Chapter 3: External Environment (Part Uno)

17. Keeping in mind the five forces in the airline industry, which of the following best explains the situation in the industry? A. Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry. B. Suppliers have weak bargaining power because they offer products that are not differentiated. C. Entry barriers in the industry are high resulting in hardly any new airlines popping up. D. Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry.

A. Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry. According to Strategy Highlight 3.2, the competitive forces are quite unfavorable for generating a profit potential in the airline industry. Substitutes are readily available: If prices are seen as too high, customers can drive their cars or use the train or bus.

While Burger Cult Inc. operates in a monopolistically competitive industry, Citizen Telecom 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 Burger Cult Inc. than Citizen Telecom Inc. B. Burger Cult Inc. will have more pricing power than Citizen Telecom Inc. C. Burger Cult Inc. will have more profit potential than Citizen Telecom Inc. D. The number of buyers will be limited for both Burger Cult Inc. and Citizen Telecom Inc.

A. The threat of new entrants will be higher for Burger Cult Inc. than Citizen Telecom Inc. The threat of new entrants is higher for Burger Cult Inc. than Citizen Telecom Inc. A monopolistically competitive industry is characterized by many firms, a differentiated product, some obstacles to entry, and the ability to raise prices for a relatively unique product while retaining customers. An industry is a monopoly when there is only one (large) firm supplying the market.

26. 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. B. Bargaining power of suppliers will be high. C. Availability of complements will be low. D. Threat of substitute products and services will be high.

A. Threat of new entrants will be low. The threat of entry is low when incumbents possess cumulative learning and experience effects.

25. In an industry, the threat of entry is high when A. capital requirements are low. B. expected returns are high. C. technological know-how is industry specific. D. switching costs are high.

A. capital requirements are low. The threat of entry is high when capital requirements are low in comparison to the expected returns. If an industry is attractive enough, efficient capital markets are likely to provide the necessary funding to enter an industry. Capital, unlike proprietary technology and industry- specific know-how, is a resource that can be relatively easily acquired in the face of attractive returns

39. Which of the following is a feature of a monopolistically competitive industry? A. differentiated products B. high entry barriers C. no pricing power D. a single firm

A. differentiated products A monopolistically competitive industry is characterized by many firms, a differentiated product, some obstacles to entry, and the ability to raise prices for a relatively unique product while retaining customers.

24. 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. B. there is expected to be a huge return on investment within this industry. C. there is no credible threat of retaliation from the incumbents. D. entering the aircraft manufacturing industry means violating government policies.

A. entering the aircraft manufacturing industry requires huge capital investments. There is not a significant threat of entry because entering the aircraft manufacturing industry requires huge capital investments.

Which type of industry structure is often analyzed using game theory? A. oligopolistic B. monopolistic C. perfectly competitive D. monopolistically competitive

A. oligopolistic An oligopolistic industry structure is often analyzed using game theory, which attempts to predict strategic behaviors by assuming that the moves and reactions of competitors can be anticipated.

Rhino Pictures Inc. is a large production company that controls a major portion of the movie 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, Rhino Pictures Inc. is most likely functioning in a(n) _____ industry. A. oligopolistic B. monopolistic C. perfectly competitive D. monopolistically competitive

A. oligopolistic In this scenario, Rhino Pictures Inc. is most likely functioning in an oligopolistic industry. An oligopolistic industry is consolidated with few (large) firms, differentiated products, high barriers to entry, and some degree of pricing power.

11. A firm's _____ relates to its ability to create value for customers (V) while containing the cost to do so (C). A. strategic position B. incumbency C. threat of entry D. attrition rate

A. strategic position A firm's strategic position relates to its ability to create value for customers (V) while containing the cost to do so (C). Competitive advantage flows to the firm that is able to create as large a gap as possible between the value the firm's product or service generates and the cost required to produce it (V C).

28. The relative bargaining power of suppliers is high when A. suppliers provide products that are differentiated. B. incumbent firms face low supplier switching costs. C. incumbent firms can credibly threaten to backward integrate into the industry. D. suppliers depend heavily on the industry for a large portion of their revenues.

A. suppliers provide products that are differentiated. The relative bargaining power of suppliers is high when suppliers offer products that are differentiated and when suppliers do not depend heavily on the industry for a large portion of their revenues.

3. 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 B. the interest rates prevalent in the economy in which the firm operates C. the inflation level in the economy in which the firm operates D. the recent innovations in process technology, including lean manufacturing

A. the composition of the strategic group to which the firm belongs External factors in a firm's task environment are ones that managers do have some influence over, such as the composition of their strategic groups (a set of close rivals) or the structure of the industry.

32. Which of the following would most likely not indicate that sellers are a strong competitive force in an industry? A. when the buyers' cost of switching to substitutes is low B. when the products and services they provide can be differentiated C. when the buyers of their products are customers who buy in small quantities D. when the components they supply affect buyers' product quality

A. when the buyers' cost of switching to substitutes is low The threat of substitutes is high when the substitute offers an attractive price-performance trade-off or when the buyer's cost of switching to the substitute is low.

10. In 2008, BlackBerry's market cap peaked at $75 billion. By 2015 this valuation had fallen more than 90 percent, to less than $7 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry's decline? A. BlackBerry failed to offer strong security features for its device. B. BlackBerry failed to change its device into one that could perform multiple tasks effectively. C. BlackBerry failed to adapt to a groundswell that involved workers bringing mobile devices to work. D. BlackBerry failed to produce an efficient emailing system using a keyboard.

B. BlackBerry failed to change its device into one that could perform multiple tasks effectively. Although BlackBerry devices were great in productivity applications, such as receiving and responding to email via typing on its iconic physical keyboard, they did not provide effective access to texting, surfing the web, taking pictures, or playing games. Because of this, BlackBerry declined because it could not compete with iPhone, which performed multiple tasks effectively.

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? A. monopolistic competition B. oligopoly C. monopoly D. perfect competition

B. Oligopoly This scenario best illustrates an oligopoly. The term oligopoly comes from the Greeks and means "few sellers." An oligopolistic industry is consolidated with few (large) firms, differentiated products, high barriers to entry, and some degree of pricing power. A key feature of an oligopoly is that the competing firms are interdependent. With only a few competitors in the mix, the actions of one firm influence the behaviors of the others.

16. Which of the following statements is not true about the five forces in Porter's competitive analysis model? A. The relative strengths of the five forces that shape competition are context-dependent. B. The stronger the five forces in an industry, the greater the industry's profit potential. C. Competition in the model is described as the tug-of-war between the five forces to capture as much as possible of the economic value created in an industry. D. An analysis of the five forces provides the basis for how a firm should position itself to gain and sustain a competitive advantage.

B. The stronger the five forces in an industry, the greater the industry's profit potential. As a rule of thumb, the stronger the five forces in an industry, the lower the industry's profit potential—making the industry less attractive for competitors. The reverse is also true: the weaker the five forces, the greater the industry's profit potential—making the industry more attractive

35. Which of the following is a characteristic of a fragmented industry? A. The entry barriers are high. B. There are many small firms. C. Firms tend to have high profitability. D. Firms have substantial pricing power.

B. There are many small firms. A fragmented industry consists of many small firms and tends to generate low profitability.

41. Beans Inc. operates in a perfectly competitive agricultural industry. Classica Apparel Inc., in contrast, operates in a monopolistically competitive industry. Keeping this information in mind, which of the following statements is true? A. Beans Inc. will face competition from many sellers, whereas Classica Apparel Inc. will be the only seller in the market. B. While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so. C. Beans Inc. will have many buyers for its products, whereas Classica Apparel Inc. will have very few buyers for its products. D. While Beans Inc. will communicate the degree of product differentiation through advertising, Classica Apparel Inc. will need no advertising.

B. While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so. While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so. A firm competing in a perfectly competitive industry has little or no ability to raise its prices. This is because the commodity product offerings are more or less identical.

Which of the following strategies will be most detrimental to firms that are close rivals operating in an oligopolistic industry structure? A. competing against each other through product differentiation B. competing against each other through price-cutting C. competing against each other through new-product introductions D. competing against each other through lifestyle advertisements

B. competing against each other through price-cutting When one firm in an oligopoly cuts prices to gain market share from its competitor, the competitor typically will respond in kind and also cut prices. This process initiates a price war, which can be especially detrimental to firm performance if the products are close rivals. Therefore, non-price competition is the preferred mode of competition.

40. Which of the following is an example of monopolistic competition? A. iron ore industry B. computer hardware industry C. express delivery industry D. beverages industry

B. computer hardware industry The computer hardware industry provides one example of monopolistic competition. Many firms compete in this industry, and even the largest of them (like Acer, Apple, Dell, HP, or Lenovo) have less than 20 percent market share.

8. In a firm's external environment, _____ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class. A. political trends B. demographic trends C. ecological trends D. economic trends

B. demographic trends Demographic trends are important sociocultural forces. These trends capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.

21. Given the industry structure in the automobile business, entering the auto manufacturing industry doesn't seem advisable. Yet Tesla Motors is joining the fray. Rather than attempting to compete head-on in internal combustion engines, Tesla Motors is entering 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? A. network effects B. economies of scale C. customer switching costs D. capital requirements

B. economies of scale Tesla is hoping to benefit from economies of scale in this market niche. Economies of scale are cost advantages that accrue for firms with larger output because they can spread fixed costs over more units, can employ technology more efficiently, can benefit from a more specialized division of labor, and can demand better terms from their suppliers.

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? A. perfect competition B. monopolistic competition C. monopoly D. oligopoly

B. monopolistic competition This scenario best illustrates a monopolistically competitive structure. A monopolistically competitive industry is characterized by many firms, a differentiated product, some obstacles to entry, and the ability to raise prices for a relatively unique product while retaining customers.

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? A. monopolistic competition B. monopoly C. oligopoly D. perfect competition

B. monopoly This best illustrates a monopoly. An industry is a monopoly when there is only one (large) firm supplying the market.

23. First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. Since the new software has different features and abilities, First Ledger Inc. has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents First Ledger Inc.'s A. opportunity cost. B. switching cost. C. octroi charge. D. excise duty.

B. switching cost. In this scenario, $10,000 represents First Ledger Inc.'s switching cost. Switching costs are incurred by moving from one supplier to another. Changing vendors may require the buyer to alter product specifications, retrain employees, and/or modify existing processes.

5. Which of the following represents an economic factor in a firm's external general environment? A. the government regulations and laws in the country in which the firm exists B. the stage of the business cycle that the country is in C. the values and norms prevalent in the society in which the firm operates D. the bargaining power of the firm's suppliers and buyers

B. the stage of the business cycle that the country is in The overall economic growth rate is a measure of the change in the amount of goods and services produced by a nation's economy. It indicates what stage of the business cycle the economy is in—that is, whether business activity is expanding (boom) or contracting (recession).

31. Buyers are highly price sensitive when A. their purchase represents a small fraction of their procurement budget. B. they earn low profits or are strapped for cash. C. the quality of their products and services are highly affected by the quality of the inputs. D. the industry's products are highly characterized with non-price competition.

B. they earn low profits or are strapped for cash. Companies need to be aware of situations when buyers are especially price sensitive. This is the case when buyers earn low profits or are strapped for cash.

18. The telecom industry in the country of New Taria 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 telecom industry, the A. threat of substitutes is most likely high. B. threat of new entrants is most likely low. C. bargaining power of buyers is most likely low. D. entry barriers are most likely nonexistent.

B. threat of new entrants is most likely low. In this scenario, the threat of new entrants is most likely low. The threat of potential entry is reduced when network effects are present. The threat of entry describes the risk that potential competitors will enter the industry. Entry barriers, which are advantageous for incumbent firms, are obstacles that determine how easily a firm can enter an industry.

12. The primary objective of Porter's five forces model is to A. replace a firm's competitive advantage with competitive parity. B. understand the profit potential of different industries. C. reduce the gap between the value of a firm's product and its cost of production. D. break down a firm's value chain activities into primary and support.

B. understand the profit potential of different industries. Michael Porter developed the highly influential five forces model to help managers understand the profit potential of different industries and how they can position their respective firms to gain and sustain competitive advantage.

52. Which of the following best illustrates a firm operating in a monopolistically competitive industry? A. A foreign exchange company sells currencies of different countries at market prices as it cannot differentiate its products from its competitors. B. A chain of multiplex theaters, along with its competitor, owns 80 percent of the multiplex market share. C. An automobile manufacturer uses branding, pricing, and superior advertising to differentiate itself from a large number of other automobile manufacturers. D. A railway company owned by the government of New Darvland owns 100 percent of the railway transport in the country.

C. An automobile manufacturer uses branding, pricing, and superior advertising to differentiate itself from a large number of other automobile manufacturers. A monopolistically competitive industry is best illustrated by an automobile manufacturer that uses branding, pricing, and superior advertising to differentiate itself from a large number of other automobile manufacturers. A monopolistically competitive industry is characterized by many firms, a differentiated product, some obstacles to entry, and the ability to raise prices for a relatively unique product while retaining customers.

34. Which of the following fundamental insights was provided by Porter's five forces framework from the completion of the Alta Velocidad Española (AVE) in 2008? A. A strong threat of substitutes decreases the rivalry among existing competitors. B. All the five forces must work together to have a meaningful impact. C. Any of the five forces on its own, if sufficiently strong, can extract industry profitability. D. Competition must be defined more narrowly to remain confined to the industry's closest competitors

C. Any of the five forces on its own, if sufficiently strong, can extract industry profitability. The AVE example highlights the two fundamental insights provided by Porter's five forces framework. First, competition must be defined more broadly to go beyond direct industry competitors. Second, any of the five forces on its own, if sufficiently strong, can extract industry profitability.

1. Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers? A. New auto companies create electric cars powered by simpler motors and gearboxes. B. New entrants in the automotive industry expect that incumbents will not or cannot retaliate. C. Car manufacturers require large-scale production in order to be cost-competitive. D. Few industrial products are as easy to build as cars powered by internal combustion engines

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

Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services? A. The competition in the industry is insignificant. B. The number of buyers in the industry is small. C. The firms can differentiate their product offerings. D. The entry barriers in the industry are extremely high.

C. The firms can differentiate their product offerings. In a monopolistically competitive industry, managers selling a product with unique features tend to have some ability to raise prices. When a firm is able to differentiate its product or service offerings, it carves out a niche in the market in which it has some degree of monopoly power over pricing, thus the name "monopolistic competition."

A key feature of an oligopoly is that the competing firms A. are independent. B. have no pricing power. C. are interdependent. D. have no barriers to entry.

C. are interdependent A key feature of an oligopoly is that the competing firms are interdependent. With only a few competitors in the mix, the actions of one firm influence the behaviors of the others.

13. In the _____ developed by Michael Porter, competition 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. A. PESTEL framework B. VRIO framework C. five forces model D. value chain analysis

C. five forces model In Porter's five forces model, competition is not defined narrowly as a firm's closest competitors but rather more broadly to include other forces in an industry: buyers, suppliers, potential new entry of other firms, and the threat of substitutes.

20. Economies of scale are cost advantages that accrue for firms with A. high fixed costs. B. low employee turnover. C. larger output. D. high capital risks.

C. larger output. Economies of scale are cost advantages that accrue for firms with larger output because they can spread fixed costs over more units, can employ technology more efficiently, can benefit from a more specialized division of labor, and can demand better terms from their suppliers.

22. 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 avail 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.? A. economies of scale B. high capital requirement C. network effects D. high fixed costs

C. network effects In this scenario, network effects are acting as an entry barrier for Clear Calls Inc. Network effects describe the positive effect (externality) that one user of a product or service has on the value of that product or service for other users. When network effects are present, the value of the product or service increases with the number of users.

37. 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 A. easily achieve a temporary competitive advantage. B. easily achieve a sustainable competitive advantage. C. only achieve competitive parity. D. maintain its absolute advantage for long time.

C. only achieve competitive parity. Since the company operates in an industry where many other suppliers sell standardized products, it can most likely only achieve competitive parity. Firms in perfect competition have difficulty achieving even a temporary competitive advantage and can achieve only competitive parity.

36. 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? A. monopoly B. oligopoly C. perfect competition D. monopolistic competition

C. perfect competition The iron ore industry best illustrates a perfect competition. A perfectly competitive industry is characterized as fragmented and has many small firms, a commodity product, ease of entry, and little or no ability for each individual firm to raise its prices.

9. Which of the following do the sociocultural forces in a firm's external environment best represent? A. the interest rates prevalent in an economy B. the laws protecting small enterprises in a nation C. the family size of the firm's target market D. the rate of employee attrition within the firm

C. the family size of the firm's target market Sociocultural factors capture a society's cultures, norms, and values. Demographic trends are also important sociocultural forces. These trends capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.

6. Which of the following is an implication of low interest rates? A. Cost of capital for firms will be high. B. Firms will invest less in future growth. C. Economic growth rate will fall. D. Consumer demand will increase.

D. Consumer demand will increase. Low interest rates have a direct bearing on consumer demand. When credit is cheap (because interest rates are low), consumers buy homes, automobiles, computers, and even vacations on credit; in turn, all of this demand fuels economic growth. During periods of low interest rates, firms can easily borrow money to finance future growth. Borrowing at lower rates lowers the cost of capital and enhances a firm's competitiveness.

Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly? A. Sellers in an oligopoly provide highly differentiated products; in monopolistic competition, the products sold are undifferentiated or standardized. B. In an oligopoly, the number of buyers is large; in monopolistic competition, the number of buyers is limited to three or four. C. Firms in an oligopoly have no pricing power; firms in a monopolistically competitive industry have the ability to raise prices. D. In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.

D. In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other. A monopolistically competitive industry has many firms competing against each other, and an oligopolistic industry is consolidated with few (large) firms.

14. Which of the following is a primary feature of the five forces model? A. It is concerned exclusively about the intensity of rivalry among direct competitors. B. It takes into account a firm's internal resources, capabilities, and core competencies. C. It helps managers determine the changing speed of an industry or the rate of innovation. D. It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

D. It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes. In Porter's five forces model, competition is not defined narrowly as the firm's closest competitors, but rather more broadly to include other forces in an industry: buyers, suppliers, potential new entry of other firms, and the threat of substitutes.

2. The _____ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment. A. VRIO framework B. SWOT analysis C. BCG matrix D. PESTEL framework

D. PESTEL framework The PESTEL framework allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.

19. Which of the following is most likely an implication of new firms entering an industry? A. The bargaining power of buyers will reduce. B. The industry's overall profit potential and sales will increase. C. The rivalry among existing competitors will reduce. D. The incumbent firms will spend more to satisfy their existing customers.

D. The incumbent firms will spend more to satisfy their existing The threat of entry by additional competitors may force incumbent firms to spend more to satisfy their existing customers. Larger investments in value creation further reduce an industry's profit potential if prices cannot be raised.

7. What is most likely to happen when there is too much money in an economy? A. There are too many goods and services. B. There is a drop in interest rates. C. There is high economic growth. D. There is an increase in prices.

D. There is an increase in prices. Too much money in an economy is characterized by rising prices—inflation. Inflation tends to go along with higher interest rates and lower economic growth.

29. 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 A. forward integration. B. product differentiation. C. crowdsourcing. D. backward integration.

D. backward integration. In this scenario, All Needs Inc. has exercised its bargaining power as a buyer through backward integration. Buyers are powerful when they can credibly threaten backward integration. Backward integration occurs when a buyer moves upstream in the industry value chain, into the seller's business.

Which of the following is a feature of an oligopolistic industry structure? A. many small sellers B. standardized or undifferentiated products C. limited pricing power D. high entry barriers

D. high entry barriers An oligopoly has a few large firms, differentiated products, and high entry barriers.

27. In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry? A. if the company is able to put up a credible threat of retaliation B. if the capital requirements in the industry are high C. if the customer switching costs in the industry are high D. if the industry has recently become deregulated

D. if the industry has recently become deregulated A company will most likely face the highest threat of entry if the telecommunications industry has recently become deregulated.

4. The government of Filvia has mandated that the standard minimum wage in the country be increased to $8,000 per year. This has ensured that all firms in the country pay their employees at least $8,000 per year, which has brought about a higher standard of living for the people of Filvia. Which of the following factors in a firm's general environment does this mandate best indicate? A. ecological factors B. sociocultural factors C. technological factors D. legal factors

D. legal factors This mandate best indicates legal factors in a firm's general environment. The legal environment captures the official outcomes of political processes as manifested in laws, mandates, regulations, and court decisions—all of which can have a direct bearing on a firm's profit potential.

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) A. oligopoly. B. monopoly. C. perfectly competitive industry. D. monopolistically competitive industry.

D. monopolistically competitive industry. In this scenario, Curry Rush is most likely operating in a monopolistically competitive industry. A monopolistically competitive industry is characterized by many firms, a differentiated product, some obstacles to entry, and the ability to raise prices for a relatively unique product while retaining customers.

The telecommunication industry of United Canava is primarily dominated by three large firms: 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? A. monopoly B. perfect competition C. monopolistic competition D. oligopoly

D. oligopoly These companies are most likely in an oligopolistic industry, which is consolidated with few (large) firms, differentiated products, high barriers to entry, and some degree of pricing power. In oligopoly, non-price competition is the preferred mode of competition.

38. In which of the following industry competitive structures do selling firms have the lowest pricing power? A. monopolistic competition B. monopoly C. oligopoly D. perfect competition

D. perfect competition A firm competing in perfectly competitive industry has little or no ability to raise its prices. This is because the commodity product offerings are more or less identical.

15. A firm's strategic position is likely to be strong when A. the entry barriers within the industry it operates in are low and the exit barriers are high. B. its suppliers and vendors can easily forward integrate and buyers can backward integrate. C. all the five forces in Porter's model are strong. D. the gap between the value the firm's product generates and the cost to produce it is large.

D. the gap between the value the firm's product generates and the cost to produce it is large. A firm's strategic position relates to its ability to create value for customers (V) while containing the cost to do so (C). Competitive advantage flows to the firm that is able to create as large a gap as possible between the value the firm's product or service generates and the cost required

33. 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? A. the emergence of entry barriers B. the bargaining power of suppliers C. the availability of complements D. the threat of substitutes

D. the threat of substitutes When fashion magazines face competition from fashion blogs on the web, the threat of substitutes gets stronger. The threat of substitutes is the idea that products or services available from outside the given industry will come close to meeting the needs of current customers. The threat of substitutes is high when the substitute offers an attractive price-performance trade-off or when the buyer's cost of switching to the substitute is low.

30. Which of the following features about a buyer indicates that the buyer has high bargaining power? A. when the buyer cannot credibly threaten to backwardly integrate into the industry B. when the buyer cannot purchase specific products from other sellers C. when the buyer faces high switching costs D. when the buyer operates in an industry where products are undifferentiated

D. when the buyer operates in an industry where products are undifferentiated The power of buyers is high when the industry's products are standardized or undifferentiated commodities