitive advantage and how many are operating at a competitive disadvantage.

A. building the picture of competition in three steps: (1) identify the different parties involved, along with specific factors that bring about competitive pressures; (2) evaluate how strong the pressures stemming from each of the five forces are (strong, moderate or weak); and (3) determining whether the collective impact of the five competitive forces is conducive to earning attractive profits in the industry.

The competitive pressures from substitute products tend to be stronger when: A. good substitutes are readily available. B. there are fewer number of substitute products. C. substitutes have lower performance features. D. buyers incur high costs in switching to substitutes. E. substitutes are priced above the market.

A. good substitutes are readily available.

Determining how strong the threat of substitutes will be entails: A. identifying the relative price/performance relationship of the substitutes, the switching costs, and the overall buyer demand for the substitute. B. identifying the attractiveness of other industries. C. measuring Coke as a substitute for Pepsi and applying dynamic simulation modeling techniques. D. adopting a substitute product concentration factor to the buyer volume. E. judging whether industry members are capable of self-manufacturing their products.

A. identifying the relative price/performance relationship of the substitutes, the switching costs, and the overall buyer demand for the substitute.

Potential entrants are more likely to be deterred from actually entering an industry when: A. incumbent firms are willing and able to be aggressive in defending their market positions against entry. B. incumbent firms are complacent. C. buyers are not particularly price-sensitive and the industry already contains a dozen or more rivals. D. the relative cost positions of incumbent firms are about the same, such that no one incumbent has a meaningful cost advantage. E. buyer switching costs are moderately low because of strong product differentiation among incumbent firms.

A. incumbent firms are willing and able to be aggressive in defending their market positions against entry.

The intensity of rivalry among competing sellers does NOT depend on whether: A. the industry has more than two strong driving forces and whether the industry has more than two diverse and capable strategic groups. B. competitors are diverse in terms of long-term directions, objectives, strategies, and countries of origin. C. strong companies outside the industry have acquired weak firms in the industry and are launching aggressive moves to transform the acquired companies into strong market contenders. D. one or two rivals have particularly powerful and successful strategies to grow the business, attract and retain buyers, and develop a sustained competitive advantage. E. industry conditions attract industry members to use price cuts or other competitive weapons to boost total sales volume and market share.

A. the industry has more than two strong driving forces and whether the industry has more than two diverse and capable strategic groups.

The bargaining leverage of suppliers is greater when: A. the suppliers' products/services account for a small percentage of industry members' costs. B. industry members incur low costs in switching their purchases from one supplier to another. C. industry members account for a big fraction of supplier's sales. D. there is extensive seller-supplier collaboration. E. the supplier industry is composed of a large number of relatively small suppliers.

A. the suppliers' products/services account for a small percentage of industry members' costs.

Rivalry among competing sellers increases: A. when buyer demand is growing slowly. B. as it becomes more costly for buyers to switch brands. C. as the products of rival sellers become more strongly differentiated. D. when there is underproduction relative to demand.. E. as the number of competitors decreases.

A. when buyer demand is growing slowly.

The strength of competitive pressures that suppliers can exert on industry members is MAINLY a function of: A. whether needed inputs are in short supply and whether suppliers provide differentiated input that enhances performance of the product. B. whether suppliers self-manufacture what they supply or source their items from other manufacturers. C. whether the industry's position in the growth cycle is favorable. D. whether technological change in the businesses of suppliers is rapid or slow. E. whether the needs and expectations of supplier-seller relationships are changing slowly or rapidly.

A. whether needed inputs are in short supply and whether suppliers provide differentiated input that enhances performance of the product.

In which of the following instances are industry members NOT subject to stronger competitive pressures from substitute products? A. The costs to buyers of switching over to the substitutes are low. B. Buyers are dubious about using substitutes. C. The quality and performance of the substitutes is well-matched to what buyers need to meet their requirements. D. Buyer brand loyalty is weak. E. Substitutes are readily available at competitive prices.

B. Buyers are dubious about using substitutes.

Which of the following is NOT a factor that causes buyer bargaining power to be stronger? A. Some buyers are a threat to integrate backward into the business of sellers and become an important competitor. B. Buyers are small and numerous relative to sellers. C. Buyers have considerable discretion over whether and when they purchase the product. D. Buyers purchase the item frequently and are well-informed about sellers' products, prices, and costs. E. The costs incurred by buyers in switching to competing brands or to substitute products are relatively low.

B. Buyers are small and numerous relative to sellers.

Which of the following factors is NOT a relevant consideration in determining the strength of buyer bargaining power? A. The relationship between the buyer market and seller market B. The degree to which the seller is a manufacturer of goods and services in substantial quantities C. The degree to which buyers pose a credible threat to integrate backward into the product market of sellers D. The degree to which buyers are well-informed about a seller's products, prices, and costs E. The degree to which industry goods are standardized and undifferentiated

B. The degree to which the seller is a manufacturer of goods and services in substantial quantities

Factors that cause the rivalry among competing sellers to be weaker include: A. low buyer switching costs. B. low fixed costs or storage costs. C. many industry rivals of roughly equal size and competitive strength. D. weakly differentiated products among rival sellers. E. slow growth in buyer demand.

B. low fixed costs or storage costs.

The lower the user's switching costs, the: A. harder it is for the sellers of attractive substitutes to lure buyers to their offering. B. more intense the competitive pressures posed by substitute products. C. less intense the competitive pressures posed by substitute products. D. greater the bargaining power from both suppliers and influential customers. E. lesser the bargaining power from both suppliers and influential customers.

B. more intense the competitive pressures posed by substitute products.

Not all buyers of an industry's product have equal degrees of bargaining power with sellers, because: A. sellers in an industry provide similar products and generally their cost structures are different because of competitive advantages in their operation. B. some sellers may be less sensitive than others to price, quality, or service differences. C. along the various stages of the value chain sellers are conducive to earning attractive profits. D. the industry is a highly cohesive structure with limited fragmentation and few industry members. E. sellers are large and few in number relative to the number of buyers.

B. some sellers may be less sensitive than others to price, quality, or service differences.

The most powerful of the five competitive forces is USUALLY: A. the competitive pressures that stem from the ready availability of attractively priced substitute products. B. the competitive pressures associated with the market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry. C. the benefits that emerge from close collaboration with suppliers and the competitive pressures that such collaboration creates. D. the competitive pressures associated with the potential entry of new competitors. E. the bargaining power and leverage that large customers are able to exercise.

B. the competitive pressures associated with the market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry.

What makes the marketplace a competitive battlefield is: A. the race of industry members to build strong defenses against the industry's driving forces. B. the constant rivalry of firms to strengthen their standing with buyers and win a competitive edge over rivals. C. the ongoing race among rival sellers to have the highest-quality product. D. the ongoing efforts of industry members to introduce new and improved products/services at a faster rate than their rivals. E. the ongoing race among rivals to achieve the fastest rate of growth in revenues and profits.

B. the constant rivalry of firms to strengthen their standing with buyers and win a competitive edge over rivals.

In analyzing the strength of competition among rival firms, an important consideration is: A. the potential for buyers to exercise strong bargaining power. B. the diversity of competitors in terms of long-term direction, objectives, strategies, and countries of origin. C. the number of firms pursuing differentiation strategies versus the number pursuing low-cost leadership strategies and focus strategies. D. the extent to which some rivals have more than two competitively valuable competencies or capabilities. E. whether the industry is characterized by a strong learning/experience curve and whether the industry is composed of many or few strategic groups.

B. the diversity of competitors in terms of long-term direction, objectives, strategies, and countries of origin.

Whether buyer-seller relationships in an industry represent a strong or weak source of competitive pressure is a function of: A. the speed with which general economic conditions and interest rates are changing. B. the extent to which buyers can exercise enough bargaining power to influence the conditions of sale in their favor and whether strategic partnerships between certain industry members can adversely affect other industry members. C. how many buyers purchase all of their requirements from a single seller versus how many purchase from several sellers. D. the number of buyers versus the number of sellers. E. whether industry members are spending more or less on advertising.

B. the extent to which buyers can exercise enough bargaining power to influence the conditions of sale in their favor and whether strategic partnerships between certain industry members can adversely affect other industry members.

Which of the following is NOT a good example of a substitute product that triggers stronger competitive pressures? A. A salad as a substitute for French fries B. Wireless phones as a substitute for wired telephones C. Coca-Cola as a substitute for Pepsi D. Snowboards as a substitute for snow skis E. Video-on-demand services from a cable TV company as a substitute for going to the movies

C. Coca-Cola as a substitute for Pepsi

Each of the following exemplifies the impact of the macro-environment on a company's strategic opportunities EXCEPT: A. sales of Smirnoff dwindle on account of new laws regulating the sale of liquor. B. consumer confidence in GM rises as its stock price soars. C. Nike considers Adidas its most potent rival in the industry. D. footfalls at the outlets of Pizza Express increase following its drive to go vegan. E. sales of Smooth Fitness Treadmills surge on account of a new feature that monitors users' blood pressure.

C. Nike considers Adidas its most potent rival in the industry.

Which of the following is LIKELY to have the biggest strategy-shaping impact on mobile service providers? A. Coca-Cola launches mobile campaigns for community-connect and awareness. B. Discovery Channel launches a mobile game to promote its Gold Rush TV show. C. T-Mobile US signs a pact with Nokia Networks for greater spectrum support. D. Hugo Boss announces the launch of its fall/winter collection via mobile. E. Apple enters into a pact with PayPal to market its mobile wallet application.

C. T-Mobile US signs a pact with Nokia Networks for greater spectrum support.

Which of the following is part of a company's macro-environment? A. Conditions outside the market B. European culture, values, and lifestyles C. The pace of technological change factors and legal and regulatory conditions D. The industry and competitive environment arena outside the company's operating territory E. The company's resource strengths, resource weaknesses, and competitive capabilities

C. The pace of technological change factors and legal and regulatory conditions

Which of the following factors is NOT a relevant consideration in judging whether buyer bargaining power is relatively strong or relatively weak? A. Whether certain customers offer sellers important market exposure or prestige B. Whether customers are relatively well-informed about sellers' products, prices, and costs C. Whether buyer needs and expectations are changing rapidly or slowly D. Whether sellers' products are highly differentiated, making it troublesome or costly for buyers to switch to competing brands or to substitute products E. Whether buyers pose a major threat to integrate backward into the product market of sellers

C. Whether buyer needs and expectations are changing rapidly or slowly

The rivalry among competing sellers tends to be less intense when: A. industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit sales. B. buyer demand is weak and many sellers have excess capacity and/or inventory. C. industry rivals are not particularly aggressive or active in making fresh moves to improve their market standing and business performance. D. rivals have diverse strategies and objectives and are located in different countries. E. rival sellers have weakly differentiated products.

C. industry rivals are not particularly aggressive or active in making fresh moves to improve their market standing and business performance.

Collaborative relationships between particular sellers and buyers in an industry can represent a source of strong competitive pressure when: A. virtually all buyers have strong brand attachments and are highly brand loyal. B. demand for the product is growing rapidly. C. sales are made to buyer groups with either strong bargaining power or high sensitivity. D. sellers are racing to add the latest and greatest performance features so as to attract the patronage of important or prestigious buyers. E. buyers are very quality conscious.

C. sales are made to buyer groups with either strong bargaining power or high sensitivity.

A company's "macro-environment" refers to: A. the industry and the competitive arena in which the company operates. B. general economic conditions plus the factors driving change in the markets where a company operates. C. the strategically relevant factors outside a company's industry boundaries—economic conditions, political factors, sociocultural forces, technological factors, environmental factors, and legal/regulatory conditions. D. the competitive market environment that exists between a company and its competitors. E. the dominant economic features of a company's industry.

C. the strategically relevant factors outside a company's industry boundaries—economic conditions, political factors, sociocultural forces, technological factors, environmental factors, and legal/regulatory conditions.

When an industry member is a major customer of the supplier, and the relationship (partnership) is unusually effective and mutually advantageous: A. it is rare for such partnerships to have much competitive impact on those industry members not having such partnerships. B. one unfortunate outcome is that it tends to give the supply partners much enhanced bargaining power in their dealings with these industry members. C. there is a strong likelihood such partnerships will put increased competitive pressure on those industry members who lack productive collaborative relationships with their suppliers. D. there is a high likelihood of such partnerships reducing competitive pressures on ALL industry members, provided technological change in the suppliers' business is rapid and the item being supplied is a commodity. E. the usual result is to reduce competitive pressures on all industry members, provided the costs of the items furnished by supply chain partners amount to 50 percent or more of total cost.

C. there is a strong likelihood such partnerships will put increased competitive pressure on those industry members who lack productive collaborative relationships with their suppliers.

Rivalry among competing sellers is generally more intense when: A. there are relatively few industry key success factors. B. the industry's driving forces are strong and rivals have strongly differentiated products. C. barriers to entry are moderately high and the pool of likely entry candidates is small. D. rivals are active in making fresh moves to lower prices, introduce new products, increase promotional efforts and advertising, and otherwise gain sales and market share. E. barriers to entry are high and buyer switching costs are high.

D. rivals are active in making fresh moves to lower prices, introduce new products, increase promotional efforts and advertising, and otherwise gain sales and market share.

The competitive battles among rival sellers striving for better market positions, higher sales and market shares, and competitive advantage, suggest the rivalry force: A. is stronger when firms strive to be low-cost producers than when they use differentiation and focus strategies. B. is often weak when rivals have emotional stakes in business or face high exit barriers. C. is largely unaffected by whether industry conditions tempt rivals to use price cuts or other competitive weapons to boost unit sales. D. tends to intensify when strong companies with sizable financial resources, proven competitive capabilities, and respected brand names hurdle entry barriers looking for growth opportunities and launch aggressive, well-funded moves to transform into strong market contenders. E. is weaker when more firms have weakly differentiated products, buyer demand is growing slowly, and buyers have moderate switching costs.

D. tends to intensify when strong companies with sizable financial resources, proven competitive capabilities, and respected brand names hurdle entry barriers looking for growth opportunities and launch aggressive, well-funded moves to transform into strong market contenders.

Which of the following is NOT one of the principal components of strategic significance in the PESTEL analysis? A. Political factors including the extent to which government intervenes in the economy B. Economic conditions that include the general economic climate and specific factors such as interest rates, inflation rate, and unemployment rate, as well as conditions in the stock and bond markets that can affect consumer confidence C. Sociocultural forces including societal values, attitudes, cultural factors, and lifestyles that impact business D. Technological factors that include the pace of change and technical developments that have the potential for impacting society E. Environmental forces that include the competitive structure, the degree of industry fragmentation, and the mobility barriers that inhibit business

E. Environmental forces that include the competitive structure, the degree of industry fragmentation, and the mobility barriers that inhibit business

Which of the following is generally NOT considered a barrier to entry? A. Restrictive regulatory policies B. High capital requirements C. Strong brand preferences D. Many industry patents in place E. Weak "network effects" in customer demand

E. Weak "network effects" in customer demand

In which of the following instances is rivalry among competing sellers NOT more intense? A. When certain competitors are dissatisfied with their market position and make moves to bolster their standing B. When strong companies outside the industry acquire weak firms in the industry and launch aggressive moves to transform their newly acquired competitors into stronger market contenders C. When competitors are fairly equal in size and capability D. When the products of rivals are weakly differentiated, buyer switching costs are low, and market demand is growing slowly E. When there are vast numbers of small rivals so the impact of any one company's actions is spread thinly across all industry members

E. When there are vast numbers of small rivals so the impact of any one company's actions is spread thinly across all industry members

Buyers are in position to exert strong bargaining power in dealing with sellers when: A. their costs to switch to competing brands or to substitute products are relatively high. B. a particular seller's product delivers quality or performance that is very important to the buyer and is not matched by other brands. C. they buy the product infrequently or in small quantities and are not particularly well-informed about sellers' products, prices, and costs. D. buyer demand is growing rapidly. E. buyers are price-sensitive due to the product representing a significant fraction of their purchases.

E. buyers are price-sensitive due to the product representing a significant fraction of their purchases.

Competitive pressures associated with the threat of entry are greater in all of the following situations, EXCEPT when: A. incumbent firms are willing to strongly contest the entry of newcomers with moves designed to make entry unprofitable. B. a large pool of potential entrants exists, some of which have the capabilities to overcome high entry barriers. C. entry barriers are relatively low and buyer demand for the product is growing rapidly, and newcomers can expect to earn attractive profits without inviting a strong reaction from incumbents. D. existing industry members are looking to expand their market reach by entering product segments or geographic areas where they currently do not have a presence. E. customers have low brand preferences and low degrees of loyalty to seller.

E. customers have low brand preferences and low degrees of loyalty to seller.

Managers must chart a company's strategic course by: A. focusing on the local environment in which they are operating. B. ensuring excess production capacity and/or inventory. C. competing fiercely for a share in the market. D. building a bigger dealer network. E. developing a thorough understanding of the company's external and internal environment.

E. developing a thorough understanding of the company's external and internal environment.

Market maneuvering among industry rivals: A. determines whether the industry's strategic group map will be static or dynamic. B. centers around collaborative efforts to overcome the bargaining power of powerful suppliers and powerful buyers. C. is usually an industry's strongest driving force. D. is usually one of the two or three weakest competitive forces because of the close familiarity that rivals have for one another's likely next moves. E. is ongoing and dynamic, with moves and countermoves of rivals producing a continually evolving competitive landscape that delivers winners and losers.

E. is ongoing and dynamic, with moves and countermoves of rivals producing a continually evolving competitive landscape that delivers winners and losers.

Buyer bargaining power is stronger when: A. winning the business of certain high-profile customers offers a seller important market exposure or prestige. B. the extent and importance of collaborative partnerships and alliances between particular sellers and buyers is credible. C. buyers cannot integrate backward into the product market of sellers. D. sellers' products are differentiated, making it easy and inexpensive for buyers to switch to competing brands. E. the industry's products are standardized or undifferentiated.

E. the industry's products are standardized or undifferentiated.

The competitive pressures on companies within an industry come from all of the following, EXCEPT: A. those associated with the market maneuvering and jockeying for buyer patronage that goes on among rival firms in the industry. B. those companies in other industries attempting to win buyers over to their substitute products. C. those associated with the threat of new entrants into the marketplace. D. those associated with the bargaining power of suppliers and customers. E. those associated with environmental factors such as water shortages.

E. those associated with environmental factors such as water shortages.

The best test of whether potential entry is a strong or weak competitive force is: A. the strength of buyer loyalty to existing brands. B. whether the industry's driving forces make it harder or easier for new entrants to be successful. C. whether the strategies of industry members are well-matched to the industry's key success factors. D. whether there are any vacant spaces on the industry's strategic group map. E. to ask if the industry's growth and profit prospects are strongly attractive to potential entry candidates.

E. to ask if the industry's growth and profit prospects are strongly attractive to potential entry candidates.

Whether buyer bargaining power poses a strong or weak source of competitive pressure on industry members depends in part on: A. the degree to which buyers have any bargaining preferences and the extent to which buyers are price-sensitive. B. how many buyers are engaged in collaborative partnerships with sellers. C. whether entry barriers are high or low and the size of the pool of likely entry candidates. D. whether the overall quality of the items being furnished by industry members is rising or falling. E. whether demand-supply conditions represent a buyer's market or a seller's market.

E. whether demand-supply conditions represent a buyer's market or a seller's market.