4490 Chapter 3

Monopoly

A market in which there are many buyers but only one seller.

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

perfect competition

a market structure in which a large number of firms all produce the same product

True or false: Sociocultural factors tend to be fixed.

False

Which of the following statements about Airbnb is correct?

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

Which of the following statements about legal factors as an external force is true?

Regulatory changes tend to affect entire industries at once.

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

exit barriers industry growth competitive industry structure

Although ______ coordination, such as price fixing, is illegal in the United States, ______ coordination such as "an unspoken understanding" is not.

explicit; tacit

Firm Effects

firm performance attributed to the actions managers take

Industry Effects

firm performance attributed to the structure of the industry in which the firm competes

In the PESTEL model, political factors are those that relate to ______.

government bodies

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 entry the barriers to entry the threat of substitutes

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

Which of the following statements is likely to be true about a fragmented industry?

It consists of small firms.

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.

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

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

entry barriers

Michael Porter developed the five forces model to help firms do which of the following? (Check all that apply.) gain and sustain a competitive advantage understand the strengths and weaknesses of a firm's resources analyze PESTEL forces determine the profit potential of different industries

gain and sustain a competitive advantage determine the profit potential of different industries

entry barriers

obstacles that determine how easily a firm can enter an industry and often significantly predict industry profit potential

exit barriers

obstacles that determine how easily a firm can leave an industry

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

perfect competition oligopoly monopoly monopolistic competition

Although the five forces model is useful in understanding an industry's profit potential, it provides only a ___.

point-in-time snapshot of a moving target

In the five forces model, threat of entry refers to the risk that ______.

potential competitors will enter a given industry

Which of the following are examples of economic factors in the firm's general environment? (Check all that apply.) price stability growth rates government regulations technological advancements interest rates

price stability growth rates interest rates

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

real time, accurate price comparisons low switching costs

Which of the following are factors in a firm's legal environment? (Check all that apply.) demographic trends innovative technology regulations laws mandates

regulations laws mandates

Along which of the following dimensions do strategic groups differ from one another? (Check all that apply.) profit motive research and development customer service distribution channels market segments

research and development customer service distribution channels market segments

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

rivalry

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

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

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

strategic

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

substitutes

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

Reconfiguring value chains Leverage existing assets Establishing a niche

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.

are interdependent

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

bargaining power of suppliers

A rise in economic growth is reflected by ______.

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 threat of substitutes the regulations in possible host countries suppliers

buyers the threat of substitutes suppliers

Production costs can increase when ______.

buyers demand higher quality and more service

Which of the following are ways in which the power of buyers affects producers? (Check all that apply.) by obtaining price discounts by requesting more service by demanding higher quality by reducing economies of scale

by obtaining price discounts by requesting more service by demanding higher quality

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

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

The relationship between the natural environment and business organizations can best be described as ______.

interdependent

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

low switching costs real time, accurate price comparisons

A perfectly competitive industry has ______ entry barriers and ______ small firms.

low; many

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

strategic group composition the structure of their industry

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

strong

The expected competitive intensity is stronger when the other four forces are ______, and weaker when the other four forces are ______.

stronger; weaker

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

threat of substitutes

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

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

The economic factors that affect a firm's external environment are ______.

largely macroeconomic

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

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

An example of a recent innovation in process technology is ______.

lean manufacturing

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

legal

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

mitigate threats and leverage opportunities

Industry-specific factors known as ______ separate one strategic group from another.

mobility barriers

What is the result of the airline industry having powerful buyers?

Airlines' profit margins are reduced.

competitive industry structure

Elements and features common to all industries, including the number and size of competitors, the firms' degree of pricing power, the type of product or service offered, and the height of entry barriers.

Which of the following helped Airbnb develop a successful business in the peer-to-peer rental space? (Select all that apply.) Ensuring a smooth transaction between hosts and guests Presenting a well-designed website Fortuitous timing that led to the growing demand Following the traditional rental model offered by hotels

Ensuring a smooth transaction between hosts and guests Presenting a well-designed website Fortuitous timing that led to growing demand

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

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

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? What type of entry should be made? How to enter? Who are the players? Why is it important to study the external environment?

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

When a firm in an oligopoly cuts prices, ______.

a price war is likely to result

In a perfectly competitive industry, firms have difficulty ______.

achieving competitive advantage

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

an industry

The most rigorous means of analyzing the profit potential within a specific industry is to conduct ______.

an industry analysis

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

differentiated products a few large firms high barriers to entry

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

economic

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

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 ______.

monopolistic competition

When suppliers can demand higher prices for their inputs or reduce the quality of the input factor delivered, they demonstrate that they are ______.

powerful

PESTEL model

A framework that categorizes and analyzes an important set of external factors (political, economic, sociocultural, technological, ecological, and legal) that might impinge upon a firm. These factors can create both opportunities and threats for the firm.

Oligopoly

A market structure in which a few large firms dominate a market

Which of the following are characteristics of a perfectly competitive industry? (Check all that apply.) Firms in the industry sell a commodity product. Consumers make purchasing decisions based on product features. The industry is fragmented. 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 are ways that powerful suppliers are a threat to firms? (Check all that apply.) They can reduce the industry's profit potential. They can drive away the consumer market directly. They can force the cost of production to increase. They can capture part of the economic value created by firms.

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

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 ______.

a complement

strategic position

a firm's strategic profile based on the difference between value creation and cost (V-C)

According to Michael Porter, the profit potential of an industry is ______.

a function of five forces related to competition

monopolistic competition

a market structure in which many companies sell products that are similar but not identical

Exit barriers, strategic commitments, and competitive industry structure are important factors in determining the _____________.

intensity of rivalry

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 Five Forces 3. Strategic Group Mapping

Five Forces Model

A framework that identifies five forces that determine the profit potential of an industry and shape a firm's competitive strategy.

An industry analysis provides which of the following? (Check all that apply.) the stability of the firm's internal structure insight into a firm's strategic position within an industry a rigorous way of identifying the industry's profit potential the level of profitability that can be expected for the average firm in the industry

insight into a firm's strategic position within an industry a rigorous way of identifying the industry's profit potential the level of profitability that can be expected for the average firm in the industry

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

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