CH6

A fragmented industry is composed of a large number of small and medium-sized companies.

TRUE

A leadership strategy aims at growing in a declining industry by picking up the market share of companies that are leaving the industry.

TRUE

By their choices of competitive actions and decisions about product attributes, managers can speed up or slow down the rate of progress of an industry through the stages of the industry life cycle

TRUE

Fragmented industries typically have low barriers to entry.

TRUE

McDonald's created the first national chain of fast-food restaurants in a previously fragmented industry. This is called consolidation.

TRUE

Product proliferation refers to the strategy of filling the niches by catering to the needs of customers in all market segments. a. True b. False

TRUE

Relish Inc. created the first national chain of fast-food restaurants in a previously fragmented industry. This is called divestment

TRUE

Strategic managers at Clear Channel Communications recognized from the beginning that the major way to make small radio stations profitable was to obtain economies of scale.

TRUE

The shakeout strategy of share-increasing is put in place by allocating resources to attract customers from weak companies exiting the market.

TRUE

Through chaining, companies increase their buying power, which allows them to negotiate large price reductions with their suppliers, which in tum promotes their competitive advantage

TRUE

Through chaining, companies increase their buying power, which allows them to negotiate large price reductions with their suppliers, which in turn promotes their competitive advantage.

TRUE

Most embryonic industries arise from a. a technological breakthrough. b. serendipity. c. patents. d. government research. e. university research and development programs.

a. a technological breakthrough.

Alpha corporation owns and controls several retail outlets and is thus pursuing a strategy called franchising.

FALSE

Barnes & Noble owns thousands of retail outlets and is pursuing a strategy called franchising.

FALSE

Because franchisees essentially own their own businesses, they are less motivated to make the companywide business model work and instead pursue strategies that they feel are appropriate for their unique circumstances.

FALSE

Broad cost leadership is the most appropriate generic strategy for a fragmented industry.

FALSE

Reaching the early majority requires successful niche marketing and narrow market segmentation.

FALSE

The franchisor typically owns and funds each of its franchisees.

FALSE

To be successful in a growth industry, it is important to remain focused on the needs of the early adopters of the new product.

FALSE

Customers who have a practical interest in using a new technology in the future and who are willing to experiment and envision new uses for the technology are called a. early adopters. b. the early majority. c. innovators. d. laggards. e. the late majority.

a. early adopters.

There are many real estate offices in most locations. Some of them are small independent firms; some are larger and affiliated with national chains. Thus, the real estate sales industry is a. fragmented. b. vertically integrated. c. homogeneous. d. mature. e. embryonic

a. fragmented.

Successful companies in a mature industry are most interested in a. increasing entry barriers. b. reducing the power of suppliers. c. reducing the threat of substitute products. d. reducing entry barriers. e. reducing the power of buyers.

a. increasing entry barriers.

In deciding on a strategy, a company in a declining industry must do all of the following except a. lower prices. b. manage industry capacity. c. evaluate its strengths relative to the remaining pockets of demand. d. evaluate the severity of decline. e. monitor its cash flow.

a. lower prices.

Firms sometimes pursue a chaining strategy to a. obtain the advantages of cost leadership. b. create product diversity. c. retain current market share. d. spread overhead costs. e. establish a number of unrelated business units.

a. obtain the advantages of cost leadership.

A telecommunications firm is working on the next generation of switching equipment that allows calls to be digitally transmitted from sender to receiver. If the new product will be sold to existing customers, the firm is pursuing a strategy of a. product development. b. market penetration. c. product proliferation. d. market signaling. e. market development

a. product development.

Which of the following customer groups represents the leading wave or edge of the mass market? a. Early adopters b. Early majority c. Innovators d. Late majority e. Laggards

b. Early majority

One strategy used to consolidate fragmented industries is a. vertical mergers. b. chaining. c. product proliferation. d. price signaling. e. nonprice competition

b. chaining.

Franchising is a business-level strategy that allows companies to a. spread overhead and administrative costs over a large number of franchises. b. enjoy the competitive advantages of cost leadership or differentiation. c. hedge the costs of supplies. d. expand beyond their base of support. e. engage in new businesses that were previously beyond reach.

b. enjoy the competitive advantages of cost leadership or differentiation

An embryonic industry is one that a. has not yet been thought of. b. is just beginning to develop. c. has sufficiently developed so that early industry leaders have already been identified. d. has initial government backing because of its importance to the general populace. e. none of these choices.

b. is just beginning to develop.

In embryonic industries, customer demand is typically a. high. b. low. c. growing rapidly. d. variable. e. slowly declining.

b. low.

Which of the following best describes an industry that consists of many small firms? a. Mature b. Growth c. Fragmented d. Declining e. Diverse

c. Fragmented

Which of the following customer groups is not very price sensitive? a. Early adopters b. Early majority c. Innovators d. Early adopters and early majority e. Early adopters, early majority, and innovators

c. Innovators

Competitive intensity in a declining industry is greatest when a. the industry is declining slowly instead of rapidly. b. the product is easy to differentiate. c. exit barriers are high. d. entry barriers are high. e. technology is stable.

c. exit barriers are high.

The first group of customers to enter the market for a new product are called a. early adopters. b. first users. c. innovators. d. adventurers. e. initial customers.

c. innovators.

A horizontal merger is a a. consolidation of small firms from disparate industries. b. consolidation of suppliers in an effort to ensure availability of vital components. c. merger of firms within the same industry. d. conglomerate acquisition. e. violation of antitrust regulations.

c. merger of firms within the same industry.

Which of the following strategies for fragmented industries grants the right to use the parent's name, reputation, and business model in a particular location or area in return for a fee and often a percentage of the profits? a. Chaining b. Horizontal merger c. Vertical merger d. Franchising e. B2B

d. Franchising

Which of the following is not a characteristic of fragmented industries? a. A large number of small competitors b. Low economies of scale c. Many custom-made or specialty firms d. High barriers to entry e. Low consolidation

d. High barriers to entry

In which stage of the industry life cycle do both cost leaders and differentiators adopt a hold-and-maintain strategy to defend their business models and ward off threats from focused companies that might be appearing? a. Late majority b. Growth c. Shakeout d. Mature e. Decline

d. Mature

Which of the following strategies allows interdependent firms indirectly to coordinate their actions? a. Cost cutting b. Vertical integration c. Preemption d. Price signaling e. Horizontal mergers

d. Price signaling

Mature industries are generally characterized by a. low entry barriers. b. few economies of scale. c. high transportation costs. d. a small number of large firms. e. rapidly fluctuating demand.

d. a small number of large firms.

Most market demand and industry profits arise when a. early adopters leave the market. b. innovators become regular users. c. initial users become regular customers. d. early and late majority users enter the market. e. none of these choices.

d. early and late majority users enter the market.

Firms in fragmented industries most often follow which generic strategy? a. Differentiation b. Cost leadership c. Focused low cost d. Stuck in the middle e. Focused differentiation

e. Focused differentiation

Which of the following shakeout strategies requires a company to limit or decrease its investment in a business and to extract, or milk, the investment as much as it can? a. Market concentration strategy b. Share-increasing strategy c. Cost-leadership strategy d. Hold-and-maintain strategy e. Harvest strategy

e. Harvest strategy

Which of the following is not a characteristic of a fragmented industry? a. Low barriers to entry b. Diseconomies of scale c. Constant entry of new competitors d. Very specialized customer needs e. High barriers to exit

e. High barriers to exit

Product proliferation occurs in which stage of the product life cycle? a. Embryonic b. Growth c. Shakeout d. Maintenance e. Maturity

e. Maturity

Which of the following strategies helps companies with high cost structures, allowing them to survive without having to implement strategies to become more productive and efficient? a. Price signaling b. Nonprice competition c. Capacity control d. Market development e. Price leadership

e. Price leadership

At the growth stage of an emergency market, a. ongoing technological progress makes a product easier to use. b. key complementary products are developed. c. companies in the industry find ways to reduce costs. d. demand for the product increases. e. all of these choices.

e. all of these choices.

John, a computer scientist, is willing to pay premium prices to be one of the first to have new versions of software packages. John is in the ____ customer group. a. laggard b. early majority c. early adopter d. late majority e. innovator

e. innovator