CH 3-4

List seven factors that make rivalry among competing sellers weaker.

1. Buyer demand is growing rapidly 2. Buyer costs to switch brands are high. 3. The products of rival sellers are strongly differentiated and customer loyalty is high. 4. Fixed and storage costs are low. 5. Sales are concentrated among a few large sellers. 6. Rivals are similar in size, strength, objectives, strategy and country of origin. 7. Exit barriers are low

List seven factors that make rivalry among competing sellers stronger.

1. Buyer demand is growing slowly or delining 2. Buyer costs to switch brands are low 3. THe products of industry members are commodities or weakly differentiated 4. The firms in the industry have high fixed costs or high storage costs. 5. Competitors are numerous or are of roughly equal size and competitive strength. 6. Rivals have divers objectives, strategies and or countries of origin 7. Rivals face high EXIT barriers

List the most widely encountered barriers to entry.

1. Cost advantages enjoyed by industry incumbents 2. Strong brand preferences and high degrees of customer loyalty. 3. Strong "network effects" in customer demand 4. High capital requirements. 5. The difficulties of building a network of distributors or dealers and securing adequate space on retailers shelves. 6. Restrictive government policies.

8. Which of the following is generally NOT considered a barrier to entry? A. The reaction of incumbent firms to rapid market growth B. High capital requirements and restrictive government policies C. Strong brand preferences and a high degree of customer loyalty D. Cost advantages due to the economies of scale in production enjoyed by incumbent firms E. Strong "network effects" in customer demand

A. The reaction of incumbent firms to rapid market growth

14. In which of the following circumstances are competitive pressures associated with the bargaining power of buyers NOT relatively strong?

A. When buyer demand is growing rapidly

34. Identifying and assessing a company's resource strengths and weaknesses and its external opportunities and threats is called: A. a SWOT analysis. B. a competitive asset/liability analysis. C. a competitive positioning analysis. D. a strategic resource assessment. E. a company resource mapping.

A. a SWOT analysis.

36. When an activity becomes something a company has learned to perform proficiently and capably, it is said to have: A. a competence. B. a competitive advantage over rivals. C. a key value chain proficiency. D. a distinctive capability. E. a resource advantage.

A. a competence.

39. Companies that seize opportunities in the marketplace are usually those that have been: A. actively waiting, staying alert with diligent market reconnaissance and preparing internally to capitalize on potential opportunities. B. the market winners in the past, because they have a proven record and are the best competitively. C. adopting every opportunity for understanding that not all opportunities will be successful and rewarded commensurately. D. first movers willing to accept business risk. E. All of these.

A. actively waiting, staying alert with diligent market reconnaissance and preparing internally to capitalize on potential opportunities.

28. A useful way to identify a company's resources is to view them as: A. divided into two main categories, tangible and intangible. B. every productive input or competitive asset except human assets and intellectual capital, which are considered capabilities or competencies. C. physical resources, such as the company's brand, image, and reputation assets. D. an inventory or a collection of the firm's strengths, weaknesses, opportunities, and threats. E. All of these.

A. divided into two main categories, tangible and intangible.

13. Supplier bargaining power is weaker when: A. good substitutes for supplier products/services exists. B. the cost of switching from one supplier to another is high. C. suppliers furnish a critical part or component. D. buying firms are looking for suppliers with good just-in-time supply capabilities. E. a few large suppliers are the primary sources of a particular item.

A. good substitutes for supplier products/services exists.

19. In analyzing driving forces, the strategist's role is to A. identify the driving forces and evaluate their impact on (1) demand for the industry's product, (2) the intensity of competition, and (3) industry profitability. B. predict future marketing innovations and how fast the industry is likely to globalize. C. evaluate what stage of the life cycle the industry is in and when it is likely to move to the next stage. D. determine who is likely to exit the industry and what changes can be expected in the industry's strategic group map. E. forecast fluctuations in product demand and how buyer needs will most likely change.

A. identify the driving forces and evaluate their impact on (1) demand for the industry's product, (2) the intensity of competition, and (3) industry profitability.

43. The steps of SWOT analysis are: A. identifying the company's resource strengths and weaknesses and its opportunities and threats, drawing conclusions about the company's overall situation, and translating the conclusions into strategic actions to improve the company's strategy. B. pinpointing the company's competitive assets, pinpointing its competitive deficiencies, and determining whether it enjoys a competitive advantage. C. determining whether the company has more competitive assets than competitive liabilities, determining whether the company has good market opportunities, and evaluating the seriousness of the threats to the company's future profitability. D. matching the company's strategy to its resource strengths, correcting the company's important resource weaknesses, and identifying the company's best market opportunities. E. benchmarking the company's strengths and weaknesses against those of key rivals, identifying its market opportunities and the external threats it faces, and determining the company's potential for establishing a competitive advantage over rivals.

A. identifying the company's resource strengths and weaknesses and its opportunities and threats, drawing conclusions about the company's overall situation, and translating the conclusions into strategic actions to improve the company's strategy.

46. With its focus on value-creating activities, the value chain: A. is an ideal tool for examining how a company delivers on its customer value proposition. B. preserves cost structure advantages. C. provides identification of customer differentiation shortfalls. D. is a recognized method for classifying the relevant support activities that are relevant to operations tasks. E. is crucial in understanding cost disadvantages and economies of scale and scope shortfalls.

A. is an ideal tool for examining how a company delivers on its customer value proposition.

15. A competitive environment where there is strong rivalry among sellers, low entry barriers, strong competition from substitute products, and considerable bargaining leverage on the part of both suppliers and customers: A. is competitively unattractive from the standpoint of earning good profits. B. offers little ability to build a sustainable competitive advantage. C. is highly conducive to achieving strong product differentiation and high customer loyalty to the company's brand. D. offers moderate to good prospects for making a reasonable profit and building a sustainable competitive advantage. E. requires that industry members have a strongly differentiated product offering in order to be profitable.

A. is competitively unattractive from the standpoint of earning good profits.

33. A dynamic capability: A. is the ongoing capacity to modify existing resources and capabilities to create new ones. B. is the improvement evaluation process for eliminating waste in the firm. C. is the functional and operating resources management process. D. is the ongoing capability to understand and establish rival commitment to resource alignment. E. All of these.

A. is the ongoing capacity to modify existing resources and capabilities to create new ones.

42. The primary lesson stemming from a SWOT analysis is that a company's strategy should: A. leverage resource strengths, capitalize on market opportunities, overcome important weaknesses, and defend against external threats. B. be aimed at opportunities that offer the best potential for improved profitability. C. seek aggressively to defend against those threats to the company's immediate profitability. D. be designed to place heavy demands on areas where the company has proven competencies to meet the threats head-on. E. concentrate on making the SWOT's four lists relevant for strategic discussion and planning.

A. leverage resource strengths, capitalize on market opportunities, overcome important weaknesses, and defend against external threats.

12. 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. the industry's position in the growth cycle. 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.

9. 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.

20. In identifying an industry's key success factors, strategists should: A. try to single out all factors that play a major role in shaping whether buyer demand grows rapidly or slowly. B. consider on what basis customers choose between competing brands, what resources and competitive capabilities firms need to be competitively successful, and what shortcomings are almost certain to put a company at a significant competitive disadvantage. C. consider whether the number of strategic groups is increasing or decreasing and whether the five competitive forces are powerful or relatively weak. D. consider what it will take to overtake the company with the industry's overall best strategy. E. focus their attention on what it will take to capitalize on the impacts of the industry's driving forces.

B. consider on what basis customers choose between competing brands, what resources and competitive capabilities firms need to be competitively successful, and what shortcomings are almost certain to put a company at a significant competitive disadvantage.

10. The lower the price of product substitutes, the higher their quality and performance and 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 rival sellers experience strong bargaining power from both suppliers and influential customers. E. less rival sellers experience weak bargaining power from both suppliers and influential customers.

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

35. SWOT analysis is a simple but powerful tool for: A. gauging whether a company has a cost-competitive value chain. B. sizing up a company's resources and capabilities, strengths and deficiencies, its market opportunities, and the external threats to its future well-being. C. evaluating whether a company is in the most appropriate strategic group. D. determining a company's competitive strength vis-à-vis close rivals. E. identifying the market segments in which a company is strongly positioned and weakly positioned.

B. sizing up a company's resources and capabilities, strengths and deficiencies, its market opportunities, and the external threats to its future well-being.

21. Identifying the strategic issues a company faces and compiling a "worry list" of problems and roadblocks is an important component of company situation analysis because: A. without a precise fix on what problems/issues a company confronts, managers cannot know what the industry's key success factors are. B. the "worry list" sets the management agenda for taking actions to improve the company's performance and business outlook. C. without a precise fix on what problems/roadblocks a company confronts, managers are less clear about what value chain activities to benchmark. D. the "worry list" helps company managers clarify their thinking about how best to modify the company's value chain. E. these issues and obstacles must be cleared before management can focus clearly on what is the best strategy for the company to pursue.

B. the "worry list" sets the management agenda for taking actions to improve the company's performance and business outlook.

4. 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.

5. 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.

26. A company's resources and capabilities represent: A. the firm's net working capital and related determinants for measuring operating performance and capabilities. B. the firm's competitive assets, which are considered big determinants of its competitiveness and ability to succeed in the marketplace. C. whether the firm has the industry's most efficient value chain. D. management's source of funding of new strategic initiatives. E. All of these.

B. the firm's competitive assets, which are considered big determinants of its competitiveness and ability to succeed in the marketplace.

45. A company's value chain identifies: A. the steps it goes through to convert its net income into value for shareholders. B. the primary activities and related support activities it performs in creating customer value. C. the series of steps it takes to get a product from the raw materials stage into the hands of end users. D. the activities it performs in transforming its competencies into distinctive competencies. E. the competencies and competitive capabilities that underpin its efforts to create value for customers and shareholders.

B. the primary activities and related support activities it performs in creating customer value.

44. One of the most telling signs of whether a company's market position is strong or precarious is: A. whether its product is strongly or weakly differentiated from rivals. B. whether its prices and costs are competitive with those of key rivals. C. whether it has a lower stock price than key rivals. D. the opinions of buyers regarding which seller has the best product quality and customer service. E. whether it is in a bigger or smaller strategic group than its closest rivals.

B. whether its prices and costs are competitive with those of key rivals.

22. Which of the following is NOT part of the task of identifying the strategic issues and problems that merit front-burner managerial attention? A. Analyzing the company's external environment B. Evaluating the company's own resources and competitive position C. Surveying a company's board members, managers, select employees, and key investors regarding what strategic issues they think the company faces D. Developing a "worry list" of "how to...," "whether to...," and "what to do about..." E. Assessing what challenges the company must overcome to be financially and competitively successful in the years ahead

C. Surveying a company's board members, managers, select employees, and key investors regarding what strategic issues they think the company faces

30. Which of the following is a clear representation of a company's capability? A. A company's brand B. A productive input that is owned or controlled by the firm C. The capacity of a firm to perform some activity D. An alliance or collaboration with another firm E. All of these.

C. The capacity of a firm to perform some activity

16. The "driving forces" in an industry: A. are usually triggered by changing technology or stronger learning/experience curve effects. B. usually are spawned by growing demand for the product, the outbreak of price-cutting, and big reductions in entry barriers. C. are major underlying causes of changing industry and competitive conditions and have the biggest influences in reshaping the industry landscape and altering competitive conditions. D. appear when an industry begins to mature but are seldom present during early stages of the industry life cycle. E. are usually triggered by shifting buyer needs and expectations or by the appearance of new substitute products.

C. are major underlying causes of changing industry and competitive conditions and have the biggest influences in reshaping the industry landscape and altering competitive conditions.

38. A company's resource weaknesses can relate to: A. inferior or unproven skills, expertise, or intellectual capital in competitively important parts of the business. B. something that it lacks or does poorly in comparison to rivals. C. deficiencies in competitively important physical, organizational, or intangible assets. D. missing or competitively inferior capabilities in key areas. E. All of these.

C. deficiencies in competitively important physical, organizational, or intangible assets.

41. In order to gain value from the SWOT analysis, it is important that the company address the two most important parts of a SWOT analysis, which are: A. identifying the resource strengths and resource weaknesses. B. understanding the relationship between the strengths, weaknesses, opportunities, and threats and establishing criteria for remedying the company's shortfalls. C. drawing conclusions from the SWOT listings about the company's overall situation and translating these conclusions into strategic actions. D. clarifying the firm's current position and ensuring the SWOT listings are complete. E. establishing a game plan to capitalize on the company's strengths and leverage the weaknesses in light of the available opportunities.

C. drawing conclusions from the SWOT listings about the company's overall situation and translating these conclusions into strategic actions.

11. 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 number of suppliers that each seller/industry member purchases from on average. 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.

C. how aggressively rival industry members are trying to differentiate their products.

47. Identifying the primary activities and support activities that comprise a company's value chain: A. indicates whether a company's resource strengths will ultimately translate into greater value for shareholders. B. reveals whether a company's resource strengths are well-matched to the industry's key success factors. C. is the first step in understanding a company's internal cost structure since each activity in the value chain gives rise to costs. D. is called benchmarking. E. is called resource value analysis.

C. is the first step in understanding a company's internal cost structure since each activity in the value chain gives rise to costs.

29. A company's resource and capability analysis: A. represent its core competencies. B. are the most important parts of the company's value chain. C. signal whether it has the wherewithal to be a strong competitor in the marketplace. D. give it an excellent ability to insulate itself against the impact of the industry's driving forces. E. combine to give it a distinctive competence.

C. signal whether it has the wherewithal to be a strong competitor in the marketplace.

1. 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, socio-cultural 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, socio-cultural forces, technological factors, environmental factors, and legal/regulatory conditions.

24. Which of the following is not an analytical tool for revealing a company's competitiveness and for helping to match the strategy to the company's own particular circumstances? A. Resource and capability analysis B. SWOT analysis C. Value chain analysis D. Bench-pressing analysis E. Competitive strength analysis

D. Bench-pressing analysis

23. Which of the following is NOT accurate as concerns the task of identifying the strategic issues and problems that merit front-burner managerial attention? A. It entails drawing upon the results and conclusions from analyzing the company's external environment. B. It entails drawing on the results and conclusions from evaluating the company's own resources and competitive position. C. It entails developing a "worry list" of "how to...," "whether to...," and "what to do about..." D. Identifying the strategic issues and problems that the company faces is the first thing that company managers need to do before starting to analyze the company's internal and external environment. E. Developing a list of issues and problems that management need to address (and to resolve) should always precede deciding upon a strategy and what actions to take to improve the company's position and prospects.

D. Identifying the strategic issues and problems that the company faces is the first thing that company managers need to do before starting to analyze the company's internal and external environment.

37. The difference between a company competence and a core competence is that: A. a company competence refers to a company's best-executed functional strategy, while a core competence refers to a company's best-executed business strategy. B. a company competence refers to a company's strongest resource, whereas a core competence refers to a company's lowest-cost and most efficiently performed value chain activity. C. a company competence is a competitively relevant activity that a firm performs especially well relative to other internal activities, whereas a core competence is an activity that a company has learned to perform proficiently. D. a company competence represents real proficiency in performing an internal activity, whereas a core competence is a competitively and strategically relevant activity. E. a core competence usually resides in a company's technology and physical assets, whereas a company competence usually resides in a company's human assets and intellectual capital.

D. a company competence represents real proficiency in performing an internal activity, whereas a core competence is a competitively and strategically relevant activity.

27. The difference between a resource and a capability is: A. a resource is a productive input or competitive asset, while a capability is the capacity of the firm to perform some internal activity competently. B. a resource is a reserve supply or back-up supply function, whereas a capability is the ability to manage the resource function. C. a resource is a mechanism used for carrying out some responsibility, while a capability possesses the qualities needed to do a particular thing. D. a resource is the firm's fixed assets, while a capability defines whether the firm is competent to perform some function. E. All of these.

D. a resource is the firm's fixed assets, while a capability defines whether the firm is competent to perform some function.

17. Industry conditions change: A. because of such powerful driving forces as swings in buyer demand, changing interest rates, ups and downs in the economy, and higher/lower entry barriers. B. because of newly emerging industry threats and industry opportunities that alter the composition of the industry's strategic groups. C. because new industry key success factors emerge. D. because important forces are enticing or pressuring certain industry participants (competitors, customers, suppliers) to alter their actions in important ways. E. chiefly because of changes in the barriers to entry and the degree of competition from substitute products.

D. because important forces are enticing or pressuring certain industry participants (competitors, customers, suppliers) to alter their actions in important ways.

18. The task of driving forces analysis is to: A. develop a comprehensive list of all the potential causes of changing industry conditions. B. predict which new driving forces will emerge next. C. determine which one of the five competitive forces is the biggest driver of industry change. D. identify the driving forces, assess whether their impact will make the industry more or less attractive, and determine what strategy changes are needed to prepare for the impacts of the driving forces. E. learn what the industry key success factors are and how they might change in the future.

D. identify the driving forces, assess whether their impact will make the industry more or less attractive, and determine what strategy changes are needed to prepare for the impacts of the driving forces.

40. SWOT analysis: A. provides a measure of the relative strength of resources in the company's value chain in relation to rivals positioning. B. is a tool for benchmarking whether a firm's strategy is closely matched to industry key success factors. C. reveals whether a company is competitively stronger than its closest rivals. D. provides a good overview and conclusions about the company's overall situation. E. identifies the reasons why a company's strategy is or is not working very well.

D. provides a good overview and conclusions about the company's overall situation.

6. Rivalry among competing sellers is generally more intense when: A. there are relatively few industry key success factors and rivals have highly differentiated products. 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.

25. Sluggish performance results relative to rivals are a reliable warning sign that the company has either a weak strategy or poor strategy execution or both. The best way to identify a well-conceived, well-executed strategy is to determine whether the company is experiencing: A. a strengthening of its image and reputation among shareholders. B. a desirable growth rate in new customer acquisition and favorable customer retention efforts for establishing a strong customer experience. C. movement in its operating profit margin, satisfactory returns on investable liquid assets, and elimination of credit access restrictions. D. positive trends with the relevant cultural factors related to buyer's choices and product modifications. E. All of these.

E. All of these.

3. The nature and strength of the competitive forces that prevail in an industry is generally a joint product of: A. competition from rival sellers. B. competition from potential new entrants. C. competition from producers of substitute products. D. competitive pressures stemming from the bargaining power of both suppliers and buyers. E. All of these.

E. All of these.

31. A company's resources can include: A. a skill, specialized expertise, or competitively important capability. B. valuable human assets and intellectual capital. C. an achievement or attribute that puts the company in a position of market advantage. D. competitively valuable alliances or cooperative ventures. E. All of these.

E. All of these.

32. The competitive power of a company resource strength or competitive capability hinges on: A. how hard it is for competitors to copy. B. whether it is rare and something rivals lack. C. whether it is really competitively valuable and has the potential to contribute to a competitive advantage. D. how easily it can be trumped by the substitute resources/capabilities of rivals. E. All of these.

E. All of these.

2. 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

E. Tax policy, fiscal policy, and tariffs providing impetus for anti-trust matters

48. A much-used and potent managerial tool for determining whether a company performs particular functions or activities in a manner that represents "the best practice" when both cost and effectiveness are taken into account is: A. competitive strength analysis. B. activity-based costing. C. resource cost mapping. D. SWOT analysis. E. benchmarking.

E. benchmarking.

7. Rivalry among competing sellers grows in intensity when: A. rivals' products/services are sold at widely varying prices and there are only a few rivals. B. rivals have highly differentiated products and buyer demand is growing rapidly. C. there are so many industry rivals that the impact of any one company's actions is spread thinly across all industry members. D. the products/services of rivals are strongly differentiated and buyers have high switching costs. E. buyer demand is growing slowly or declining and the number of competitors is increasing and they become more equal in size and competitive capability.

E. buyer demand is growing slowly or declining and the number of competitors is increasing and they become more equal in size and competitive capability.