LearnSmart for Chapter 3

Select all that apply Which of the following are examples of commonly encountered capital requirements? Multiple select question. - managing a production process - setting up production facilities - covering the cost of severance packages - paying for start-up losses

- managing a production process - setting up production facilities - paying for start-up losses

Select all that apply Which of the following are important factors in determining the intensity of rivalry among existing competitors? Multiple select question. Short-term contracts Exit barriers Industry growth Competitive industry structure Entry barriers

- Exit barriers - Industry growth - Competitive industry structure

The most rigorous means of investigating the profit potential within a specific industry is to conduct ______. Multiple choice question. - an industry analysis - an industry PET scan - a PESTEL analysis - a market analysis

-an industry analysis

Select all that apply Which of the following are forces in Porter's five forces model? Multiple select question. - threat of new entrants - differentiated price parity - threat of substitute products or services - revered oligopoly - bargaining power of buyers

-bargaining power of buyers+ -threat of new entrants -threat of substitute products or services

Select all that apply Which of the following conditions lead to a strong threat of substitutes? Multiple select question. - when the established firms have many loyal customers - when new firms lack a "cool" factor - when the price-performance trade-off is attractive - when the cost of switching to the substitute is low

-when the price-performance trade-off is attractive - when the cost of switching to the substitute is low

Which of the following is an example of a recent innovation in process technology? Multiple choice question. - the microwave - the BP oil spill - the smartphone - lean manufacturing

- lean manufacturing

The cultures, norms, and values of the society in which a firm competes are considered ______ factors. Multiple choice question. - political - sociocultural - economic - PESTEL

sociocultural

There is a(n) ______ relationship between competitive intensity and the power of the five forces. Multiple choice question. disconnected inverted strong negative

strong

The ______ the forces, the ______ the expected competitive intensity, which in turn limits the industry's profit potential. Multiple choice question. weaker; stronger weaker; weaker stronger; stronger stronger; weaker

stronger; stronger

The threat of ______ is one of the five forces and can be exemplified by the threat that videoconferencing presents to business travel. Multiple choice question. entry suppliers buyers substitutes

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 ______. Multiple choice question. - vendor-changing costs - switching costs - switching gains - start-up costs

switching costs

True or false: The only legal means of retaliation against new entrants is price competition. - True - False

False

Redbox offers DVD rentals for $2, which is inexpensive when compared to the price of purchasing a DVD, which may be $10 or more. This is an example of ______. Multiple choice question. low costs of switching resulting in a low threat of substitution an attractive price-performance trade off resulting in a high threat of substitution low barriers to entry resulting in a high threat of competition high buyer power resulting in low barriers to entry

an attractive price-performance trade off resulting in a high threat of substitution

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. Multiple choice question. are interdependent are price takers engage in co-opetition engage in monopolistic behavior

are interdependent

Walmart producing private-label brands, such as Equate health and beauty items and Parent's choice baby products, is an example of ______. Multiple choice question. skip-hop integration backward integration horizontal integration forward integration

backward integration

When a buyer moves upstream in the industry value chain, into the suppliers' business, ______ occurs. Multiple choice question. - threat of substitutes - backward integration - rivalry of existing competitors - entry barriers - forward integration

backward integration

Production costs can increase when ______. Multiple choice question. - the power of suppliers goes down - buyers demand lower quality and less service - buyers demand higher quality and more service

buyers demand higher quality and more service

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 ______. Multiple choice question. - boom period, rise - downturn; rise - boom period; fall - downturn; fall

downturn; fall

A perfectly competitive industry has ______ entry barriers and ______ small firms. Multiple choice question. low; few high; many high; few low; many

low; many

In order to influence changes in their political environment, firms pursue ______. Multiple choice question. - revolutionary change - market strategies - nonmarket strategies - constitutional amendments

nonmarket strategies

When suppliers can demand higher prices for their inputs or reduce the quality of the input factor delivered, they demonstrate that they are ______. Multiple choice question. evil powerful weak desperate for business

powerful

The intensity with which companies in an industry jockey for market share and profitability is known as______. Multiple choice question. threats identification barriers rivalry

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

Obstacles that determine how easily a firm can enter an industry, are called ______. Multiple choice question. - entry barriers - supplier barriers - threats of substitutes - rivalry barriers

- entry barriers

Select all that apply Which of the following are examples of demographic factors? Multiple select question. - gender - age - sexual orientation - labor-force size

- gender - age - sexual orientation

In the PESTEL model, political factors are those that relate to ______. Multiple choice question. - government bodies - banking organizations - climate and weather - employment

- government bodies

Select all that apply Which of the following are examples of economic factors in the firm's general environment? Multiple select question. growth rates government regulations interest rates technological advancements price stability

- growth rates - interest rates - price stability

Select all that apply Which of the following help determine competitive industry structure? Multiple select question. composition of the board of directors height of entry barriers firms' degree of pricing power size and number of competitors the firm's resources

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

Changes in prices (a lack of price stability) is a direct function of ______. Multiple choice question. - dividend payments by companies - how many people live in a country - how much money is in the economy

- how much money is in the economy

The economic factors that affect a firm's external environment are ______. Multiple choice question. - primarily ecological - usually regional - often unidentifiable - largely macroeconomic

- largely macroeconomic

Select all that apply Which of the following are factors in a firm's legal environment? Multiple select question. - laws - demographic trends - mandates - regulations - innovative technology

- laws - mandates - regulations

Select all that apply Which of the following are employed as nonmarket strategies to influence government bodies? Multiple select question. advertising public relations lobbying litigation

- lobbying - public relations - litigation

Consumers tend to buy homes, automobiles, and computers when interest rates are ______ because credit is inexpensive. Multiple choice question. - fluctuating - low - variable - high

- low

In a period of economic boom, unemployment is ______, and human resources become expensive. Multiple choice question. - variable - fluctuating - high - low

- low

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

- low

The stronger the five forces in Porter's model, the ______ the industry's profit potential. Multiple choice question. - lower - stronger - higher - less differentiated

- lower

When managers understand the forces in the external environment, they are better able to ______. Multiple choice question. - understand the firm's internal resources - achieve price stability - illustrate the impact of strategic actions - mitigate threats and leverage opportunities

- mitigate threats and leverage opportunities

If the US dollar depreciates compared to the euro, it will take ______ dollars to buy one euro. Multiple choice question. - fewer - more - a deflated number of - the same number of

- more

Select all that apply For consumers who only watch a couple of movies per month, Redbox, which offers movie rentals for just $2, offers an attractive price-performance trade-off with low switching costs in comparison to which of the following? Multiple select question. movie theater tickets DVD purchases Netflix's streaming service Netflix's DVD rental service

- movie theater tickets - DVD purchases - Netflix's streaming service

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

limits to the industry's profit potential

Multiple Select Question Select all that apply Through use of the PESTEL model, firms are able to do which of the following? Multiple select question. - evaluate external trends - determine internal decision-making processes - monitor external factors - evaluate internal resources

- monitor external factors - evaluate external trends

Select all that apply Which of the following are the four main competitive industry structures? Multiple select question. monopoly perfect competition oligopoly monopolistic oligopoly perfect monopoly monopolistic competition

- monopoly - perfect competition - oligopoly - monopolistic competition

Select all that apply Which of the following are important sources of entry barriers? Multiple select question. - economies of scale - network effects - government policy - credible threat of retaliation - capital requirements - low product differentiation

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

Managers have ______ direct influence over external forces in the firm's general environment than those in the firm's task environment. Multiple choice question. - more - the same - vastly more - less

-less

Which of the following statements about Airbnb is correct? Multiple choice question. - It was spun off as a service developed by Google, Inc. - It handles more accommodations than the three biggest hotel chains combined. - It was founded before the Internet was created. - It operates only in North America and Europe.

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

Which statement about the five forces that shape competition is true? Multiple choice question. - They only apply to perfect competition. - Their strengths are context-dependent. - Their weaknesses are constant in all markets. - They impact all firms in the same way.

Their strengths are context-dependent.

True or false: The relative strengths of the five forces that shape competition are largely dependent on the context.

True

When buyers can credibly threaten to backwardly integrate into the industry, the power of buyers is ______. Multiple choice question. moderate high low insignificant

high

When suppliers do not depend heavily on the industry for a large portion of their revenues, the power of suppliers is ______. Multiple choice question. insignificant high low moderate

high

When suppliers offer products that are differentiated, the power of suppliers is ______. Multiple choice question. low high insignificant moderate

high

When there are a few buyers and each buyer purchases large quantities relative to the size of a single seller, the power of buyers is ______. Multiple choice question. insignificant moderate low high

high

Exit barriers, strategic commitments, and competitive industry structure are important factors in determining the ______. Multiple choice question. intensity of rivalry development of new products industry growth switching costs

intensity of rivalry

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 ______. Multiple choice question. oligopolistic industry natural monopoly monopolistic competition perfectly competitive industry

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? Multiple choice question. network effect user effect mass effect multiplicity effect

network effect

The fact that tax preparation software such as Intuit's TurboTax is a valid alternative for professional services offered by H&R Block and others, is an example of_____. Multiple choice question. the threat of suppliers the threat of substitutes the threat of alternatives the threat of replacement

the threat of substitutes

When restrictive government policies do not exist or when industries become deregulated, the _____ of entry is high.

threat

The ______ is the idea that products or services available from outside the given industry will come close to meeting the needs of current customers. Multiple choice question. power of buyers threat of new entrants rivalry of existing competitors threat of substitutes

threat of substitutes

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? Multiple choice question. - The market was characterized by rational exuberance. - People did not overvalue housing prices. - Economic boom periods can overheat and lead to speculative bubbles. - During economic boom periods, investors stay cautious and conservative.

- Economic boom periods can overheat and lead to speculative bubbles.

Select all that apply Which of the following are characteristics of a perfectly competitive industry? Multiple select question. Individual firms have little or no ability to raise prices. Consumers make purchasing decisions based on product features. The industry is fragmented. Firms in the industry sell a commodity product.

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

Select all that apply When a new firm enters an industry, which of the following often occur? Multiple select question. - Industry profit potential declines. - Incumbent firms increase their market share. - Incumbent firms lower prices. - Incumbent firms raise prices. - Incumbent firms spend more to satisfy customers.

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

Which is a negative effect of inflation? Multiple choice question. - It gives workers too much power. - It reduces purchasing power. - It drastically lowers prices. - It expands purchasing power.

- It reduces purchasing power.

Select all that apply Deflation is a serious threat to economic growth for which of the following reasons? Multiple select question. - It forces sellers to increase prices to meet a rise in demand. - It encourages companies to invest in new production capacity because they expect a further rise in prices. - It stops companies from investing in new production capacity because they expect a further decline in prices. - It distorts expectations about the future.

- It stops companies from investing in new production capacity because they expect a further decline in prices. - It distorts expectations about the future.

Select all that apply What might potential substitutes do to make themselves more attractive to customers? Multiple select question. Offer an unrelated usage. Offer greater profits. Offer a higher value proposition. Offer a lower price.

- Offer a higher value proposition. - Offer a lower price.

Which of the following statements about legal factors as an external force is true? Multiple choice question. - Regulatory changes tend to affect entire industries at once. - The U.S. government has allowed very few industries to be deregulated. - Legal factors affect a firm's profit potential only indirectly. - 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.

A group of companies that deal with more or less the same set of suppliers and buyers make up ______. Multiple choice question. - an industry - a business group - a state - a multi-environment

- an industry

Select all that apply Which of the following are examples of sociocultural factors? Multiple select question. - increased number of health-conscious consumers - method of raising income - growth of the Hispanic population - extended period of low interest rates

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

The relationship between the natural environment and business organizations can best be described as ______. Multiple choice question. - interdependent - a U-shape - unconnected - insignificant

- interdependent

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 ______. Multiple choice question. - economies of scale - bargaining power - switching costs - network effects

- switching costs

Select all that apply According to the PESTEL model, which of the following are kinds of forces that exist in the general external environment? Multiple select question. - leveraged - stakeholder - ecological - technological - economic

- technological - ecological - economic

The overall ______ is a measure of the change in the amount of goods and services produced by a nation's economy. Multiple choice question. economic growth rate level of employment currency exchange rate interest rate

- economic growth rate

Select all that apply Which of the following are examples of economies of scale? Multiple select question. - Spreading fixed costs over more units - Employing technology less efficiently - Spreading fixed costs over fewer units - Having more negotiating power vis-à-vis suppliers

- Spreading fixed costs over more units - Having more negotiating power vis-à-vis suppliers (page 83)

Select all that apply Which statements about the threat of retaliation are true? Multiple select question. - The threat of retaliation often acts as a deterrent to entry. - New entrants must anticipate how incumbent firms will react to their entry. - Incumbent firms may retaliate in ways that go beyond price competition. - Although the threat of retaliation exists, it is virtually never exercised.

- The threat of retaliation often acts as a deterrent to entry. - New entrants must anticipate how incumbent firms will react to their entry. - Incumbent firms may retaliate in ways that go beyond price competition.

What is true about the external forces called technological factors? Multiple choice question. - They capture the application of knowledge to create new process and products. - They quantify characteristics of the economy and business climate. - They represent official government decisions and regulations. - The describe society's norms and values.

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

Advantages based on brand loyalty, proprietary technology, preferential access to raw materials, and favorable geographic locations are examples of ______. Multiple choice question. - advantages for new entrants - advantages independent of size - advantages dependent on size - disadvantages dependent on size

- advantages independent of size

The amount that savers are paid for use of their money and the amount that borrowers pay for that use is known as ______. Multiple choice question. - a currency rate - a level of employment - an economic boom - an interest rate

- an interest rate

The pressures that industry suppliers can exert on an industry's profit potential, is also called the ______. Multiple choice question. - bargaining power of suppliers - rivalry amongst existing competitors - bargaining power of buyers - threat of new entry

- bargaining power of suppliers

A rise in economic growth is reflected by ______. Multiple choice question. - businesses closing operations due to lack of demand - businesses expanding operations to satisfy demand - businesses staying the same

- businesses expanding operations to satisfy demand

In general, how does a firm improve its strategic position? Multiple choice question. - by maintaining a level of profitability below its industry's average - by lowering the value it creates for customers in order to reduce costs - by increasing the gap between value of goods and cost of production - by increasing its costs while maintaining the value it creates for customers

- by increasing the gap between value of goods and cost of production

Select all that apply Which of the following are advantages, independent of size, that incumbent firms possess? Multiple select question. - inertia related to their structure - cumulative experience effects - brand loyalty - preferential access to distribution channels - fast reaction times to environmental changes due to their small size - proprietary technology

- cumulative experience effects - brand loyalty - preferential access to distribution channels - proprietary technology

The ______ rate determines how many dollars one must pay for a unit of foreign currency. Multiple choice question. - labor exchange - currency exchange - dollar growth - interest fluctuation

- currency exchange

Select all that apply Michael Porter developed the five forces model to help firms do which of the following? Multiple select question. - determine the profit potential of different industries - analyze PESTEL forces - gain and sustain a competitive advantage - understand the strengths and weaknesses of a firm's resources

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

Global warming would be an example of a ______ factor in a firm's external environment. Multiple choice question. political technological ecological sociocultural

- ecological

When companies seek ways to recharge car batteries in a sustainable way, it is an example of ______ factors creating business opportunities. Multiple choice question. - legal - political - economic - ecological

- ecological

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? Multiple choice question. - online effects - buyer-meets-seller effects - competition effects - network effects

- network effects (Page 85)

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 ______. Multiple choice question. - of excessive startup costs - of potential competitors entering the industry - that firms face due to strict government regulation - that firms face due to lack of funds

- of potential competitors entering the industry

Which factors result from the processes and actions of government bodies that influence the decisions and behavior of firms? Multiple choice question. - technological - political - economic - profitable

- political

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

The economic recession that began in 2008 in the United States was the result of unwise investment in ______. Multiple choice question. - the online economy - real estate - stocks - commodities

- real estate

Price ______ is the lack of change in price levels of goods and services. Multiple choice question. - stability - power - hazard - range

- stability

The five forces of Porter's model include the threat of entry and substitutes, rivalry among existing competitors, and the power of ______. Multiple choice question. - substitutes - suppliers and buyers - competitors or rivals - complementors

- suppliers and buyers

When a firm is able to maximize the gap between ______, it increases its competitive advantage. Multiple choice question. - the rate of growth and the rate of sales - the PESTEL analysis and the industry analysis - the number of employees and the number of positions to be filled - the cost of production and the value of what it produces

- the cost of production and the value of what it produces

Select all that apply According to Porter's model, which of the following should be considered when analyzing a firm's competition? Multiple select question. - the threat of substitutes - buyers - the regulations in possible host countries - suppliers

- the threat of substitutes - buyers - suppliers

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

- true

To determine economic value, one must subtract the cost of production from the ______. Multiple choice question. - value of a firm's product or service - total overhead of a firm - profit margins of the average competitor - marketplace

- value of a firm's product or service

Select all that apply The Alta Velocidad Espanola high-speed trains allow passengers to travel in comfort and reach their destinations in less time than it would take to fly to the same location. As a result, many people choose to take the train when traveling. Which of the following points are illustrated by this example? Multiple select question. A higher value proposition can make a substitute more appealing. Firms must look beyond their immediate industry for competitors. Non-price competition has far less influence than price-related strategies. Buyer power is sufficiently strong to impact industry profitability.

-A higher value proposition can make a substitute more appealing. - Firms must look beyond their immediate industry for competitors.

Select all that apply Which of the following innovative ideas helped Airbnb develop a successful business in the peer-to-peer rental space? Multiple select question. -Following the traditional rental model offered by hotels -Fortuitous timing that led to growing demand -Ensuring a smooth transaction between hosts and guests -Presenting a well-designed website

-presenting a well designed website -fortuitous timing that led to growing demand -developing a smooth transaction between hosts and guests

True or false: The relationship between firms and the natural environment must be adversarial.

False

According to the five forces model, competition involves not only creating economic value but also capturing a significant share of the economic value created. - True - False

True

New firms have been established in the airline and telecommunications industries after ______. Multiple choice question. new barriers to entry were erected deregulation additional regulations were implemented Congressional oversight increased

deregulation