Chapter 3 - Smart book

Which of the following statements about industry dynamics is true? The five forces model takes into account industry dynamics. Over time, industry structures are not stable. The five forces model is a static model. Firms in an industry have a tendency to fragment in order to increase profitability.

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

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

economic

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

rivalry

Which of the following innovative ideas helped Airbnb develop a successful business in the peer-to-peer rental space?

- Presenting a well-designed website - Fortuitous timing that led to growing demand - Ensuring a smooth transaction between hosts and guests

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

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

stronger, stronger

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

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

government bodies

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

Which of the following are ways in which the power of buyers affects producers? demanding higher quality requesting more service obtaining price discounts reducing economies of scale

-demanding higher quality -requesting more service - obtaining price discounts

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

Lean manufacturing

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

the structure of their industry strategic group composition

Which of the following are characteristics of the companies in a strategic group? The companies do not seek a competitive advantage. The companies differ in important dimensions from companies in other strategic groups. The companies pursue similar strategies.

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

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 reduce the industry's profit potential.

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

- buyers - the threat of substitutes - suppliers

Which of the following are important sources of entry barriers?

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

In an oligopoly, which of the following conditions exist? differentiated products high barriers to entry a few large firms few commodity products

- differentiated products - high barriers to entry - a few large firms

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

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

- laws - mandates - regulations

Global warming would be an example of a ______ factor in a firm's external environment.

ecological

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

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 scale

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

entry barriers

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

of potential competitors entering the industry

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

Which of the following contribute to consumer buying power?

- low switching costs - real-time, accurate price comparisons

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

- oligopoly - monopoly - perfect competition - monopolistic competition

Which of the following reduces profit margins for air carriers?

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

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

consolidated

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

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 of the following tend to result from strong competitive rivalry?

limits to the industry's profit potential

Which of the following tend to result from strong competitive rivalry? a reduction in the threat of substitutes limits to the industry's profit potential less product differentiation industry-wide price increases

limits to the industry's profit potential

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

low; many

In the airline industry, the ______ 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 economic factors in the firm's general environment?

interest rates growth rates price stability

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

largely macroeconomic

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

point-in-time snapshot of a moving target

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

political

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

- Competitive industry structure - Exit barriers - Industry growth

Which of the following are important strategic dimensions in mapping strategic groups? product and service offerings cost structure expenditures on research and development expenditures on advertising and HR

- product and service offerings - cost structure - expenditures on research and development

Which of the following are important factors in determining the intensity of rivalry among existing competitors? Competitive industry structure Industry growth Short-term contracts Entry barriers Exit barriers

- Competitive industry structure - Industry growth - Exit barriers

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

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

Which of the following are examples of economies of scale?

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

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.

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

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

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? What type of entry should be made? Why is it important to study the external environment? Who are the players? When to enter?

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

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

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______.

a function of five forces related to competition

When a firm in an oligopoly cuts prices,

a price war is likely to result

In a perfectly competitive industry, firms have difficulty ______.

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

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

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

bargaining power of suppliers

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

bargaining power of suppliers

A rise in economic growth is reflected by

businesses expanding operations to satisfy demand

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

threat of entry

Which of the following are examples of sociocultural factors?

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

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

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

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

1. PESTEL analysis 2. Porter's five forces 3. Strategic group mapping

Which of the following statements is likely to be true about a fragmented industry? It consists of small firms. It has a very low competitive structure. It has high profitability. It consists of only a few firms.

It consists of small firms.

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 statements about Airbnb is correct?

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

Which of the following statements about legal factors as an external force is true? - Legal factors affect a firm's profit potential only indirectly. - The U.S. government has allowed very few industries to be deregulated. - The courts do not allow the government to use legal factors to exert its political will on businesses. - Regulatory changes tend to affect entire industries at once.

Regulatory changes tend to affect entire industries at once.

Production costs can increase when ______.

buyers demand higher quality and more service

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

legal

Along which of the following dimensions do strategic groups differ from one another? distribution channels market segments research and development customer service profit motive

- research and development - market segments - distribution channels - customer service

Which of the following help determine competitive industry structure?

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

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

less

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

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

non-price competition

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

of potential competitors entering the industry