MGMT 434 Chapter 3

When a firm enters an industry, which of the following can occur?

Firms spend more money to satisfy customers, firms lower prices, profit potential declines

Which of the following statements best supports the fact that even during a low period of low demand in the US auto industry, excess capacity remained?

GM and Chrysler, which both filed for bankruptcy in 2009, restructured instead of exiting the industry

Rivalry among existing competitors has _________ with the height of the industry's exit barriers

a direct relationship

Rivalry among existing competitors has _________ with the height of the industry's exit barriers

a direct relationsip

Which of the following is an example of a demographic factor?

age, sexual orientation, gender

Firms have a tendency to change the industry in their favor, for example by making industries more _________ through mergers and acquisitions

consolidated

A company is a complementor to your company if:

customers value your product more when they can use it with the other company's product

Which of the following are likely outcomes of a competitive rivalry based entirely on price cutting?

Most or all value is transferred to customers, firms struggle to make profits, and investments from firms drop off

Which of the following are the four main competitive industry structures?

Perfect Competition, Monopolistic Competition, Oligopoly, Monopoly

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

Political, Technological, and Economic

According to the five forces model, a firm seeking to compete in an established industry should seek to do which of the following?

Position itself in a way that relaxes the constraints of strong forces and position itself in a way that leverages weak forces

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

Preferential access to distribution channels, proprietary technology, brand loyalty, and cumulative experience effects

Which of the following are the primary factors in the emergence of "green" technology companies that provide new means of extracting energy from renewable resources?

Technological and ecological

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

high

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

high

In a period of economic boom, unemployment is ________ and human resources become expensive

low

When managers understand the forces in the external environment, they are better able to:

mitigate threats and leverage opportunities

An industry in which only one firm supplies the market is known as a _________

monopoly

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

non-price competition

Firms are able to create a near monopoly by maximizing _________

product differentiation

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

real estate

Exit barriers, strategic commitments, and competitive industry structure are important factors in determining the intensity of _________

rivalry

Price __________ is the lack of change in price levels of goods and services

stability

The expected competitive intensity is _______, when the other four forces are ________.

stronger stronger; weaker weaker

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 ________

switching costs

Despite high barriers to entry, startups such as Tesla have been able to break into the US car market through:

technological innovations

When a firm is able to maximize the gap between __________, it increases its competitive advantage

the cost of production and the value of what it produces

The key take away from the five forces model is that:

the stronger the forces, the lower the industry's ability to earn profits

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

threat of substitutes

Governments sometimes set up a natural monopoly when a venture _________

would otherwise not be profitable

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

Pricing, customer service, market segments, and research and development

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

nonmarket strategies

There is a ________ relationship between competitive intensity and the power of buyers and suppliers

positive

The intensity with which companies in an industry jockey for market share and profitability is:

rivalry

Firms within the same strategic group tend to follow a _________ strategy while firms in a different strategic group follow a _________ strategy

similar; different

Price discounts, frequent new products releases with minor modifications, and intense promotional campaigns are all tactics indicative of an industry with __________ growth.

slow or negative

To determine economic value, one must subtract the cost of production from the _________

value of a firm's product or service

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

intensely and directly

As strategic commitments increase, rivalry within an industry _________

intensifies

The fact that tax preparation software such as TurboTax is a valid alternative for professional services offered by HR Block and others, is an example of ________

the threat of substitutes

A firm's strategic position relates to its ability to create __________ for customers while containing the ________ to do so

value, cost

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

A differentiated product, obstacles to entry, and the ability to raise prices for differentiated products

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

Evaluate external trends, monitor external factors

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

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

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

backward integration

The pressures that industry suppliers can exert on an industry's profit potential, is also called the:

bargaining power of suppliers

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

economic

Exit barriers are composed of __________ factors

economic and social

Cost advantages that accrue for firms with larger output because they can spread fixed costs over more units and can employ technology more efficiently are called:

economies of scale

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

entry barriers

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

an industry

Which of the following are important factors in determining the intensity of rivalry among existing competitors?

Exit barriers, industry growth, and competitive industry software

Which of the following are important strategic dimensions in mapping strategic groups?

Product and service offerings, expenditures on research and development, and pricing

When competitors cooperate in the name of a shared strategic objective, they engage in:

co-opeition

In addition to the static nature of the strategic group model, what is its other shortcoming?

It does not help us understand why there are performance differences among firms in the same strategic group