Chapter 3 MGT 401

The power of Blank______ is the pressure they can put on the margins of producers in the industry by demanding a lower price or higher product quality.

buyers

Production costs can increase when Blank______.

buyers demand higher quality and more service

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

economic growth rate

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

entry barriers

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

explicit; tacit

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

government bodies

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

mobility barriers

Which of the following are examples of economies of scale?

Having more negotiating power vis-à-vis suppliers Spreading fixed costs over more unit

Which of the following are essential questions that strategic leaders need to consider to increase the probability of entering an industry successfully?

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

Which of the following statements about Airbnb is correct?

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

Which of the following reduces profit margins for air carriers?

Large corporate customers contracting with the U.S. airline industry

Which of the following statements about industry dynamics is true?

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

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 characteristics of the companies in a strategic group?

The companies form part of a specific industry. The companies differ in important dimensions from companies in other strategic groups. The companies pursue similar strategies.

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.

What is true about the external forces called technological factors?

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

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

True

Place the three frameworks used in industry analysis in the order they should be used, with the first at the top.

1. PESTEL 2. Porter's 3. Strategic group mapping

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

bargaining power of suppliers

A Blank______ 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, making it more Blank______ through horizontal mergers and acquisitions, since this tends to be more profitable than a fragmented one.

consolidated

Which of the following are important sources of entry barriers?

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

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

It consists of small firms.

Growth rates, interest rates, and levels of employment would be considered Blank______ 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 Blank______.

economies of scale

What are the three aspects of mapping strategic groups?

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

In an oligopoly, which of the following conditions exist?

high barriers to entry differentiated products a few large firms

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

intensity of rivalry

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

largely macroeconomic

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

less

Along which of the following dimensions do strategic groups differ from one another?

market segments distribution channels customer service research and development

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

mitigate threats and leverage opportunities

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 Blank______.

monopolistic competition

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

When firms compete by offering unique product features rather than competing on price, Blank______ occurs.

non-price competition

Which of the following are ways in which the power of buyers affects producers?

obtaining price discounts requesting more service demanding higher quality

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

of potential competitors entering the industry

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

point-in-time snapshot of a moving target

Which of the following are factors in a firm's legal environment?

regulations mandates laws

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

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

Which of the following tend to result from strong competitive rivalry?

limits to the industry's profit potential

Which of the following contribute to consumer buying power?

low switching costs real time, accurate price comparisons

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

low; many

Which of the following are the four main competitive industry structures?

oligopoly monopolistic competition perfect competition monopoly

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

political

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

powerful

Which of the following are examples of economic factors in the firm's general environment?

price stability growth rates interest rates

Which of the following are important strategic dimensions in mapping strategic groups?

product and service offerings cost structure expenditures on research and development

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

strong

The Blank______ the forces, the Blank______ the expected competitive intensity, which in turn limits the industry's profit potential.

stronger; stronger

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

substitutes

The pressure of rivalry increases when which of the following forces increase in intensity?

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

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

the threat of substitutes suppliers buyers

The Blank______ 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 does the five forces model to help firms do?

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

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

The risk that potential competitors will enter the industry is known as the Blank______.

threat of entry

Governments sometimes set up a natural monopoly when a venture Blank______.

would otherwise not be profitable

An industry analysis provides which of the following?

A rigorous way of identifying the industry's profit potential 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

Which of the following are important factors in determining the intensity of rivalry among existing competitors?

Competitive industry structure Exit barriers Industry growth

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. What does this example show?

Economic boom periods can overheat and lead to speculative bubbles.

Which of the following innovative ideas 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

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 Blank______.

a complement

Which of the following are characteristics of a monopolistically competitive industry?

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

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

a function of five forces related to competition

When a firm in an oligopoly cuts prices, Blank______.

a price war is likely to result

In a perfectly competitive industry, firms have difficulty Blank______.

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 investigating the profit potential within a specific industry is to conduct ______.

an industry analysis

Which of the following are characteristics of a perfectly competitive industry?

Firms in the industry sell a commodity product. Individual firms have little or no ability to raise prices. The industry is fragmented.

When a new firm enters an industry, which of the following often occur?

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

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.

Which of the following are approaches for answering the question "How to enter?" when a firm is considering entering an industry?

Reconfiguring value chains Leverage existing assets Establishing a niche

As utility companies tend to serve a whole market exclusively, they are known as Blank______ because the governments involved believe that the product or service would not be supplied otherwise.

natural monopolies

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

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

strategic

A company is a complementor to your company if Blank______.

customers value your product more when they can use it with the other company's product

Which of the following is an example of a recent innovation in process technology?

lean manufacturing

Which of the following help determine competitive industry structure?

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

A key feature of an oligopoly is that the competing firms in the industry Blank______, 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 Blank______.

businesses expanding operations to satisfy demand

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

interdependent

In the airline industry, the Blank______ involved in offering international routes restricts movement between hub-and-spoke and point-to-point airlines.

mobility barrier

Which of the following are examples of sociocultural factors?

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