CH. 3

Which of the following is true if the threat from a substitute is strong? A) Customers are likely to switch to competitors' products. B) Competitors' products are of a lower quality. C) Competitors are yet to overcome the entry barriers. D) Prices of competitors' products are higher.

Customers are likely to switch to competitors' products.

A business that selects a differentiation strategy will always structure itself around least-cost activities.

FALSE

According to Porter's five forces model, a company is profitable if all the five competitive forces are strong.

FALSE

An information system can be part of a product, but it cannot provide support for a product or service.

FALSE

Customer service falls under the category of supporting activities in a value chain.

FALSE

Each stage of the generic value chain accumulates costs and reduces the value of the product.

FALSE

Enhancing existing products and services is a competitive advantage created by the implementation of business processes.

FALSE

Firm infrastructure excludes general management, finance, accounting, legal, and government affai

FALSE

Focused differentiation is a strategy in which a product is unique and is used by a wide range of consumers.

FALSE

Inbound and outbound logistics are the primary value generators in a service-oriented company.

FALSE

It is easier to calculate the margin of supporting activities

FALSE

Manufacturing systems avoid linkages to reduce inventory costs.

FALSE

Porter identified the bargaining power of competitors as one of the competitive forces.

FALSE

Porter originally developed the five forces model in order to understand organizations' workforce.

FALSE

Porter's definition of technology is narrow because it includes only research and development.

FALSE

Procurement falls under the category of primary activities in a value chain.

FALSE

Raising barriers to market entry is a product implementation principle.

FALSE

Receiving, storing, and disseminating inputs to a product is an operations management activity.

FALSE

Support activities are business functions that relate directly to the production of the organization's products or services.

FALSE

The strength of bargaining power forces does not depend on the availability of substitutes.

FALSE

Two companies with the same value chain activities will have the same business processes.

FALSE

Typically, as an individual, a customer has substantial bargaining power over a large manufacturing industry.

FALSE

________ includes general management, finance, accounting, legal, and government affairs. A) Human resources B) Research and development C) Firm infrastructure D) Operations management

Firm infrastructure

Which of the following is true of a value chain? A) It is a network of value-creating activities. B) It consists of only primary activities. C) It is specific to manufacturing industries. D) It nullifies the importance of support activities.

It is a network of value-creating activities

Which of the following is true of supporting activities? A) Their contribution toward a product's value is negligible. B) Their contributions to margin can be calculated easily. C) Customer service is considered as a supporting activity. D) Negotiation of prices is considered as a supporting activity.

Negotiation of prices is considered as a supporting activity.

A business with a differentiation strategy will add cost to an activity only as long as the activity has a positive margin.

TRUE

A company uses the outbound logistics activity to deliver the finished product to a customer.

TRUE

According to Porter, to be effective an organization's goals, objectives, cultures, and activities must be consistent with the organization's strategy.

TRUE

An organization can choose to either minimize cost or maximize differentiation to gain a competitive advantage.

TRUE

Availability of substitutes plays a role in determining the bargaining power of suppliers.

TRUE

Business processes implement value chains or portions of value chains.

TRUE

Competitive strategy determines an organization's value chain.

TRUE

Each value chain is supported by one or more business processes

TRUE

Establishing alliances with other organizations promotes product awareness.

TRUE

If a value chain's margin is negative, the company must reduce the cost of the value chain.

TRUE

If the costs of switching to another vendor are high, then the strength of the competitive forces is low.

TRUE

Organizations analyze the structure of their industry and use that analysis to formulate a competitive strategy.

TRUE

Porter's model of business activities includes linkages, which are interactions across value activities.

TRUE

The difference between the value that an activity generates and the cost of the activity is called the margin.

TRUE

The support activities in the generic value chain facilitate the primary activities and contribute only indirectly to the production, sale, and service of the product.

TRUE

The three competitive forces in Porter's model concern the danger of customers taking their business elsewhere.

TRUE

Value chain activities are not dependent on the competitive strategies used by organizations.

TRUE

Value chain analysis has a direct application to manufacturing businesses.

TRUE

Value chains exist in service-oriented companies.

TRUE

Vendor knowledge and vendor relationships serve as a barrier to entry for new competitors.

TRUE

Which of the following statements describes a scenario in which the bargaining power of a supplier is strong? A) Competitors have decreased demand for raw materials. B) The availability of raw materials is limited. C) The supplier has excess inventory. D) There are many suppliers providing the same raw materials for comparable prices.

The availability of raw materials is limited.

Which of the following statements is true of business processes? A) If a value chain's margin is negative, the value should be decreased. B) Value chain activities differ based on the business processes being used. C) If a value chain's margin is negative, the costs of the value chain should be increased. D) The processes implementing a value chain must create sufficient value to cover their costs.

The processes implementing a value chain must create sufficient value to cover their costs

Which of the following is true about new entrants? A) They have strong customer loyalty. B) They will have records on customers' purchase habits. C) They are yet to develop relationships with suppliers. D) They can lock in suppliers to gain a competitive advantage.

They are yet to develop relationships with suppliers.

Each stage of the value chain not only adds value to the product but also ________. A) improves supplier relationships B) accumulates costs C) devalues the final product D) attracts competitors

accumulates costs

A business that selects a differentiation strategy ________. A) adds cost to an activity, provided it has a positive margin B) provides essential functions at lowest costs C) imitates rival companies' strategy and products D) always tries to price its products' higher than its competitors' products

adds cost to an activity, provided it has a positive margin

Which of the following statements describes a customer service activity? A) receiving and storing materials B) transforming customers' inputs into the final product C) inducing buyers to purchase the product D) assisting customers with the use of the product

assisting customers with the use of the product

Which of the following statements describes suppliers in a position of strong bargaining power? A) coffee planters during a season of frost that decreases production B) domestic suppliers of corn in the event of removal of import duties on corn C) providers of logistic support when fuel prices have been reduced D) temporary part-time gym instructor

coffee planters during a season of frost that decreases production

Porter's five competitive forces can be grouped into two types: forces related to ________ and forces related to supply chain bargaining power. A) potential profitability of an industry B) services of an industry C) reason for the collapse of certain industries D) means for improving resource utilization

competition

An organization responds to the structure of its industry by choosing a ________ strategy. A) competitive B) growth C) leadership D) diversification

competitive

According to Porter, the processes and systems in an organization pursuing differentiation strategy must ________ to avoid negative margins. A) create sufficient value to cover their costs B) provide products at lowest costs to customers C) develop and adopt new technologies D) increase procurement

create sufficient value to cover their cost

The bargaining power of ________ is one of the five competitive forces in Porter's five forces mode A) investors B) competitors C) employees D) customers

customers

In Porter's five forces model, each of the three competitive forces concerns the danger of ________. A) suppliers favoring rival companies B) customers taking their business elsewhere C) investors refusing to back new projects D) employees not working toward organizational goals

customers taking their business elsewhere

Which of the following is a primary activity in the value chain? A) process of finding vendors B) setting up contractual arrangements C) negotiating prices D) delivering products to consumers

delivering products to consumers

Which of the following is a product implementation principle of competitive advantage? A) raise barriers to market entry B) enhance existing products or services C) establish alliances with other organizations D) lock in customers and buyers

enhance existing products or services

Which of the following is a process implementation principle of competitive advantage? A) creating a new product B) enhancing existing services C) establishing alliances with other organizations D) differentiating a service

establishing alliances with other organizations

A firm introduces a new range of laptops that concentrate on delivering good graphics performance. Which of the following competitive strategies has the firm adopted if these laptops have relatively low prices? A) focused differentiation B) focused low cost C) industry-wide differentiation D) industry-wide low cost

focused low cost

Which of the following competitive strategies does a company follow if it produces a uniquely formulated anti-ageing face cream targeted at women above the age of forty? A) providing the lowest cost across the industry B) providing a better product across the industry C) focusing on lowering the cost within an industry-segment D) focusing on product differentiation within an industry-segment

focusing on product differentiation within an industry-segment

Which of the following is least likely to be an outcome of organizations forming alliances with each other? A) promotion of product awareness B) development of market size C) establishment of standards D) increment of purchasing costs

increment of purchasing costs

Which of the following is an example of a competitive strategy employed by a firm? A) increasing the price of its product when raw material prices increase B) laying off staff in order to cut down costs during a recession period C) advertising its products nationwide like its competitor organizations D) launching a unique product targeted at a section of consumers

launching a unique product targeted at a section of consumers

A manufacturing system uses sales forecasts to plan production. It uses the production plan to determine raw material needs and then uses the material needs to schedule purchases. This ultimately leads to reduced inventory costs. Which of the following is being used to reduce the inventory cost? A) linkages B) margins C) competitive strategy D) support activities

linkages

Porter's model of business activities includes ________, which are interactions across value activities. A) linkages B) evaluations C) iterations D) operations

linkages

Which of the following strategies is also called establishing high switching costs? A) increasing production B) locking in suppliers C) reducing output D) locking in customers

locking in customers

The difference between the value that an activity generates and the cost of the activity is called the ________. A) equity B) liability C) overhead D) margin

margin

Which of the following primary activities describes collecting, storing, and physically distributing products to buyers? A) customer service B) sales and marketing C) outbound logistics D) operations/management

outbound logistics

Porter developed the five forces model to help organizations determine the ________. A) potential profitability of an industry B) services of an industry C) reason for the collapse of certain industries D) means for improving resource utilization

potential profitability of an industry

Which of the following primary value chain activities induce buyers to purchase a product and provide a means for them to do so? A) inbound logistics B) sales and marketing C) outbound logistics D) operations/management

sales and marketing

Jupiter Shop is an online store. Customers have to create an online account to purchase products. The purchased products are delivered free of cost. The address of delivery is stored, so that customers can choose the same address for future purchases. Jupiter Shop features seasonal discounts and exchange offers. It also accumulates redeemable points for regular shoppers. Which of the following statements describes the use of information systems (IS) by Jupiter Shop to lock in customers? A) providing free home delivery B) saving the delivery addresses C) offering seasonal discounts D) collecting feedback online

saving the delivery addresses

According to Porter, to be effective, an organization's goals, objectives, culture, and activities must be consistent with the organization's ________. A) functions B) competitors C) strategy D) workforce

strategy

The competitive strategy followed by an organization is derived from the ________ of its industry. A) function B) structure C) profits D) goals

structure

In Porter's five forces model, the two strength factors that relate to competitive forces are ________ and customer loyalty. A) employee unions B) nature of products C) customer services D) switching costs

switching costs

The bargaining power of a customer is weak if ________. A) the availability of a rival product is limited B) the cost of switching to a substitute is low C) competitors offer products with same benefits at lower prices D) new entrants are offering a product that uses more recent technology

the availability of a rival product is limited

The strength of bargaining power forces depends on the availability of substitutes and ________ compared to the size of suppliers or customers. A) the amount of profit made annually B) the relative size of the firm C) the production capacity D) the relative size of the employee union

the relative size of the firm

Simpson's Lawn Services decides to offer two free mowing services for all customers who booked garden landscaping in the fall. Which of the following forces is Simpson's Lawn Services addressing? A) the control exercised by Acme Corp., who supplies Simpson's with lawn mowers B) the power held by the landlord of the Simpson's office space C) the threat posed by Roger's Landscapes, a new competitor D) the bargaining power of the City Football Club who are Simpson's customers

the threat posed by Roger's Landscapes, a new competitor

If the price of an alternative is lower than the price of the existing product, and customers perceive similar benefits from both the products, then the ________. A) switching cost is high B) price of the product should be increased to retain market share C) threat from the substitute is strong D) customers' bargaining power decreases

threat from the substitute is strong

Porter defined ________ as the amount of money that a customer is willing to pay for a resource, product, or service. A) margin B) profit C) price D) value

value

The competitive strategy of an organization determines its ________. A) industry rivals B) functions C) value chains D) strategic alliances

value chains

In which of the following cases is the strength of competitive forces low? A) when switching costs are high B) when the prices of rival products are relatively high C) when customers are not loyal to the existing company or brand D) when finding rival products is difficult

when switching costs are high