Chapter 6

Most embryonic industries arise from:

a. a technological breakthrough.

Which of the following statements is true in the context of growing industries?

b. Innovators and early adopters are typically reached through specialized distribution channels.

In a bid to expand its business and gain cost advantages, Omega Inc. has established several merchandising outlets in different locations. All the outlets share a good network and are interconnected by information technology. The entire network of outlets operates in the industry as one large company. Which of the following strategies has Omega Inc. most likely used ?

a. Chaining

Which of the following factors that affect market growth rates refers to the degree to which a new product is perceived as difficult to understand and use?

a. Complexity

Which of the following factors of a particular product tends to accelerate customer demand for it?

a. High observability

Which of the following statements is true about horizontal mergers?

a. Horizontal mergers result from an intention to achieve economies of scale.

Nutrimax Corp., a breakfast cereal company, has designed extensive and elaborate advertising campaigns for its existing products. The campaigns mainly focus on the aspects and benefits of the products that make them better than other products. The massive advertising and marketing initiatives are also intended to intimidate new entrants and rivals. Nutrimax Corp. is most likely to be using which of the following strategies?

a. Market penetration

Which of the following statements is true in the context of declining industries?

a. Not all segments of an industry typically decline at the same rate.

Customers who have a practical interest in using a new technology in the future and who are willing to experiment and envision new uses for the technology are called:

a. early adopters.

The real estate industry comprises different kinds of firms in several locations. Some are independent and popular locally while the others are affiliated to national chains. The real estate industry is most likely to be a(n):

a. fragmented industry.

In deciding on a strategy, a company in a declining industry must do all of the following except

a. lower prices.

Firms sometimes pursue a chaining strategy to:

a. obtain the advantages of cost leadership.

A telecommunications firm is working on new product concept of built-in routers in mobile phones. If the new product will be sold to existing customers, the firm is pursuing a strategy of:

a. product development.

The growth stage of an industry's life cycle is the:

a. time when companies attempt to secure their grip over customers in existing market segments. b. time when customers start exiting the markets.

Music CDs and newspaper sales have been falling as users tum to the Internet for their music and news. Which of the following is NOT a strategy for companies in these declining industries?

b. Chaining

Which of the following customer groups represents the leading wave or edge of the mass market?

b. Early majority

Which of the following factors that affect market growth rates refers to the degree to which a new product is perceived as better at satisfying customer needs than the product it supersedes?

b. Relative advantage

One strategy used to consolidate fragmented industries is:

b. chaining.

When a company decides to exit an industry by selling off its business assets to another company, it is said to be using a(n) strategy.

b. divestment

In a harvest strategy, a company:

b. extracts maximum profits from its investments.

An embryonic industry is one that:

b. is just beginning to develop.

Gadgetbug, an electronic gadgets company, has established itself as one of the industry leaders. The company recently has been facing some amount of competition from certain new entrants. The new entrants offer gadgets in different colors and with interesting artwork embossed. Recognizing that there is a special market for gadgets that are designed uniquely, Gadgetbug has now introduced its own range of uniquely designed gadgets. In this scenario, Gadgetbug's attempt to cater to all the different segments of customers to deter competition demonstrates:

b. product proliferation

A fragmented industry is one composed of a:

c. large number of small and medium-sized firms.

Which of the following statements is true about customer categories in the context of growing industries?

c. A typical late majority customer group is a behaviorally conservative set of customers.

Who among the following is most likely to fall under the category of laggards in the context of customer groups?

c. Allan is ignorant about the newest uses of technology and buys new products only when they become an absolute necessity.

Which of the following factors in an industry is most likely to cause excess capacity?

c. Increasing age of a company's physical assets

Which of the following is a disadvantage of franchising?

c. It results in the delegation of authority to franchisees and thus, the franchisor may not enjoy complete control.

Thomas tends to be ignorant about technological advancements. He was reluctant to own a smartphone even when they were well-established and familiar in the market. However, Thomas slowly got used to the idea of a smartphone when his job demanded him to be connected to the office network all the time. Thomas is most likely to fall under which of the following categories of customers?

c. Laggards

Which of the following statements is true about fragmented industries?

c. They require companies to use focus strategies because of specialized customer needs.

Factors leading to the slow growth of demand in embryonic industries include all of the following except the:

c. customer familiarity with products.

Competitive intensity in a declining industry is greatest when:

c. exit barriers are high.

The first group of customers to enter the market for a new product are called:

c. innovators.

Hydralicious, a juice parlor, has been looking to expand its business. The company has given a few entrepreneurs in different locations the license to operate under its name.The entrepreneurs are given the permission to use the company's reputation and the business model to run operations. The entrepreneurs will be charged a fee but will also get a percentage of the profits made. Which of the following strategies is Hydralicious most likely to be using ?

d. Franchising

Which of the following strategies allows interdependent firms indirectly to coordinate their actions?

d. Price signaling

Which of the following statements is true in the context of embryonic industries?

d. They face the challenge of customers not being familiar with product benefits.

Mature industries are generally characterized by:

d. a small number of large firms.

Price signaling in the context of mature industries happens when:

d. companies increase or decrease product prices to convey their intentions to other companies.

Highest market demand and industry profits arise when:

d. early and late majority users enter the market.

A strategy aims at growing in a declining industry by picking up the market share of companies that are leaving the industry.

d. leadership

A company uses ____ when it focuses on pockets of demand that are declining more slowly than the industry as a whole to maintain profitability.

d. niche strategy

An industry moves from embryonic to growth stage when:

d. ongoing technological progress makes its product easier to use. e. mass markets for its products decline.

To compete in the fragmented restaurant industry, Red Lobster Corporation built, and now operates hundreds of stores across the United States and Canada. Which of the following strategies is Red Lobster using ?

e. Chaining

Which of the following shakeout strategies requires a company to limit or decrease its investment in a business and to extract, or milk, the investment as much as it can?

e. Harvest strategy

Which of the following is an advantage of franchising?

e. It can help the franchisor expand his or her business rapidly.

Which of the following is not a characteristic of a fragmented industry?

e. Large mass-production operation

Which of the following factors that affect market growth rates refers to the degree to which the results of using and enjoying a new product can be seen and appreciated by other people?

e. Observability

Which of the following strategies helps companies with high cost structures, allowing them to survive without having to implement strategies to become more productive and efficient?

e. Price leadership

John, a technology enthusiast, is often willing to pay premium prices to be one among those who have new versions of software packages. John most likely belongs to the group of customers.

e. innovator