MGMT 481 Ch 3 snartbook

What is the result of the airline industry having powerful buyers? . Airlines' profit margins are reduced. It is difficult for new airlines to enter the industry. The potential for airline profit is high. Airlines have increased negotiating power.

Airlines' profit margins are reduced.*

The ______ is a measure of the change in the amount of goods and services produced by a nation's economy. interest rate currency exchange rate level of employment economic growth rate

economic growth rate*

Obstacles that determine how easily a firm can enter an industry, are called ______. rivalry barriers supplier barriers entry barriers threats of substitutes

entry barriers*

Which of the following are important strategic dimensions in mapping strategic groups? (Check all that apply.) expenditures on research and development expenditures on advertising and HR product and service offerings cost structure

expenditures on research and development product and service offerings cost structure*

A __________ Occurs when a firm has accrued significant market power and is changing the industry structure in its favor

Near monopoly

The positive affect that one user of a product or service has on the value of that product or service for other users is known as the

Network affect

They expected competitive intensity is stronger when the other four forces are _______ and weaker when the other four forces are ____

Stronger, weaker

Place the three frameworks used in industry analysis in the order they should be used, with the first at the top.

1. Pestel analysis 2. Porter's 5 forces 3. strategic group mapping*

When a firm in an oligopoly cuts prices what is likely to be the result

A price war

The pressures that Industry suppliers can exert on an industries profit potential is also called Bargaining power of suppliers Threat of new entry Rivalry among existing competitors Bargaining power buyers

Bargaining power of suppliers

Production costs can increase when... Buyers demand lower quality and less service Buyers demand higher quality and more service The power of suppliers goes down

Buyers demand higher quality and more service

What is a product or service that adds value to the original product offering

Complement

Michael Porter developed the five force model to help firms do which of the following Determine the profit potential of different industries Understand the strengths and weaknesses of a firms resources Gain and sustain a competitive advantage Analyze PESTEL forces

Determine the profit potential of different industries Gain in sustain a competitive advantage

It might be a good idea to expand or upgrade a firms human capital base during a_________ because unemployment is high and therefore human capital is abundant and wages usually ________

Downturn;fall

In the early 2000s easy credit made real estate the investment of choice in the United States. By the end of the decade however a recession headset in impacting almost all businesses in the country. This Example shows that

Economic boom periods can overheat and lead to speculative bubbles

True or false: Sociocultural factors tend to be fixed.

False *

Which of the following are characteristics of a perfectly competitive industry? (Check all that apply.) Firms in the industry sell a commodity product. The industry is fragmented. Consumers make purchasing decisions based on product features. Individual firms have little or no ability to raise prices.

Firms in the industry sell a commodity product. The industry is fragmented. Individual firms have little or no ability to raise prices.

Which of the following does the five forces model help firms do Understand the strengths and weaknesses of a firms resources Gain and sustain a competitive advantage Determine the profit potential of different industries Organize cooperation efforts with other firms

Gain and sustain a competitive advantage Determine the profit potential of different industries

Which of the following are examples of economies of scale? (Check all that apply.) Having more negotiating power vis-à-vis suppliers Employing technology less efficiently Spreading fixed costs over fewer units Spreading fixed costs over more units

Having more negotiating power vis-à-vis suppliers Spreading fixed costs over more units

Which of the following are important factors in determining the intensity of rivalry among existing competitors Short term contracts Entry barriers Industry growth Competitive industry structure Exit barriers

Industry growth Competitive industry structure Exit barriers

When a new firm enters an industry, which of the following often occur? (Check all that apply.) Incumbent firms increase their market share. Industry profit potential declines. Incumbent firms spend more to satisfy customers. Incumbent firms lower prices. Incumbent firms raise prices.

Industry profit potential declines. Incumbent firms spend more to satisfy customers. Incumbent firms lower prices.*

Exit barriers, strategic commitments, and competitive industry structure or important factors in Determining the Intensity of rivalry Industry growth Switching cost Development of new products

Intensity of rivalry

Which of the following are likely outcomes of a competitive rivalry based entirely on price cutting Product offering improve Investments from firms drop off Firms struggle to make profit Most or all value is transferred to customers

Investments from firms drop off Firms struggle to make profit Most or all value is transferred to customers

Which of the following statements is likely to be true about a fragmented industry? It has high profitability. It consists of small firms. It has a very low competitive structure. It consists of only a few firms.

It consists of small firms.*

In a period of economic boom unemployment is ______ And human resources become expensive

Low

A perfectly competitive industry has______ entry barriers and _______ Small farms

Low, many

The online auction site eBay has more than 100 million active users so buyers are more likely to find what they are looking for a while sellers are more likely to find buyers for the items they are offering this is an example of Networker effects Buyer meets seller effects Online effects competition affects

Networker effects

What is the result of low barriers to entry in the airline industry New airlines are unheard of New airlines are only allowed by government mandates New airlines join the market from time to time

New airlines join the market from time to time

______ factors result from the processes and actions of government bodies that influence the decisions and behavior of firms. Profitable Political Technological Economic

Political*

Which of the following help Airbnb develop a successful business in the peer to peer rental space Following the traditional rental model offered by hotels Presenting a well-designed website Ensuring a smooth transition between host and guest Fortuitous Timing that lead to growing to demand

Presenting a well-designed website Ensuring a smooth transition between host and guest Fortuitous Timing that lead to growing to demand

Which of the following are examples of economic factors in the firms general environment Technological advancements priced stability government regulations growth rates interest rates

Prized ability, growth rates, interest rates

Firms are able to create a near monopoly by maximizing ___________

Product differentiation

The economic recession that began in 2008 in the United States was a result of unwise investment in Stocks commodities the online economy real estate

Real estate

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 face is significant Vendor changing cost Start up cost Switching cost Switching gains

Switching cost

When a person that has been using a PC with a Microsoft Windows operating system start using an Apple computer which has a different operating system that person will incur significant customer Network effects Switching cost Economies of scale Bargaining power

Switching cost

Which of the following are characteristics of the companies in a strategic group? (Check all that apply.) The companies do not seek a competitive advantage . The companies differ in important dimensions from companies in other strategic groups. The companies form part of a specific industry. The companies pursue similar strategies.

The companies differ in important dimensions from companies in other strategic groups. The companies form part of a specific industry. The companies pursue similar strategies.*

What conclusions can be reached about the airline industry using the five force framework Customers derive only very limited benefits from the existence of airline industry The overall probability of the airline industry is exceptionally low The supporting players such as airports and aircraft suppliers are quite profitable The mega airlines must constantly struggle to achieve consistent probability

The supporting players such as airports and aircraft suppliers are quite profitable The mega airlines must constantly struggle to achieve consistent probability

Which statement best describes into barriers and the airline industry They are nonexistent They are relatively high They are relatively low They are generally insurmountable

They are relatively low

Which of the following are ways that powerful suppliers are a threat to firms? (Check all that apply.) They can force the cost of production to increase. They can reduce the industry's profit potential. They can drive away the consumer market directly. They can capture part of the economic value created by firms.

They can force the cost of production to increase. They can reduce the industry's profit potential. They can capture part of the economic value created by firms.*

Which of the following are essential questions that strategic leaders need to consider to increase the probability of entering an industry successfully? (Check all that apply.) When to enter? Who are the players? How to enter? What type of entry should be made? Why is it important to study the external environment?

When to enter? Who are the players? How to enter? What type of entry should be made?*

In a perfectly competitive industry, firms have difficulty ______. achieving competitive advantage keeping prices low making purchasing decisions avoiding profitability

achieving competitive advantage*

Global warming would be an example of ______ factor in a firm's external environment. a political an ecological a sociocultural a technological

an ecological*

A rise in economic growth is reflected by ______. businesses expanding operations to satisfy demand businesses staying the same businesses closing operations due to lack of demand

businesses expanding operations to satisfy demand*

According to Porter's model, which of the following should be considered when analyzing a firm's competition? (Check all that apply.) buyers the regulations in possible host countries the threat of substitutes suppliers

buyers the threat of substitutes suppliers

Production costs can increase when ______. the power of suppliers goes down buyers demand lower quality and less service buyers demand higher quality and more service

buyers demand higher quality and more service*

The power of ______ is the pressure they can put on the margins of producers in the industry by demanding a lower price or higher product quality. supplier existing competitors new entrants buyers

buyers*

The external forces called technological factors ______. capture the application of knowledge to create new process and products describe society's norms and values quantify characteristics of the economy and business climate represent official government decisions and regulations

capture the application of knowledge to create new process and products*

Which of the following are important factors in determining the intensity of rivalry among existing competitors? (Check all that apply.) short-term contracts entry barriers competitive industry structure exit barriers industry growth

competitive industry structure exit barriers industry growth*

Firms have a tendency to change the industry structure in their favor, for example by making industries more __ through mergers and acquisitions. consolidated competitive diffuse intuitive

consolidated

The economic factors that affect a firm's external environment are ______. largely macroeconomic primarily ecological often unidentifiable usually regional

largely macroeconomic*

An example of a recent innovation in process technology is ______. . the microwave the BP oil spill lean manufacturing the smartphone

lean manufacturing*

Many firms of all sizes actively compete in the computer hardware industry, and there are no firms with a large market share. Product offerings tend to be similar but are differentiated in ways that enable some firms to raise or impact pricing. The computer hardware industry is an example of ______. perfectly competitive industry oligopolistic industry natural monopoly monopolistic competition

monopolistic competition*

When firms compete by offering unique product features rather than competing on price, ______ occurs. . competitor allegiance strategic intent non-price competition an oligopoly

non-price competition*

A ____ group is a set of companies within a specific industry that seek to achieve competitive advantage in similar ways.

strategic*

There is a(n) ______ relationship between competitive intensity and the power of the five forces. negative inverted strong disconnected

strong*

Managers are able to influence which of the following types of external forces? (Check all that apply.) the structure of their industry strategic group composition currency exchange rates interest rates

the structure of their industry strategic group composition*

The risk that potential competitors will enter the industry is known as the ______. power of suppliers threat of entry rivalry among existing competitors threat of substitutes power of buyers

threat of entry*

Many drivers find a GPS navigation system useful. Because installing a GPS system in an automobile adds value to the vehicle, the system functions as ______. mobility barrier loss leader a complement co-opetition

a complement*

In an oligopoly, which of the following conditions exist? (Check the three that apply.) . a few large firms few commodity products high barriers to entry differentiated products

a few large firms high barriers to entry differentiated products*

According to Michael Porter, the profit potential of an industry is ______. . entirely determined by industry-specific factors largely random a function of five forces related to competition similar for all service industries

a function of five forces related to competition*

In the airline industry, the ______________ of offering international routes restricts movement between hub-and-spoke and point-to-point airlines. . supplier power exit barrier strategic commitment mobility barrier

mobility barrier*

Industry-specific factors known as ______ separate one strategic group from another. planned emergencies mobility barriers competitive rivalries oligopolies

mobility barriers*

The relationship between the natural environment and business organizations can best be described as ______. a U-shape interdependent insignificant unconnected

interdependent*

Which of the following statements about Airbnb is correct? It was spun off as a service developed by Google, Inc. It handles more accommodations than the three biggest hotel chains combined. It was founded before the Internet was created. It operates only in North America and Europe.

It handles more accommodations than the three biggest hotel chains combined.*

The intensity with which companies in an industry jockey for market share and profitability is known as ______. . threats barriers identification rivalry

rivalry*

The threat of ______ is one of the five forces and can be exemplified by the threat that videoconferencing presents to business travel. entry substitutes suppliers buyers

substitutes*

Which of the following are important sources of entry barriers? (Check all that apply.) government policy network effects capital requirements economies of scale credible threat of retaliation low product differentiation

government policy network effects capital requirements economies of scale credible threat of retaliation*

Which of the following are the four main competitive industry structures? (Check all that apply.) perfect monopoly monopolistic competition perfect competition oligopoly monopoly monopolistic oligopoly

monopolistic competition perfect competition oligopoly monopoly*

The _______ is the idea that products or services available from outside the given industry will come close to meeting the needs of current customers. power of buyers threat of new entrants rivalry of existing competitors threat of substitutes

threat of substitutes*

A group of companies that deal with more or less the same set of suppliers and buyers make up ______. a state a multi-environment a business group an industry

an industry*

A key feature of an oligopoly is that the competing firms in the industry ______, meaning the actions of any one firm will influence the behaviors of the other firms. engage in monopolistic behavior engage in co-opetition are price takers are interdependent

are interdependent*

In the PESTEL model, political factors are those that relate to ______. employment climate and weather banking organizations government bodies

government bodies*

Exit barriers, strategic commitments, and competitive industry structure are important factors in determining the _____________. industry growth development of new products switching costs intensity of rivalry

intensity of rivalry*

Deregulation of industries leads to intensified competition and higher value at lower prices for consumers. This is an example of ______ factors influencing business. socio-cultural legal economic technological

legal*

Managers have ______ direct influence over external forces in the firm's general environment than those in the firm's task environment.

less*

Which of the following tend to result from strong competitive rivalry? limits to the industry's profit potential less product differentiation a reduction in the threat of substitutes industry-wide price increases

limits to the industry's profit potential*

Which of the following contribute to consumer buying power? low switching costs moderately high barriers to entry high levels of product differentiation real time, accurate price comparisons

low switching costs real time, accurate price comparisons*

Which of the following are characteristics of a monopolistically competitive industry? (Check all that apply.) obstacles to entry the ability to raise prices for differentiated products very few competing firms a differentiated product

obstacles to entry the ability to raise prices for differentiated products a differentiated product*

The cost advantages that a firm obtains by increasing output, such as by spreading fixed costs over more units, are called economies of

scale*

Which of the following are approaches for answering the question "How to enter?" when a firm is considering entering an industry? . Establishing a niche Timing of the entry Leverage existing assets Reconfiguring value chains

Establishing a niche Leverage existing assets Reconfiguring value chains*

In addition to the static nature of the PESTEL, Porter's five forces, and strategic group mapping frameworks, what is their other shortcoming? It does not help us understand why there are performance differences among firms in the same strategic group It does not refer to the international nature of the PESTEL factors. It does not account for the threat of new entrants or proposed governmental legislation.

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

As utility companies tend to serve a whole market exclusively they are known as_____________ Because the government involved believe that the product or service would not be supplied otherwise

Natural Monopolies

Which of the following statements about legal factors as an external force is true? . The U.S. government has allowed very few industries to be deregulated. Regulatory changes tend to affect entire industries at once. The courts do not allow the government to use legal factors to exert its political will on businesses. Legal factors affect a firm's profit potential only indirectly.

Regulatory changes tend to affect entire industries at once.*

Which of the following statements about industry dynamics is true? The five forces model takes into account industry dynamics. The five forces model is a static model. Firms in an industry have a tendency to fragment in order to increase profitability. Over time, industry structures are not stable

The five forces model is a static model. Over time, industry structures are not stable.*

Government sometimes set up a natural monopoly when a venture Would otherwise not be profitable Could otherwise draw in a large number of arrival for It's not wanted by the public Is in the exclusive interest of private wealth creation

Would otherwise not be profitable

Which of the following are examples of sociocultural factors? (Check all that apply.) an increased demand by consumers for gluten-free products the growth of the Hispanic population the widespread adoption of smart phones an extended period of low interest rates

an increased demand by consumers for gluten-free products the growth of the Hispanic population the widespread adoption of smart phones*

The most rigorous means of analyzing the profit potential within a specific industry is to conduct ______. an industry analysis an industry PET scan a market analysis a PESTEL analysis

an industry analysis*

What are the three aspects of mapping strategic groups? graphing the firms in the strategic group and indicating each firm's market share identifying the most important strategic dimensions calculating the shareholder value of the two firms selected choosing two key dimensions for the horizontal and vertical axes

graphing the firms in the strategic group and indicating each firm's market share identifying the most important strategic dimensions choosing two key dimensions for the horizontal and vertical axes*

Which of the following help determine competitive industry structure? (Check all that apply.) height of entry barriers composition of the board of directors size and number of competitors firms' degree of pricing power the firm's resources

height of entry barriers size and number of competitors firms' degree of pricing power

The pressure of rivalry increases when which of the following forces increase in intensity? (Check all that apply.) the power of buyers and suppliers the threat of substitutes the barriers to entry the threat of entry

the power of buyers and suppliers the threat of substitutes the threat of entry

Call advantages that occur for firms with larger output because they can spread fixed cost over more units and can employ technology more efficiently are called

Economics of scale

Although the five forces model is useful in understanding an industry's profit potential, it provides only a ___. point-in-time snapshot of static industries dynamic view of a moving target fixed view of a static competitive market point-in-time snapshot of a moving target

point-in-time snapshot of a moving target*