449 exam 1
drawback of porters 5 forces model?
Managers cannot determine the changing speed of an industry or the rate of innovation.
Which of the following statements about strategy is NOT true?
Operations effectiveness and competitive benchmarking should be treated as strategy
The ________ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.
PESTEL framework
In the smartphone industry, Google is a complementor to Samsung. Which of the following statements best explains why this is true?
Samsung's smartphones increase in value when they are pre-installed with Google's Android system.
While industry forces have been favorable for a long time in the U.S. automotive industry, recent dynamics have lowered the profit potential of competing in thisindustry and thus reduced its attractiveness. The continued success of Tesla Motors inthe industry will depend on other firm and industry factors. Which of the following represents one such factor that directly affects Tesla Motors?
Since suppliers of its key sources are few, the bargaining power of suppliers is high.
________ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.
Strategy
Keeping in mind the five forces in the airline industry, which of the following best explains the situation in the industry?
Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry.
In which of the following situations is the power of suppliers high in an industry?
Suppliers' industry is more concentrated than the industry it sells to.
. The basic law of demand says that all other things being the same, _______________________.
The lower the price of a product, the more of it consumers will purchase
Which of the following statements is NOT true about the five forces in Porter's competitive analysis model?
The stronger the five forces in an industry, the greater the industry's profit potential.
Which of the following scenarios illustrates a firm that has a sustainable competitive advantage?
TrueLink corp was able to hold its market share of 68% in the social networking industry for more than 3 years
Beans Inc. operates in a perfectly competitive agricultural industry. Classica Apparel Inc., in contrast, operates in a monopolistically competitive industry. Keeping this information in mind, which of the following statements is true?
While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so.
which characteristics is present in a perfectly competitive market? a) Firms produce identical or nearly identical products b) Market price is beyond the control of any individual firm c) A firm's demand curve is perfectly horizontal at the market price d) Firms can enter and exit the market very easily
all of the above
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 itsstores for Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, itdecides 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
in an industry the threat of entry is high when
capital requirements are low.
Samsung and Google cooperate as complementors to compete against Apple's strong position in the mobile device industry, while at the same time Samsung and Google are increasingly becoming competitive with one another. This scenario best illustrates theprocess of:
co-opetition
_______ is best described as cooperation by competitors to achieve a strategic objective.
co-opetition
If SA Pharmaceuticals obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other
comparing the return to the return on invested capital obtained by other firms in the industry
A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n) ________
competitive advantage
Underperformance relative to other firms in the same industry or the industry average results in a(n) ________ for a firm.
competitive disadvantage
Exis Inc. and Stelma Inc. are two companies that have been manufacturing typewriters for almost 30 years. Due to the reduced demand for typewriters today, both companies' average return on invested capital is approximately -5 percent. The current industryaverage is 2 percent. In this scenario, Exis Inc. and Stelma Inc. most likely have:
competitive party with each other
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 combineit with the other company's product or service.
complement
which of the following is an implication of low interest rates?
consumer demand will increase
Demand for traditional fast-food providers such as McDonald's, Burger King, and Wendy's has been on a decline in recent years. Consumers have become more health conscious and demand has shifted to alternative restaurants like Subway, Chick-fil-A,and Chipotle. Attempts by McDonald's and Wendy's to steal customers from one another include frequent discounting tactics such as dollar menus. Such competitive actions are indicative of ________
cut-throat competition
when applying all 5forces model the first step ideally should be
defining the relevant industry
In a firm's external environment, ________ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.
demographic trends
which of the following is a feature of a monopolistically competitive industry
differentiated products
Industry effects describe the underlying ________ structure of the industry.
economic
In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because:
entering the aircraft manufacturing industry requires huge capital investments
Pure Food Inc., a multinational company, relies on its media partner Radio Ex to regularly advertise its offers, sales, and new products. Radio Ex is invested in this relationship because it generates most of its revenue from advertising Pure Food'sproducts. In this scenario, Radio Ex is Pure Food Inc.'s ________.
external stakeholder
Which of the following do the sociocultural forces in a firm's external environment best represent?
family size of the firms target market
For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance?
focusing on creating value for customers rather than destroying rivals
Stakeholder strategy is an integrative approach to managing a diverse set of stakeholders effectively in order to ________.
gain and sustain competitive advantage
which of the following is a feature of an oligopolistic industry structure
high entry barriers
Keeping in mind Apple's competitive advantage, which of the following products was introduced by Apple in 2007?
iPhone
in what special situation might the law of demand not hold
if high prices confer prestige
In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry?
if the industry has recently become deregulated
which of the characteristics does not describe a perfectly competitive market
industry level price elasticity is finite
if a firm can sell its product for more than its fixed costs but not for more than its total costs
it will continue to operate int he short run at a loss
economies of scale are cost advantages that accrue for firms with
larger output
The government of Filvia has mandated that the standard minimum wage in the country be increased to $8,000 per year. This has ensured that all firms in the countrypay their employees at least $8,000 per year, which has brought about a higher standardof living for the people of Filvia. Which of the following factors in a firm's general environment does this mandate best indicate?
legal factors
Balmia Ammunition Inc., a firm controlled and managed by the government of Balmia, is the only company that has the license to produce defense arms in the country. Whichof the following industry competitive structures does this best illustrate?
monopoly
In Galvania Republic, the federal government owns and manages all the nuclear power plants. This is because the business would not be profitable if there was more than one supplier in the nuclear power industry. Which of the following industry competitive structures does the scenario best illustrate?
natural monopoly
3T Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all 3T users are free. When a person switches to a 3T network,his or her entire network of family and friends is likely to switch to the same networkto avail the benefit of free calls and messages. In addition, an existing user who gets a new user to register with 3T Inc. is given a free wireless connection. This has helped to keep competition away from 3T. In this scenario, which of the following factors is acting as an entry barrier for 3T Inc.?
network effects
Eon Inc., Electravia Inc., and FC Inc., the three largest firms in the consumer electronics industry, hold close to 85 percent of the industry's market share. Thesecompanies mainly compete against each other by providing unique features in theirproducts rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate?
oligopoly
The telecommunication industry of United Canava is primarily dominated by three large firms, AD Telecom Inc., Mystic Telecom Corp., and Total Talk Inc. Instead ofcutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in?
oligopoly
In which of the following industry competitive structures do selling firms have the lowest pricing power?
perfect competition
When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number ofsellers in the iron ore industry, and iron ore is a highly undifferentiated commodity.Which of the following industry competitive structures does the iron ore industry best illustrate?
perfect competition
which of the following variables does not influence the quantity of product that a firm is able to sell
plant production cost
during periods of high industry growth:
price competition among firms frequently decreases
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
Which of the following is NOT an example of a software company's external stakeholder?
project managers
which of the following cost line items would be a fixed cost
rent
which of the following represents an economic factor in a firms external general environment
stage of the business cycle that the country is in
Derek, a retired CEO, invests capital in a start-up company that creates mobile applications. He mentors the entrepreneur and the employees of the company becausehe wants the company to perform well and survive in the market. Thus, Derek is thestart-up company's ________
stakeholder
A firm's ________ relates to its ability to create value for customers (V) while containing the cost to do so
strategic position
In ________, a firm frames a guiding policy to address the competitive challenge.
strategy formulation
Through ________, a firm puts its guiding policy into practice by employing a set of coherent actions.
strategy implementation
the relative bargaining power of suppliers is high when
suppliers provide products that are differentiated
Cadia Foods Inc. was the first company to start selling energy drinks in its country—a product that gained popularity among diverse groups. Soon, other companies started tosell their own brands of energy drinks, thereby giving Cadia Foods ample competition.In response, Cadia Foods decided to limit its variety of energy drinks to only two. However, it ensured that these two flavors were free of calories and low in cost. With this innovation, Cadia Foods Inc. consistently outperformed its competitors for ten years. In this scenario, Cadia Foods Inc. has maintained a ________ through its
sustainable competitive advantage
First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. Since the new software has differentfeatures and abilities, First Ledger Inc. has had to spend $10,000 on training itsemployees to use it. In this scenario, $10,000 represents First Ledger Inc.'s ________
switching costs
Which of the following forces tends to be more important in determining a firm's performance?
the actions of managers within a firm
what is sunk cost
the cost incurred no matter what the decision is and cannot be avoided
Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services?
the firms can differentiate their product offerings
a firms strategic position is likely to be strong when:
the gap between the value the firm's product generates and the cost to produce it is large.
which of the following best describes marginal cost?
the incremental cost of producing one more unit of output
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 best describes average cost
the per-unit of output cost for a product at a given quantity
Which of the following would not be a characteristic of a good with an elastic demand?
the product has high switching cost
Which of the following statements accurately describes firm effects?
they attribute firm performance to the actions managers take within a chosen industry
The telecom industry in the country of Andalus is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the telecom industry, the:
threat of new entrants is most likely low
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?
threat of substitutes
primary objective of porters 5 forces model is to
understand the profit of different industries
If a firm is producing as efficiently as it knows how, then how will the total cost function slope?
upward
Which of the following features about a buyer indicates that the buyer has high bargaining power?
when the buyer operates in an industry where products are undifferentiated
suppose a factory is producing 100 units and the price of each unit is 10$. if raising the price to 12$ per unit results in a drop in sales of 12 units what is the price elasticity of demand?
.6
Suppose an entrepreneur starts a business earning $2M in revenue in 2009 while at the same time incurring $1.8M in costs. If the entrepreneur's best outside alternative employment opportunity is to earn $300K, what are the firms accounting and economic profits?
200k, -100k
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.
5 forces model
Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers?
Car manufacturers require large-scale production in order to be cost-competitive.
True Cinemas Inc. and Digi Future Inc. are two companies that own and run movie theaters in malls and other commercial areas. While True Cinemas Inc. pursues a cost-leadership strategy, Digi Future Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario?
Digi Future and True Cinemas will not be direct competitors to each other and their customer segments will overlap very little.
