EEE Chapter 5 - Exam 2 Review

What entrepreneurs should understand is that:

each individual force has the potential to affect the ability of any firm to earn profits while competing in the industry or a segment of an industry. The challenge is to find a position within an industry or a segment of an industry in which the probability of the firm being negatively affected by one or more of the five forces is reduced. Additionally, successfully examining an industry yields valuable information to those starting a business.

Because a high level of uncertainty characterizes​ _____ industries, any opportunity that is captured may be​ short-lived. A. declining B. local C. emerging D. multi-domestic E. fragmented

emerging

According to​ IBISWorld, the market for​ e-books is expected to grow at an annual rate of​ ___ percent over the next 5 years. A. 25.3 B. 2.9 C. 1.7 D. 3.7 E. 45.6

3.7

Which one of the following is a question an entrepreneur has to ask before pursuing the idea of starting a​ firm? A. Do I have a​ strategy? B. Are there​ suppliers? C. Is the industry a realistic place for a new venture to​ enter? D. Are there​ shareholders? E. Are there​ stakeholders?

Is the industry a realistic place for a new venture to​ enter?

Access to distribution channels are a relevant factor in which of the five​ forces? A. Bargaining power of suppliers B. Threat of substitutes C. Threat of new entrants D. Rivalry among existing firms E. Bargaining power of buyers

Threat of new entrants

John Banega developed a drug that offers a potential cure for pediatric blindness.​ However, he finds a number of government and legal issues that make it difficult for him to launch his drug company. Which of the following force is he facing in the five forces model of industry​ analysis? A. Bargaining power of suppliers B. Threat of new entrants C. Threat of stakeholders D. Threat of substitutes E. Rivalry among existing firms

Threat of stakeholders

Which of the following is a substitute for​ Coca-Cola, the carbonated​ beverage, as per the five forces​ model? A. Pepsi B. Diet Coke C. RC Cola D. Store-brand cola E. Water

Water

To compete successfully,

a firm needs to understand the industry in which it intends to compete.

Successful competition demands that :

a firm understand its competitors and the actions they may take - both today and in the future.

Environmental trends and business trends

are the two components of "industry trends" that firms should study.

Prior to launching​ Pete's Seafood​ Restaurant, Pete Axthelm found out that the number of seafood suppliers in his market area was small relative to the number of seafood restaurants. Pete concluded that for seafood​ restaurants, the​ _____________ is​ ____________. A. threat of new​ entrants; high B. threat of​ substitutes; high C. intensity of​ rivalry; high D. bargaining power of​ suppliers; high E. bargaining power of​ buyers; high

bargaining power of​ suppliers; high

It is useful for a new venture to think about its position at​ ____ the company level and the product or service level. A. the supplier​ level, B. both C. either D. the stakeholder​ level, E. the customer​ level,

both

The competitive analysis grid

can help a firm see how it stacks up against its competitors, provide ideas for markets to pursue, and perhaps most importantly, identify its primary sources of competitive advantage.

The five forces model helps a firm determine whether it should enter a particular industry and whether it can​ _____________. A. be tenacious despite failure B. effectively execute C. carve out an attractive position in that industry D. keep its​ product/customer focus E. stick to its mission

carve out an attractive position in that industry

​A(n) _________ helps identify a​ firm's primary source of competitive advantage. A. industry analysis B. profit analysis C. promotion analysis D. internal analysis E. competitive analysis grid

competitive analysis grid

The information that is gathered by a firm to learn about its competitors is called​ _______. A. competitive intelligence B. corporate analysis C. internal analysis D. industry analysis E. product analysis

competitive intelligence

Prior to launching his​ Korean-Mexican fusion​ restaurant, Gregory Kim is making a detailed evaluation of the restaurants in his market area. Gregory Kim is doing a​ ____ analysis. A. stakeholder B. stockholder C. industry D. competitor E. resource

competitor

Sun​ Tzu's quote​ "Time spent in reconnaissance is seldom​ wasted" is relevant to​ ______. A. competitor analysis B. corporate analysis C. internal analysis D. budgeting E. promotion

competitor analysis

A(n) _____ industry is an industry or a part of an industry that is experiencing a reduction in demand. A. declining B. fragmented C. emerging D. mature E. nurturing

declining

For Delta​ Airlines, United Airlines is​ a(n) _____ competitor. A. indirect B. direct C. future D. entrepreneurial E. peripheral

direct

There are a number of ways a firm can ethically obtain the information it seeks to have about its competitors;

including attending conferences and trade shows; purchasing competitors' products; studying competitors' websites; setting up Google e-mail alters; reading industry-related books, magazines, and websites; and talking to customers about what motivated them to buy your product as opposed to your competitor's product.

​Coffee, milk,​ tea, and water are​ ______ competitors for​ Coca-Cola. A. peripheral B. not C. indirect D. future E. direct

indirect

An in-depth analysis of​ a(n) _____ helps a firm determine whether the niche or target markets it identified during its feasibility analysis are accessible and which ones represent the best points of entry for the new firm. A. supplier B. population C. industry D. customer E. competitor

industry (Industry analysis is the next step to determine an entry point for the firm.)

Industry analysis

is a business research framework or tool that focuses on an industry's potential. The knowledge gleaned from this analysis helps a firm decide whether to enter an industry and if it can carve out a position in that industry that will provide it a competitive advantage.

A competitor analysis

is a detailed analysis of a firm's competition. It helps a firm understand the position of its major competitors and the opportunities that are available to obtain a competitive advantage in one or more areas.

A competitive analysis grid

is a tool for organizing the information a firm collects about its competitors.

The need to invest​ ____ to gain entrance to an industry is a barrier to entry. A. insignificant amounts of money B. large amounts of money C. moderate amounts of money D. profits E. small amounts of money

large amounts of money

Slow increases in demand are a feature of​ _____ industries. A. fragmented B. global C. declining D. emerging E. mature

mature. This is because there are primarily repeat rather than new customers.

It is useful for a new venture to think about its​ _____ at both the company level and the product or service level. A. revenues B. profits C. sales D. position E. market share

position

Each of the five forces in the five forces model represents a threat to industry​ ______. A. failure B. people C. capital D. profitability E. sales

profitability

The five forces in the five forces model determine the threat to industry​ _______. A. revenues B. services C. stakeholders D. products E. profitability

profitability

If the price of the United States Postal​ Service's express mail gets too​ high, people will increasingly attach documents to​ e-mail messages. This is an example of​ ________. A. bargaining power of suppliers B. intensity of rivalry C. threat of substitutes D. bargaining power of buyers E. threat of new entrants

threat of subsitutes

The parts of Porter's five forces model are:

threat of substitutes, threat of new entrants, rivalry among existing firms, bargaining power of suppliers, and bargaining power of buyers.

The five forces model can be used by a firm to​ _________. A. find out whether it has stakeholders B. find out whether it has customers C. find out whether it has stockholders D. get sales leads E. find out whether it can carve out an attractive position in that industry

find out whether it can carve out an attractive position in that industry

A(n) ____ industry is one that is characterized by a large number of firms of approximately equal size. A. fragmented B. global C. declining D. emerging E. mature

fragmented. Here, market share is divided among many​ firms, none of which is dominant.

An emerging industry is one​ _____________. A. in which a geographic rollout strategy is possible B. in which standard operating procedures have yet to be developed C. which has repeat rather than new customers D. that is characterized by a large number of firms of approximately equal size E. in which sales are in decline

in which standard operating procedures have yet to be developed

Environmental trends

include economic trends, social trends, technological advances, and political and regulatory changes.

Business trends

include other business-related trends that aren't environmental trends but are important to recognize and understand.

The five forces model provides a picture of an industry​ ______. A. "as is" B. in the past C. in the future D. "as was" E. "as will​ be"

"as is"

Firms use the _______________________ to understand an industry's structure.

"five forces model"

There are five primary industry types of entrepreneurial firms consider when choosing the industry in which they will compete. These industry types and the opportunities they offer are:

- emerging industry/first-mover advantage - fragmented industry/consolidation - mature industry/emphasis on service and process innovation - declining industry/leadership, niche, harvest, and divest - global industry/multi-domestic strategy or global strategy

​______ is an opportunity in fragmented industries. A. Consolidation B. Niche C. Harvest D. First-mover advantage E. Process innovation

Consolidation

​_____ competitors are businesses that offer products or services that are identical or highly similar to those of the firm in question. A. Future B. Indirect C. Direct D. Peripheral E. Substitute

Direct

The three groups of competitors a new firm faces are:

Direct competitors, indirect competitors, and future competitors.

​______ occur(s) when​ mass-producing a product results in lower average costs. A. Economies of scale B. Customization C. Economies of scope D. Globalization E. Product differentiation

Economies of scale

Armed with the information it has collected, firms are prepared to consider four industry-related questions that should be examined before deciding to enter an industry. These questions are:

Is the industry a realistic place for a new venture? If we do enter the industry, can our firm do a better job than the industry as a whole in avoiding or diminishing the threats that suppress industry profitability? Is there a unique position in the industry that avoids or diminishes the forces that suppress industry profitability? Is there a superior business model that can be put in place that would be hard for industry incumbents to duplicate?