Chapter 3

Which of the following are examples of economies of scale?

Having more negotiating power vis-à-vis suppliers Spreading fixed costs over more units

Which statements about the threat of retaliation are true?

Incumbent firms may retaliate in ways that go beyond price competition. The threat of retaliation often acts as a deterrent to entry. New entrants must anticipate how incumbent firms will react to their entry.

Which of the following are characteristics of a perfectly competitive industry?

Individual firms have little or no ability to raise prices. The industry is fragmented. Firms in the industry sell a commodity product.

Which of the following are characteristics of the companies in a strategic group?

The companies pursue similar strategies. The companies differ in important dimensions from companies in other strategic groups. The companies form part of a specific industry.

What is true about the external forces called technological factors?

They capture the application of knowledge to create new process and products.

Sociocultural factors are constantly in flux and also differ across groups.

True

True or false: High exit barriers lead to intense rivalry.

True

Fill in the blank question. Firms within the same strategic group are __________ competitors.

direct

Global warming would be an example of a Blank______ factor in a firm's external environment.

ecological

When companies seek ways to recharge car batteries in a sustainable way, it is an example of ______ factors creating business opportunities.

ecological

According to the PESTEL model, which of the following are kinds of forces that exist in the general external environment?

ecological technological economic

Growth rates, interest rates, and levels of employment would be considered Blank______ factors in a firm's general environment.

economic

Although Blank______ coordination, such as price fixing, is illegal in the United States, Blank______ coordination such as "an unspoken understanding" is not.

explicit; tacit

Which of the following are examples of economic factors in the firm's general environment?

interest rates growth rates price stability

Which of the following is an example of a recent innovation in process technology?

lean manufacturing

Industry-specific factors known as Blank______ separate one strategic group from another.

mobility barriers

The online auction site eBay has more than 100 million active users, so buyers are more likely to find what they are looking for while sellers are more likely to find buyers for the items they are offering. What is this an example of?

network effects

Which of the following are important sources of entry barriers?

network effects economies of scale government policy capital requirements credible threat of retaliation

When firms compete by offering unique product features rather than competing on price, Blank______ occurs.

non-price competition

In order to influence changes in their political environment, firms pursue ______.

nonmarket strategies

Which of the following are employed as nonmarket strategies to influence government bodies?

public relations litigation lobbying

The economic recession that began in 2008 in the United States was the result of unwise investment in Blank______.

real estate

Firms within the same strategic group tend to follow a(n) Blank______ strategy.

similar

Obstacles that determine how easily a firm can enter an industry, are called Blank______.

entry barriers

The obstacles that determine how easily a firm can leave an industry, are called Blank______.

exit barriers

Which of the following are examples of sociocultural factors?

growth of the Hispanic population increased number of health-conscious consumers

Which of the following are examples of commonly encountered capital requirements?

managing a production process paying for start-up losses setting up production facilities

Many firms of all sizes actively compete in the computer hardware industry, and there are no firms with a large market share. Product offerings tend to be similar but are differentiated in ways that enable some firms to raise or impact pricing. The computer hardware industry is an example of Blank______.

monopolistic competition

The cultures, norms, and values of the society in which a firm competes are considered Blank______ factors.

sociocultural

There is a(n) Blank______ relationship between competitive intensity and the power of the five forces.

strong

The Blank______ the forces, the Blank______ the expected competitive intensity, which in turn limits the industry's profit potential.

stronger; stronger

The threat of Blank______ is one of the five forces and can be exemplified by the threat that videoconferencing presents to business travel.

substitutes

When a person that has been using a PC with a Microsoft Windows operating system starts using an Apple computer (which has a different operating system), that person will incur significant customer Blank______.

switching costs

Which of the following are characteristics of a monopolistically competitive industry?

the ability to raise prices for differentiated products a differentiated product obstacles to entry

In the early 2000s, easy credit made real estate the investment of choice in the United States. By the end of the decade, however, a recession had set in, impacting almost all businesses in the country. What does this example show?

Economic boom periods can overheat and lead to speculative bubbles.

Deflation is a serious threat to economic growth for which of the following reasons?

It distorts expectations about the future. It stops companies from investing in new production capacity because they expect a further decline in prices.

In an oligopoly, which of the following conditions exist?

a few large firms high barriers to entry differentiated products

According to Michael Porter, the profit potential of an industry is Blank______.

a function of five forces related to competition

When a firm in an oligopoly cuts prices, Blank______.

a price war is likely to result

In a perfectly competitive industry, firms have difficulty Blank______.

achieving competitive advantage

Which of the following are examples of demographic factors?

age gender sexual orientation

A group of companies that deal with more or less the same set of suppliers and buyers make up ______.

an industry

A key feature of an oligopoly is that the competing firms in the industry Blank______, meaning the actions of any one firm will influence the behaviors of the other firms.

are interdependent

Walmart producing private-label brands, such as Equate health and beauty items and Parent's choice baby products, is an example of ______.

backward integration

When a buyer moves upstream in the industry value chain, into the suppliers' business, ______ occurs.

backward integration

Which of the following are forces in Porter's five forces model?

bargaining power of buyers threat of substitute products or services threat of new entrants

According to Porter's model, which of the following should be considered when analyzing a firm's competition?

buyers suppliers the threat of substitutes

New firms have been established in the airline and telecommunications industries after Blank______.

deregulation

Which of the following are advantages, independent of size, that incumbent firms possess?

cumulative experience effects brand loyalty proprietary technology preferential access to distribution channels

The Blank______ rate determines how many dollars one must pay for a unit of foreign currency.

currency exchange

Through use of the PESTEL model, firms are able to do which of the following?

evaluate external trends monitor external factors

Deregulation of industries leads to intensified competition and higher value at lower prices for consumers. This is an example of ______ factors influencing business.

legal

Which is a negative effect of inflation?

It reduces purchasing power.

Which of the following statements about legal factors as an external force is true?

Regulatory changes tend to affect entire industries at once.

Fill in the blank question. The cost advantages that a firm obtains by increasing output, such as by spreading fixed costs over more units, are called economies of

Scale

When buyers can credibly threaten to backwardly integrate into the industry, the power of buyers is Blank______.

high

When suppliers do not depend heavily on the industry for a large portion of their revenues, the power of suppliers is Blank______.

high

When suppliers offer products that are differentiated, the power of suppliers is Blank______.

high

When there are a few buyers and each buyer purchases large quantities relative to the size of a single seller, the power of buyers is Blank______.

high

The closer firms are on the strategic group map, the more Blank______ they are competing with each other.

intensely directly

The relationship between the natural environment and business organizations can best be described as Blank______.

interdependent

If the US dollar depreciates compared to the euro, it will take Blank______ dollars to buy one euro.

more

One would expect low-cost grocery stores such Safeway and Piggly Wiggly to compete Blank______ with each other than with higher-end grocery stores such as Whole Foods and Trader Joe's.

more intensely

What term describes the positive effect that one user of a product or service has on the value of that product or service for other users?

network effect

Fill in the blank question. When restrictive government policies do not exist or when industries become deregulated, the _______ of entry is high.

threat

The Blank______ is the idea that products or services available from outside the given industry will come close to meeting the needs of current customers.

threat of substitutes

Which of the following conditions lead to a strong threat of substitutes?

when the cost of switching to the substitute is low when the price-performance trade-off is attractive

An industry analysis provides which of the following?

A rigorous way of identifying the industry's profit potential The level of profitability that can be expected for the average firm in the industry Insight into a firm's strategic position within an industry

True or false: The only legal means of retaliation against new entrants is price competition.

False

True or false: The relationship between firms and the natural environment must be adversarial.

False

Advantages based on brand loyalty, proprietary technology, preferential access to raw materials, and favorable geographic locations are examples of Blank______.

advantages independent of size

The most rigorous means of investigating the profit potential within a specific industry is to conduct ______.

an industry analysis

Fill in the blank question. The threat of entry is high when capital requirements are ____ in comparison to the expected returns.

low

The threat of entry is high when capital requirements are _______ in comparison to the expected returns.

low

Along which of the following dimensions do strategic groups differ from one another?

market segments research and development customer service distribution channels

In the airline industry, the Blank______ involved in offering international routes restricts movement between hub-and-spoke and point-to-point airlines.

mobility barrier

A(n) _________ group is a set of companies within a specific industry that seek to achieve competitive advantage in similar ways.

strategic

The five forces of Porter's model include the threat of entry and substitutes, rivalry among existing competitors, and the power of Blank______.

suppliers and buyers

If a business considers changing vendors, but doing so would require that business to alter product specifications, retrain employees, and/or modify existing processes, we would say the business faces significant Blank______.

switching costs

The fact that tax preparation software such as Intuit's TurboTax is a valid alternative for professional services offered by H&R Block and others, is an example of Blank______.

the threat of substitutes