CH 3 SMBK
Which of the following statements about industry dynamics is true?
The five forces model is a static model. Over time, industry structures are not stable.
Which of the following are essential questions that strategic leaders need to consider to increase the probability of entering an industry successfully?
When to enter? How to enter? What type of entry should be made? Who are the players
A group of companies that deal with more or less the same set of suppliers and buyers make up ______.
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.
are interdependent
A rise in economic growth is reflected by ______.
businesses expanding operations to satisfy demand
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.
buyers
Along which of the following dimensions do strategic groups differ from one another?
customer service distribution channels research and development market segments
Which of the following does the five forces model to help firms do?
determine the profit potential of different industries gain and sustain a competitive advantage
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
Obstacles that determine how easily a firm can enter an industry, are called ______.
entry barriers
True or false: Sociocultural factors tend to be fixed. True false question.
false
Which of the following help determine competitive industry structure?
height of entry barriers firms' degree of pricing power size and number of competitors
In an oligopoly, which of the following conditions exist?
high barriers to entry differentiated products a few large firms
The most rigorous means of analyzing the profit potential within a specific industry is to conduct ______.
industry analysis
Exit barriers, strategic commitments, and competitive industry structure are important factors in determining the _____________.
intensity of rivalry
The relationship between the natural environment and business organizations can best be described as ______.
interdependent
The economic factors that affect a firm's external environment are ______.
largely macroeconomic
An example of a recent innovation in process technology is _____
lean manufacturing
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
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
In a period of economic boom, unemployment is ______, and human resources become expensive
low
A perfectly competitive industry has ______ entry barriers and ______ small firms.
low ; many
Which of the following contribute to consumer buying power?
low switching costs real time, accurate price comparisons
In the airline industry, the ______________ of offering international routes restricts movement between hub-and-spoke and point-to-point airlines.
mobility barrier
Industry-specific factors known as ______ separate one strategic group from another.
mobility barriers
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
The positive effect 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 effects
The intensity with which companies in an industry jockey for market share and profitability is known as ______.
rivalry
The cost advantages that a firm obtains by increasing output, such as by spreading fixed costs over more units, are called economies of
scale
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.
strong
The threat of ______ is one of the five forces and can be exemplified by the threat that videoconferencing presents to business travel.
substitutes
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
When a person that has been using a PC with a Microsoft Windows operating system starts using an Apple computer (which has a different operating system), that person will incur significant customer ______________.
switching costs
Which of the following are characteristics of a monopolistically competitive industry?
the ability to raise prices for differentiated products a differentiated product obstacles to entry
Which of the following are examples of sociocultural factors?
the growth of the Hispanic population an increased demand by consumers for gluten-free products the widespread adoption of smart phones
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 sources of entry barriers?
capital requirements network effects economies of scale government policy credible threat of retaliation
Michael Porter developed the five forces model to help firms do which of the following?
gain and sustain a competitive advantage determine the profit potential of different industries
What are the three aspects of mapping strategic groups?
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
______ factors result from the processes and actions of government bodies that influence the decisions and behavior of firms.
Political
The external forces called technological factors ______.
capture the application of knowledge to create new process and products
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 Airbnb is correct? 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 operates only in North America and Europe.
It handles more accommodations than the three biggest hotel chains combined.
Production costs can increase when ______.
buyers demand higher quality and more service
Global warming would be an example of ______ factor in a firm's external environment.
ecological
Growth rates, interest rates, and levels of employment would be considered ______ factors in a firm's general environment.
economic
The ______ is a measure of the change in the amount of goods and services produced by a nation's economy.
economic growth rate
Although ______ coordination, such as price fixing, is illegal in the United States, ______ coordination such as "an unspoken understanding" is not.
explicit ; tacit
In the PESTEL model, political factors are those that relate to ______. Multiple choice question.
government bodies
Which of the following are the four main competitive industry structures?
monopoly perfect competition monopolistic competition oligopoly
As utility companies tend to serve a whole market exclusively, they are known as ______ because the governments involved believe that the product or service would not be supplied otherwise.
natural monopolies
A ______ occurs when a firm has accrued significant market power and is changing the industry structure in its favor.
near monopoly
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. This is an example of __.
network effects
The pressures that industry suppliers can exert on an industry's profit potential, is also called the ______.
power of suppliers
What is the result of the airline industry having powerful buyers?
Airlines' profit margins are reduced.
Which of the following helped Airbnb develop a successful business in the peer-to-peer rental space?
Ensuring a smooth transaction between hosts and guests Fortuitous timing that led to growing demand Presenting a well-designed website
Which of the following are approaches for answering the question "How to enter?" when a firm is considering entering an industry?
Establishing a niche Leverage existing assets Reconfiguring value chains
When a new firm enters an industry, which of the following often occur?
Incumbent firms spend more to satisfy customers. Incumbent firms lower prices. Industry profit potential declines
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.
What is the result of low barriers to entry in the airline industry?
New airlines join the market from time to time.
Place the three frameworks used in industry analysis in the order they should be used, with the first at the top.
PESTEL Porter's 5 Forces Strategic Group Mapping
What conclusions can be reached about the airline industry using the five forces framework?
The mega-airlines must constantly struggle to achieve consistent profitability. The supporting players, such as airports and aircraft suppliers, are quite profitable.
Which statement best describes entry barriers in the airline industry?
They are relatively low.
Which of the following are ways that powerful suppliers are a threat to firms?
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.
Which of the following are ways that powerful suppliers are a threat to firms?
They can reduce the industry's profit potential. They can capture part of the economic value created by firms. They can force the cost of production to increase.
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
According to Michael Porter, the profit potential of an industry is ______.
a function of five forces related to competition
When a firm in an oligopoly cuts prices, ______.
a price war is likely to result
The pressure of rivalry increases when which of the following forces increase in intensity?
the threat of entry the power of buyers and suppliers the threat of substitutes
The risk that potential competitors will enter the industry is known as the ______.
threat of entry
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
A ______ is a product or service that adds value to the original product offering.
complement
Firms have a tendency to change the industry structure in their favor, for example by making industries more __ through mergers and acquisitions.
consolidated
Which of the following are important strategic dimensions in mapping strategic groups?
cost structure product and service offerings expenditures on research and development
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 had set in, impacting almost all businesses in the country. This example shows that _____.
economic boom periods can overheat and lead to speculative bubbles
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
In a perfectly competitive industry, firms have difficulty ______.
achieving competitive advantage
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
Managers are able to influence which of the following types of external forces? (Check all that apply.) Multiple select question. currency exchange rates strategic group composition the structure of their industry interest rates
strategic group composition the structure of their industry
The expected competitive intensity is stronger when the other four forces are ______, and weaker when the other four forces are ______.
stronger ; weaker
Governments sometimes set up a natural monopoly when a venture ______.
would otherwise not be profitable