BUS 491 Chapter 3

The amount that savers are paid for use of their money and the amount that borrowers pay for that use is known as _______

an interest rate

It might be a good idea to expand or upgrade a firm's human capital base during a ______, because unemployment is high and therefore human capital is abundant and wages usually _____.

downturn; fall

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

government bodies

______effects result from the basic economic structure of an entire field.

industry

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

industry analysis

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

interdependent

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

legal

The five forces of Porter's model include the threat of entry and substitutes, rivalry among existing competitors, and the power of ______.

suppliers and buyers

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

Which of the following are examples of commonly encountered capital requirements? -paying for start-up losses -covering the cost of severance packages -setting up production facilities -managing a production process

-paying for start-up losses -setting up production facilities -managing a production process

What term describes the costs and benefits of producing or consuming goods that are not captured by prices of the goods?

externalities

_______occur when producing or consuming goods and services results in costs or benefits that are not captured by the prices charged for the goods or services.

externalities

Which factors result from the processes and actions of government bodies that influence the decisions and behavior of firms?

political

________ pressure from groups like NGOs often results in legal changes.

political

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

real estate

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

economic

The overall ______ is a measure of the change in the amount of goods and services produced by a nation's economy.

economic growth rate

Which are examples of negative externalities? -untreated wastewater -toxic emissions -noise pollution -flowers outside an apartment building

-untreated wastewater -toxic emissions -noise pollution

Which of the following is an example of a major innovation in process technology? -the microwave -the BP oil spill -lean manufacturing -the smartphone

lean manufacturing

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

mitigate threats and leverage opportunities

What term describes the positive effect that one user of a product or service has on the value of that product or service for other users?

network effect

The online auction site eBay has more than 100 million active users, so buyers are more likely to find what they are looking for while sellers are more likely to find buyers for the items they are offering. What is this an example of?

network effects

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

-Presenting a well-designed website -Ensuring a smooth transaction between hosts and guests

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

-a function of five forces related to competition

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

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

Which of the following are important sources of entry barriers? -low product differentiation -economies of scale -credible threat of retaliation -capital requirements -government policy -network effects

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

Which of the following are examples of sociocultural factors? -growth of the Hispanic population -extended period of low interest rates -increased number of health-conscious consumers -method of raising income

-growth of the Hispanic population -increased number of health-conscious consumers

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 -position itself in a way that leverages weak forces -partner with the most established company possible -Ignore the strength of competitive forces and focus on functional strategy

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

Managers are able to influence which of the following types of external forces?

-the structure of their industry -strategic group composition

The stronger the five forces in Porter's model, the ______ the industry's profit potential.

Lower

What is true about the external forces called technological factors?

They capture the application of knowledge to create new process and products.

T/F Sociocultural factors are constantly in flux and also differ across groups.

True

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

backward integration

Which of the following are factors that increase the power of buyers? -Buyers threaten backward integration. -Many consumers buy small amounts of goods. -Switching costs are low. -Products are standardized.

-Buyers threaten backward integration. -Switching costs are low. -Products are standardized.

Which are reasons that price stability is hard to achieve? -Economic growth follows predictable rules. -Economic growth is dynamic. -The central bank's actions are unpredictable. -Measurements of gross domestic product may be incorrect.

-Economic growth is dynamic. -The central bank's actions are unpredictable. -Measurements of gross domestic product may be incorrect.

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

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

An industry analysis provides which of the following? -The level of profitability that can be expected for the average firm in the industry -A rigorous way of identifying the industry's profit potential -The stability of the firm's internal structure -Insight into a firm's strategic position within an industry

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

Which of the following are advantages, independent of size, that incumbent firms possess? -fast reaction times to environmental changes due to their small size -proprietary technology -preferential access to distribution channels -brand loyalty -cumulative experience effects -inertia related to their structure

-proprietary technology -preferential access to distribution channels -brand loyalty -cumulative experience effects

Why are political pressures related to legal factors?

Political pressure may lead to changes in laws.

Advantages based on brand loyalty, proprietary technology, preferential access to raw materials, and favorable geographic locations are examples of ______.

advantages independent of size

Price ______ means there is little or no change in the prices of goods and services.

stability

Which of the following are likely outcomes of a competitive rivalry based entirely on price cutting? -firms struggle to make profits -most or all value is transferred to customers -product offerings improve -investments from firms drop off

-firms struggle to make profits -most or all value is transferred to customers -investments from firms drop off

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

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

Which statements are true about proprietary technology? -It helps solve production problems. -It works best when shared with rivals. -It is the foundation of competitive advantage. -It is legally required to be publicly available.

-It helps solve production problems. -It is the foundation of competitive advantage.

Which factors are most important elements of industry effects? -strategic management actions -entrance and exit barriers -number of companies -types of products and services

-entrance and exit barriers -number of companies -types of products and services

Which of the following are examples of economic factors in the firm's general environment? -price stability -government regulations -interest rates -growth rates -technological advancements

-price stability -interest rates -growth rates

What term describes a firm's independent ability to obtain necessary components for producing goods?

preferential access