CH3 MGMT4200

21) How is a firm's task environment different from its general environment?

A) Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment

68) Mara is a management consultant for a soda manufacturer that wants to expand into health drinks such as green tea and after-workout drinks. Based on what you have read, which of these is sensible advice for Mara to offer her client?

B) "Carefully consider the entry choices over time before making a decision."

31) During an interview for a CEO position, Elena's potential employers ask her, "If you get this job, will you focus more on industry effects or firm effects?" What should her answer be?

B) "Firm effects. I will be able to have the most impact on those."

79) Companies in the same strategic group are ________ to each other.

B) direct competitors

37) Economies of scale are cost advantages that accrue for firms with

C) larger output.

73) Which of the following statements with regard to industry structures is true?

C) A consolidated industry tends to be more profitable than a fragmented one.

11) The ________ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.

D) PESTEL framework

85) While implementing strategic group mapping for the U.S. domestic airline industry, two strategic groups become apparent: low-cost, point-to-point airlines (Virgin Atlantic, Alaska Airlines, JetBlue, and Southwest Airlines) versus differentiated airlines using a hub-and-spoke system (American, Delta, and United). Which of the following statements is true about these two strategic groups?

A) Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines.

33) Etsuro is a management consultant. Baker Corp. asks him to evaluate their company, and he finds that the difference between the cost of producing the firm's products and the value of those products is extremely narrow. What should Etsuro suggest that Baker Corp. management do?

A) Find a way to widen the gap between cost and value.

32) Keeping in mind the five forces in the airline industry, which of the following best explains the difficulty airlines have in generating a profit?

A) Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry.

74) Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines?

A) The overall industry profitability will increase.

59) While Tender Chicken Inc. operates in a monopolistically competitive industry, Future Wireless Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true?

A) The threat of new entrants will be higher for Tender Chicken than for Future Wireless.

75) Years ago, the travel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets, and hotels for their customers. However, with the emergence of the internet, smaller travel agencies started mushrooming in the industry and customers started making their own reservations. Which of the following can be inferred from this information?

A) The travel industry changed from a consolidated structure to a fragmented one.

44) How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces?

A) Threat of new entrants will be low.

43) In an industry, the threat of entry is high when

A) capital requirements are low.

67) 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 the process of

A) co-opetition.

42) 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

A) entering the aircraft manufacturing industry requires huge capital investments.

78) A strategic group will typically include

A) firms within the same industry.

69) Bryan is a manager at a software firm. The CEO tells him that the industry as a whole has become increasingly profitable over the past five years. Based on this information, Bryan is most likely to expect

A) increased competition in the future and therefore he should recommend that the company upgrade its products to slow the entry of rival companies.

77) With the emergence of smartphones, users no longer have to carry a separate music player, a video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone is loaded with a variety of applications to satisfy all the customer needs that different industries or products individually satisfied earlier. As a result, the smartphone industry has been posing a threat to a lot of other unrelated industries. What is this phenomenon best known as?

A) industry convergence

76) Jamie is a manager in an industry that has a few large players and that has remained relatively stable over the past few years. He finds out that legislators are proposing new laws to deregulate the industry. If the laws pass, which of these scenarios will Jamie most likely face?

A) many new competitors

60) Magical Productions is a large production company that controls a major portion of the television industry's market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Magical Productions is most likely functioning in a(n) ________ industry.

A) oligopolistic

63) Competitive rivalry based solely on ________ is destructive to firms as it transfers most of the value created in the industry to the customers.

A) price-cutting

26) A firm's ________ relates to its ability to create value for customers (V) while containing the cost to do so (C).

A) strategic position

12) Which of the following external forces is a part of a firm's task environment?

A) the composition of the strategic group to which the firm belongs

20) In 2008, BlackBerry's market cap peaked at $75 billion. By 2017 this valuation had fallen more than 90 percent, to $3.9 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry's decline?

B) BlackBerry failed to change its device into one that could perform multiple tasks effectively

23) How do low interest rates affect a business?

B) Firms can easily borrow money to finance future growth.

72) Which of the following is a drawback of Porter's five forces model?

B) Managers cannot determine the changing speed of an industry or the rate of innovation

17) Marina manages the supply chain for a company that sells diamond watches. She learns that economists are predicting a moderate to severe recession in the next six to eight months. Based on that information, what action should Marina recommend to the company's owner?

B) Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters.

24) Which of the following is the best characterization of sociocultural forces?

B) a society's culture, norms, and values

18) In a firm's external environment, ________ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.

B) demographic trends

38) Given the structure of the automobile industry, entering the auto manufacturing industry seemed risky. Yet Tesla Motors joined the fray. Rather than attempting to compete head-on with internal combustion engines, Tesla Motors entered the all-electric car segment, a much less crowded niche in the overall car industry. Which of the following is Tesla most hoping to benefit from in this market niche?

B) economies of scale

25) Quick Market Inc. is a food supply company that wants to sell its products directly to consumers through mail order instead of going through supermarkets and other stores. However, supermarket chains want to make this transaction either illegal or more difficult for Quick Market. To accomplish this, they are using ________ to influence the political process.

B) lobbying forces

54) Corner Market Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Corner Market has aggressively used branding, pricing, and superior customer service to uniquely position itself in the market. As a result, the supermarket chain has been able to differentiate itself from its competitors and sell its products at higher prices. Which of the following industry competitive structures does this scenario best illustrate?

B) monopolistic competition

58) Fadia Ammunition Inc., a firm controlled and managed by the government of Fadia, is the only company that has the license to produce defense arms in the country. Which of the following industry competitive structures does this best illustrate?

B) monopoly

55) 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. These companies mainly compete against each other by providing unique features in their products 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?

B) oligopoly

41) National Safety Inc., an insurance firm, replaced its existing project management software with new software from another supplier. Since the new software has different features and abilities, National Safety has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents National Safety's

B) switching cost.

14) Kirsten, a manager, is writing an analysis of her employer's current and possible future revenues. Which of the following could she identify as an economic factor in her firm's external general environment?

B) the stage of the business cycle that the country is in

65) Peerless Inc., a large conglomerate, wants to liquidate its business in certain industries to improve its overall profitability. Which of the following industries would Peerless Inc. find it most difficult to exit?

B) the steel industry in which the company has obligations like severance pay toward employees

34) The internet service provider industry in the country of Megalopolis 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 internet service provider industry, the

B) threat of new entrants is most likely low.

27) The primary objective of Porter's five forces model is to

B) understand the profit potential of industries.

83) Which of the following statements is true about strategic groups?

C) Profitability varies between different strategic groups.

49) Which of the following fundamental insights was provided by Porter's five forces framework from the completion of the Alta Velocidad Española (AVE)?

C) Any of the five forces on its own, if sufficiently strong, can extract industry profitability.

50) Which of the following factors most contributes to the U.S. automotive industry being characterized by high entry barriers?

C) Car manufacturers require large-scale production in order to be cost-competitive.

66) Euan manages product design and development at a toy company. The junior managers who report to him tell him that new complementors for the firm's products are available. What should Euan's reaction be?

C) He needs to find out if his company as well as other companies can provide the complements.

81) Addams Coaches Inc. is a bus line with service to several major cities. It has several competitors that each offer service to one or two cities, and based on its current outlays, it cannot match or beat those competitors on price. Because of long-term contracts and an increase in the cost of gasoline, it is not possible to reduce expenditures at this time. Which of these strategies should Addams pursue instead?

C) Pursue a differentiated strategy.

84) Zoom Zoom Car Rental follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor?

C) Reliable Rental Cars, which follows a low-cost strategy

71) Bethany is a chef who owns three moderately successful restaurants with innovative menus. Based on what you have read, which of these approaches could help her improve her profits?

C) Use her existing knowledge, equipment, and staff to launch a catering business.

82) Golden Harvest is a restaurant located inside a five-star hotel. It caters mainly to customers who are concerned about quality dining rather than the prices. In this scenario, which of the following will be a part of Golden Harvest's strategic group?

C) a premium rooftop restaurant in the same city

28) In the five forces model developed by Michael Porter, ________ 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

C) competition

35) A new company named Far Reach Inc. entered the radio retail business, which is a fairly consolidated industry. In response, two large incumbent radio retailers, Smooth Waves and Clear Signal, lowered the price of their radios. Also, they spent more money to improve their radios and on additional marketing. By doing this, Smooth Waves and Clear Signal

C) decreased industry profit potential.

22) Which of the following is a macroeconomic factor that can affect a firm's strategy?

C) levels of employment

40) Clear Calls Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all Clear Calls users are free. When a person switches to a Clear Calls network, his or her entire network of family and friends is likely to switch to the same network to receive the benefit of free calls and messages. In addition, an existing user who gets a new user to register with Clear Calls Inc. is given a free wireless connection. This has helped to keep competition away from Clear Calls. In this scenario, which of the following factors is acting as an entry barrier for Clear Calls Inc.?

C) network effects

52) Pure Carat Inc. is a company that sells 24-carat gold biscuits to companies that manufacture jewelry. Since the company operates in an industry where many other suppliers sell standardized products, it can most likely

C) only achieve competitive parity.

51) 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 of sellers 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?

C) perfect competition

80) Hammer and Nails, Local Motion, DIY Palace, and Handy Paradise are all hardware stores that compete against each other through everyday low pricing and discounts on bulk purchases. All four stores cater to the needs of highly price-sensitive customers. Thus, together these stores form a

C) strategic group.

64) Due to economic regression in Freedonia, the profitability of the large corporation Happiness Products Inc. (HPI) was poor. An analysis of the company's business showed that the company could become profitable if it divested a few strategic business units under its banner. From which of the following businesses would HPI find it most easy to exit?

C) the e-commerce retail business, where investments on assets are low

19) Anders is researching sociocultural factors related to his employer, a sporting goods manufacturer. Which of the following would be part of the sociocultural forces in a firm's external environment?

C) the family size of the firm's target market

15) Managers at Sandburg Real Estate are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates?

D) Consumer demand will increase.

70) Fran owns Consolidated Auto Parts, a company that got its start making auto parts related for hybrid vehicles, but her firm has had difficulty establishing itself as a maker of parts for the more-profitable internal combustion engine. What is most likely contributing to Consolidated's problem in this area?

D) Entry barriers usually protect the incumbent players in a profitable industry.

56) Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly?

D) In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.

29) Which of the following is a primary feature of the five forces model?

D) It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

39) In which of the following situations is the power of suppliers high in an industry?

D) Suppliers' industry is more concentrated than the industry it sells to.

53) Lu runs a company that manufactures satellites for commercial and government use. It has few rivals. At the moment, the power of buyers, the power of suppliers, and the threat of substitutes are all low. Based on this information, what can Lu conclude?

D) The company is likely to be very profitable as long as the threat to entry is low.

36) Kimba Inc. is a manufacturer of smart watches that track the wearer's heart rate and sleep patterns. Which of the following is most likely an implication of new firms entering this industry?

D) The incumbent firms will spend more to satisfy their existing customers.

16) Luz manages a chain of bars and restaurants in a tri-county area that has recently experienced an economic boom because of fracking and high oil prices. What is most likely to happen when there is too much money in the tri-county economy?

D) an increase in prices

46) 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 its stores for Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, it decides 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

D) backward integration.

62) 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

D) cutthroat competition

45) In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry?

D) if the industry has recently become deregulated

13) The government of Filvia has mandated that the standard minimum wage in the country be increased to $8,000 per year. Which of the following factors in a firm's general environment does this mandate best indicate?

D) legal factors

61) Curry Rush is a premium Asian restaurant chain that differentiates itself from a large number of competitors by providing exclusively organic Vietnamese cuisine. It has some pricing power because it provides differentiated products and therefore, has some entry barriers in place. In this scenario, Curry Rush is most likely operating in a(n)

D) monopolistically competitive industry.

57) Three large firms dominate the telecommunication industry of United Canava: AD Telecom Inc., Mystic Telecom Corp., and Total Talk Inc. Instead of cutting 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?

D) oligopoly

30) A firm's strategic position is likely to be strong when

D) the gap between the value the firm's product generates and the cost to produce it is large.

48) 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?

D) the threat of substitutes

47) Which of the following features about a buyer indicates that the buyer has high bargaining power?

D) when the buyer operates in an industry where products are undifferentiated