MAN Chp 2

Five Forces of Competition Model

1. Threat of new entrants 2. Bargaining power of suppliers 3. Bargaining power of buyers 4. Threat of substitute products 5. Rivalry among competing firms

In a suburban community outside a city in Alabama, a retail store opened that specialized in dancewear for children and adults. It was moderately successful for five years until the local newspaper published an exposé that scanty lingerie stocked in the back of the store's showroom was selling briskly to a certain clientele. Afterward, the store lost most of its customers and nearly closed. Which of the following segments of the environment did the store owners fail to take into account when they began selling the lingerie? A: Sociocultural B: Economic C: Demographic D: Political/legal

A: Sociocultural

Competitor analysis focuses on: A: firms with which the company competes directly. B: firms that produce products that are substitutes. C: all firms in the industry. D: companies that might enter the industry.

A: firms with which the company competes directly

The __________ environment is composed of dimensions in the broader society that influence an industry and the firms within it. A: general B: competitor C: sociocultural D: industry

A: general

An owner of a stable of racehorses has been earning below-average returns for more than 15 years. To a colleague, he expressed his determination to stay in horse racing until he died because "racing is in my blood." This individual is probably still racing horses because of: A: high barriers to exit. B: high switching costs. C: high fixed costs. D: low levels of competitive rivalry.

A: high barriers to exit

The aircraft industry has long been dominated by two large aircraft manufacturers, Boeing and Airbus. The demand for major aircraft is low, and Boeing and Airbus aggressively compete for orders from airlines. Which of the following effects will these conditions have on the domestic airline industry? A: It will make the airline industry more attractive because of decreased supplier power. B: It will make the airline industry less attractive because of decreased supplier power. C: It will make the airline industry more attractive because of increased supplier power. D: It will make the airline industry more attractive because of a new entrant.

A: it will make the airline industry more attractive because of decreased supplier power

A certain marble quarry provides a unique type of marble that is richly colored and strikingly veined. It has been used for churches and public buildings throughout the world. The architect of a new headquarters for a prestigious Fortune 500 firm has specified the use of this marble, and this marble only, for the project. Which of the following statements is MOST likely to be true? A: The cost of the marble will be expensive because of the bargaining power of the supplier. B: The cost of the marble will be moderate because of the bargaining power of the buyer. C: The cost of the marble will be moderate because of economies of scale. D: The cost of the marble will be expensive because of the high strategic stakes involved.

A: the cost of the marble will be expensive because of the bargaining power of the supplier

Environmental scanning would be MOST important for which of the following organizations? A:A provider of hospice services for the terminally ill B: A web design company catering to small businesses C: A neighborhood sewer and water utility D: A manufacturer of household linens

B: a web design company catering to small businesses

DWK Foods has developed a line of cookies and candies sweetened exclusively with organic honey. Although DWK is selling some of the products over the Internet, in order to gain economies of scale, the products must be sold in retail outlets as well. The main barrier to entry that DWK is likely to encounter here is: A: government licensing and permits. B: access to distribution channels. C: consumers' switching costs. D: cost disadvantages independent of scale.

B: access to distribution channels

All of the following are aspects of the political/legal segment of the general environment EXCEPT: A: antitrust laws. B: attitudes and values. C: taxation laws. D:deregulation philosophies.

B: attitudes and values

Firms within strategic groups: A: follow dissimilar strategies. B: follow similar strategies across certain dimensions. C: typically engage in greater intergroup rivalry than intragroup rivalry. D: exist almost exclusively in the manufacturing sector.

B: follow similar strategies across certain dimensions

According to the five forces model, an unattractive industry would include all of the following characteristics EXCEPT: A: low barriers to enter. B: low supplier power due to commodity inputs. C: high threat of substitute products due to a large number of low-cost alternatives. D: high bargaining power of buyers due to low switching costs.

B: low supplier power due to commodity inputs

Which of the following would NOT be identified in an analysis of the economic portion of the general environment? A: The willingness of Chrysler's buyers to purchase large vehicles in light of an increase in oil prices B: The ability of Ford to issue new debt in light of its recent financial performance C: The ability of BMW's buyers to finance car purchases in light of a change in interest rates D: The willingness of GM buyers to purchase new vehicles in light of the threat of recession

B: the ability of Ford to issue new debt in light of its recent financial performance

The threat from substitutes is high when: A: switching costs are high. B: the substitute product's price is lower than the industry product's price. C: the quality of the substitute product is lower than the quality of the industry's product. D: the substitute product stimulates new process innovations within the industry.

B: the substitute product's price is lower than the industry product's price

Acme Valves, Inc., has been a successful player in the oil field supply industry in the last 15 years. Acme maintained its strategy and product characteristics over this time period. However, the company has experienced declines in sales and profits over the last four quarters. The CEO of Acme should: A: continue with the proven strategy because its returns over the long run are important. B: focus on improving efficiency of production and cost control. C: conduct an analysis of the external environment. D: immediately begin making incremental adjustments to the traditional business strategy in an effort to improve sales.

C: conduct an analysis of the external enviornment

All of the following are forces that create high rivalry within an industry EXCEPT: A: numerous or equally balanced competitors. B: high fixed costs. C: fast industry growth. D: high storage costs.

C: fast industry growth

Because of threats and risks in the global environment, some firms choose to take a more cautious approach by: A: avoiding global markets altogether. B: expanding only to developed countries. C: focusing on global niche markets. D: acquiring already established firms in foreign markets.

C: focusing on global niche markets

When analysts develop feasible projections of future events and how quickly they will occur based on observed changes and trends, they are engaged in: A: scanning. B:monitoring. C:forecasting. D:assessing.

C: forecasting

Customer loyalty programs such as airline frequent flyer miles are an attempt to: a: decrease competitors' access to distribution channels. b: develop a cost advantage independent of scale. c: increase customers' switching costs. d: overcome the perishability of the hotel "product."

C: increase customers' switching costs

Economies of scale refers to the fact that as the quantity of product produced in a given time period __________, the cost of manufacturing each unit __________. A: increases; increases B: increases; remains constant C: increases; decreases D: decreases; decreases

C: increases, decreases

Buyers are powerful when: A: there is a threat of forward integration. B: they purchase a small proportion of the supplier's output. C: switching costs are low. D: the buyers' industry is fragmented.

C: switching costs are low

Understanding how new knowledge can develop new products, processes, or materials is a result of analyzing the __________ segment of the general environment. A: economic B: political/legal C: technological D: global

C: technological

Competitor intelligence is: A: legally or illegally gained data about competitors' internal strategic processes and competitive decisions. B: strategic information gained from industrial espionage targeting international competitors. C: the set of data and information the firm gathers to better understand competitors' objectives, strategies, assumptions, and capabilities. D: illegal to gather under the Sarbanes-Oxley Act.

C: the set of data and information the firm gathers to better understand competitors' objectives, strategies, assumptions, and capabilities

An analysis of income distribution would include all of the following EXCEPT: a: the purchasing power of various age groups. b: the discretionary income of various ethnic groups. C: wage differentials between male and female employees working for a large manufacturer. D: how income is distributed among regions of the United States.

C: wage differentials between male and female employees working for a large manufacturuer

Which of the following would be an example of the application of the next major technological opportunity for organizations? A: Boeing's 747 B: Toyota's hybrid vehicles C: Budweiser's non-alcoholic beer D: SpaceX's reusable space vehicle

D: SpaceX's reusable space vehicle

All of the following are ethical sources of data for external analysis EXCEPT: a: trade shows. b: a competitor's annual reports. c: a competitor's help-wanted advertisements. d: a competitor's confidential memos.

D: a competitor's confidential memos

In analyzing the demographic segment of the general environment, one typically examines all of the following factors EXCEPT: A: age structure. B: ethnic mix. C: distribution of income. D: cultural values.

D: cultural values

The U.S. Hispanic market is the third largest "Latin American" economy behind Brazil and Mexico. This impacts the __________ aspect of demographic segment analysis. A:age structure B: geographic distribution C: income distribution D: ethnic mix

D: ethnic mix

An analysis of the economic segment of the external environment would include all of the following EXCEPT: a: interest rates. b: trade deficits or surpluses. C: inflation rates. D: income distribution.

D: income distribution

All of the following are examples of efforts by firms to address the physical segment of the general environment EXCEPT the: A: development of sustainable packaging by McDonald's. B: reduction in carbon dioxide emissions by Procter & Gamble. C: reduction in water usage in plants by Unilever. D: increase in hiring of women and minorities at Microsoft.

D: increase in hiring of women and minorities at microsoft

A manufacturer of washing machines has expanded its plant and created excess capacity, just as the general economy takes a downturn. The company is likely to: A: raise prices on washing machines to offset lost sales. B: be vulnerable to new entrants to an attractive market. C: suffer from intense rivalry from international manufacturers. D: offer rebates and incentives to customers to promote sales.

D: offer rebates and incentives to customers to promote sales

Coca-Cola and PepsiCo have been accused of contributing to the obesity problem in the United States. This accusation comes from the __________segment of the general environment. A: choices economic B: political/legal C: technological D: sociocultural

D: sociocultural

Aardvark Corp. has three products. Two products together make up two-thirds of revenues and constitute 50 percent of company profits. Aardvark's third product makes up one-third of sales. With profitability far above the industry average, this product is responsible for one-half of Aardvark's profits. Which of the following statements regarding assessment of the general environment is accurate for Aardvark? a: the company should monitor the general environment for changes that might affect the revenue of all products. b: The company should monitor the general environment for changes that might affect the profitability of the most profitable products. c: The company should monitor the general environment for changes that might affect the profitability of all products. d: The company should monitor the general environment for changes that might affect the revenue and profitability of all products.

D: the company should monitor the general environment for changes that might affect the revenue and profitability of all products

segments of the general environment

Demographic Economic Political/legal Sociocultural Technological Global Physical look at them in notes

capital requirements

Entering a new industry requires resources to invest. Need money for physical faculties, marketing activities, and other critical business functions.

Cost Disadvantages Independent of Scale

Some existing competitors may have advantages that are independent of size or economies of scale. new entrants cannot duplicate these These derive from: • Proprietary products • Favorable access to raw materials • Government subsidies • Favorable government policies

threat

a condition in the general environment that may hinder a company's efforts to achieve strategic competitiveness

opportunity

a condition in the general environment that, if exploited effectively, helps a company reach strategic competitiveness

industry

a group of firms producing products that are close substitutes

strategic group

a set of firms emphasizing similar strategic dimensions and using a similar strategy

forecasting

analysts develop feasible projections of what might happen, and how quickly, as a result of the events and trends detected through scanning and monitoring

monitoring

analysts observe environmental changes to see if an important trend is emerging from among those spotted through scanning

buyers/customers can become competitors through integrating

backwards

Consolidation among fuel providers serving airport facilities is viewed in the five forces model of competition as a(n): a: reduction of the airlines' ability to benefit from economies of scale. b: increase in switching costs because the airlines have no choice but to use jet fuel and other oil products. c: increase in the bargaining power of suppliers of a critical input. d:increase in the intensity of rivalry among airlines for scarce resources.

c: increase in the bargaining power of suppliers of a critical input

complementors

companies or networks of companies that sell complementary goods or services that are compatible with the focal firm's good or service

general environment

composed of dimensions in the broader society that influence an industry and the firms within it

Access to distribution channels

firms nurture relationships with distribution centers which creates switching costs for those centers

suppliers can become competitors through integrating

forward

competitor analysis

how companies gather and interpret info about their competitors

switching costs

one-time costs customers incur when they buy from a different supplier

product differentiation

over time, customers may come to believe that a firm's product is unique(ie coke and pepsi)->leads to customer loyalty

success is measured

relative to other firms in the industry

four assessment tools used for all 7 segments of the general environment:

scanning, monitoring, forecasting, assessing

assessing

the objective is to determine the timing and significance of the effects of environmental changes and trends that have been identified

competitor intelligence

the set of data and information the firm gathers to better understand and anticipate competitors' objectives, strategies, assumptions, and capabilities

industry environment

the set of factors that directly influences a firm and its competitive actions and responses: the threat of new entrants, the power of suppliers, the power of buyers, the threat of product substitutes, and the intensity of rivalry among competing firms

scanning

the study of all segments of the general environment used to look for early warning signs internet helps with this

global focusing

used by firms with moderate levels of international operations who increase their internationalism by focusing on global niche markets->this lets them use their core competencies while minimizing risks