Chap 3

True or false: High exit barriers lead to intense rivalry.

true

Governments sometimes set up a natural monopoly when a venture

would not be profitable

An industry analysis provides which of the following?

- 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

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 -

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

Which of the following statements is true of an oligopoly?

It is often analyzed using game theory.

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

a function of five forces related to competition

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

an industry

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

backward integration

When a buyer moves upstream in the industry value chain, into the suppliers' business, ______ occurs.

backward integration

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

bargaining power of suppliers

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

A ______ is a product or service that adds value to the original product offering.

complement

Which of the following is a feature of a fragmented industry?

consists of many small firms

Industry _______ is the process by which formerly unrelated industries begin to satisfy the same customer need.

convergence

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

New firms have been established in the airline and telecommunications industries after

deregulation

Rivalry among existing competitors has ______ with the height of the industry's exit barriers.

direct relationship

Exit barriers are composed of ______ factors.

economic and social

Which of these is a way to reconfigure a value chain?

entering an industry by offering sporting events on streaming video when competitors are offering them through cable hookups

A fragmented industry turns into a consolidated industry when

firms reduce competition within the industry through mergers and acquisitions.

MicroChips Corp. is a company that supplies microprocessors to 2020 Processors Inc., a computer hardware company. When 2020 Processors Inc. demands lower prices for the microprocessors, MicroChips Corp. makes it clear that it would profit more from launching its own brand of laptops and desktops in the market. Fearing the competition it would then face from MicroChips Corp., 2020 Processors Inc. decides to buy the microprocessors at the quoted price itself. In this scenario, MicroChips Corp., as a supplier, has exercised its bargaining power by threatening to

forward integrate

In general, a firm improves its strategic position by

increasing competitive advantage

The relative bargaining power of suppliers is most likely low when

incumbent firms face low switching costs when changing suppliers.

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

industry analysis

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

lower

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

mitigate threats and leverage opportunities

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

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

Firms are able to create a near monopoly by maximizing

product differentiation

When a firm is able to maximize the gap between ______, it increases its competitive advantage.

the cost of production and the value of what it produces

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 substitues

When suppliers offer products that are differentiated, the power of suppliers is

high

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

less

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

Ez Solutions Inc. has been operating in the country of Jamtland for almost a decade. The nation is currently experiencing an economic downturn. Which of the following is the most likely benefit of this economic condition for Ez Solutions Inc.?

Ez Solutions Inc. will have better access to highly skilled human capital at a lower cost.

Incumbent firms can benefit from several important sources of entry barriers. Economies of scale are one such source. Which of the following is an implication of economies of scale for incumbent firms?

They can demand better terms from their suppliers.

How do complements affect a primary product or service?

They increase the demand for the primary product.

Price discounts, frequent new product releases with minor modifications, and intense promotional campaigns are all tactics indicative of an industry with ______ growth.

slow or negative

The threat of entry is high when capital requirements are ____ in comparison to the expected returns.

smaller

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.

substitues

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

- the structure of their industry -

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

- the structure of their industry - strategic group composition

According to Porter's model, which of the following should be considered when analyzing a firm's competition?

buyers, sellers, threat of substitutes

What are competitors engaged in when they work together to achieve a strategic objective?

co-opetition

In the restaurant industry, a large number of restaurants cater to similar customer needs. However, each restaurant makes its product unique by offering a different cuisine, a different ambience, organic ingredients, or different services like home delivery. This differentiation allows each restaurant to set its own prices. Thus, the restaurant industry best illustrates a(n)

monopolistically competitive structure.

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

A consolidated industry turns into a fragmented industry when

restrictive government policies are introduced in the industry.