MGT 491 Flores- Ch. 3 MC

How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces?

Threat of new entrants will be low.

Siham is a chef who owns three moderately successful restaurants with innovative menus. Based on what you have read, which of these approaches could help her improve her profits?

Use her existing knowledge, equipment, and staff to launch a catering business.

In an industry, the threat of entry is high when

capital requirements are low.

Companies in the same strategic group are ________ to each other.

direct competitors

A strategic group will typically include

firms within the same industry.

Urst Ammunition Inc., a firm controlled and managed by the government of Urst, is the only company that has the license to produce defense arms in the country. Which of the following industry competitive structures does this best illustrate?

monopoly

A firm's strategic position is likely to be strong when

the gap between the value the firm's product generates and the cost to produce it is large.

If you examine various barriers to entry facing firms that might wish to enter the airline industry, this would be most helpful in assessing which of the five forces in that industry?

threat of new entrants

The internet service provider industry in the country of Wakanda is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the internet service provider industry, the

threat of new entrants is most likely low.

Amanda is a management consultant for a soda manufacturer that wants to expand into health drinks such as green tea and after-workout drinks. Based on what you have read, which of these is sensible advice for Amanda to offer her client?

"Carefully consider the entry choices over time before making a decision."

Which of the following statements with regard to industry structures is true?

A consolidated industry tends to be more profitable than a fragmented one.

A "perfectly competitive" industry is one that

All of the answers are correct.

Which of the following fundamental insights was provided by Porter's five forces framework from the completion of the Alta Velocidad Española (AVE)?

Any of the five forces on its own, if sufficiently strong, can extract industry profitability.

In 2008, BlackBerry's market cap peaked at $75 billion. By 2017 this valuation had fallen more than 90 percent, to $3.9 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry's decline?

BlackBerry failed to change its device into one that could perform multiple tasks effectively.

Which of the following factors most contributes to the U.S. automotive industry being characterized by high entry barriers?

Car manufacturers require large-scale production in order to be cost-competitive.

Managers at SunTrustUs Properties are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates?

Consumer demand will increase.

Andrew is a management consultant. Hard Supplies Inc. asks him to evaluate their company, and he finds that the difference between the cost of producing the firm's products and the value of those products is extremely narrow. What should Andrew suggest that Hard Supplies Inc. management do?

Find a way to widen the gap between cost and value.

Steve manages product design and development at a toy company. The junior managers who report to him tell him that new complementors for the firm's products are available. What should Steve's reaction be?

He needs to find out if his company as well as other companies can provide the complements.

Which of the following is a primary feature of the five forces model?

It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

Which of the following is a drawback of Porter's five forces model?

Managers cannot determine the changing speed of an industry or the rate of innovation.

The ________ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.

PESTEL framework

Which of the following statements is true about strategic groups?

Profitability varies between different strategic groups.

Sally manages the supply chain for a company that sells diamond watches. She learns that economists are predicting a moderate to severe recession in the next six to eight months. Based on that information, what action should Sally recommend to the company's owner?

Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters.

Hank runs a company that manufactures satellites for commercial and government use. It has few rivals. At the moment, the power of buyers, the power of suppliers, and the threat of substitutes are all low. Based on this information, what can Hank conclude?

The company is likely to be very profitable as long as the threat to entry is low.

Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines?

The overall industry profitability will increase.

Samsung and Google cooperate as complementors to compete against Apple's strong position in the mobile device industry, while at the same time Samsung and Google are increasingly becoming competitive with one another. This scenario best illustrates the process of

co-opetition.

A new company named Waves Inc. entered the radio retail business, which is a fairly consolidated industry. In response, two large incumbent radio retailers, SMS Radio and TruRadio, lowered the price of their radios. Also, they spent more money to improve their radios and on additional marketing. By doing this, SMS Radio and TruRadio

decreased industry profit potential.

Tesla is addressing environmental concerns regarding the carbon emissions of gasoline-powered cars by building zero-emission battery-powered vehicles. This best represents which of the following PESTEL categories?

ecological

With the emergence of smartphones, users no longer have to carry a separate music player, a video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone is loaded with a variety of applications to satisfy all the customer needs that different industries or products individually satisfied earlier. As a result, the smartphone industry has been posing a threat to a lot of other unrelated industries. What is this phenomenon best known as?

industry convergence

Three large firms dominate the telecommunication industry of CallsRUs: TeleFone Inc., Cell Comm Corp., and Talk Now Inc. Instead of cutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in?

oligopoly

Due to economic regression in Jabu, the profitability of the large corporation Honey Comb Inc. was poor. An analysis of the company's business showed that the company could become profitable if it divested a few strategic business units under its banner. From which of the following businesses would Honey Comb Inc. find it most easy to exit?

the e-commerce retail business, where investments on assets are low

Bill is researching sociocultural factors related to his employer, a sporting goods manufacturer. Which of the following would be part of the sociocultural forces in a firm's external environment?

the family size of the firm's target market

During an interview for a CEO position, Jennifer's potential employers ask her, "If you get this job, will you focus more on industry effects or firm effects?" What should her answer be?

"Firm effects. I will be able to have the most impact on those."

TicToc Corp. is a manufacturer of smart watches that track the wearer's heart rate and sleep patterns. Which of the following is most likely an implication of new firms entering this industry?

The incumbent firms will spend more to satisfy their existing customers.

Todd is a manager in an industry that has a few large players and that has remained relatively stable over the past few years. He finds out that legislators are proposing new laws to deregulate the industry. If the laws pass, which of these scenarios will Todd most likely face?

many new competitors

How do low interest rates affect a business?

Firms can easily borrow money to finance future growth.

Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly?

In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.

Keeping in mind the five forces in the airline industry, which of the following best explains the difficulty airlines have in generating a profit?

Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry.

In which of the following situations is the power of suppliers high in an industry?

Suppliers' industry is more concentrated than the industry it sells to.

While Sesmic Inc. operates in a monopolistically competitive industry, Energy 4 All Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true?

The threat of new entrants will be higher for Sesmic than for Energy 4 All.

Years ago, the travel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets, and hotels for their customers. However, with the emergence of the internet, smaller travel agencies started mushrooming in the industry and customers started making their own reservations. Which of the following can be inferred from this information?

The travel industry changed from a consolidated structure to a fragmented one.

Given the structure of the automobile industry, entering the auto manufacturing industry seemed risky. Yet Tesla Motors joined the fray. Rather than attempting to compete head-on with internal combustion engines, Tesla Motors entered the all-electric car segment, a much less crowded niche in the overall car industry. Which of the following is Tesla most hoping to benefit from in this market niche?

economies of scale

Silvio is a manager at a software firm. The CEO tells him that the industry as a whole has become increasingly profitable over the past five years. Based on this information, Silvio is most likely to expect

increased competition in the future and therefore he should recommend that the company upgrade its products to slow the entry of rival companies.

Food Shipp Inc. is a food supply company that wants to sell its products directly to consumers through mail order instead of going through supermarkets and other stores. However, supermarket chains want to make this transaction either illegal or more difficult for Food Shipp. To accomplish this, they are using ________to influence the political process.

lobbying forces

WeBreak4Bikes Inc. has a new U.S.-based client in the bicycle industry. The client's company produces only bicycles for riding on the road. The bicycles are used for reliable general purpose transportation. When asked to identify a potential substitute for the bicycle industry from the Five Forces perspective, you would select

motorcycles.

All Signal Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all All Signal users are free. When a person switches to an All Signals network, his or her entire network of family and friends is likely to switch to the same network to receive the benefit of free calls and messages. In addition, an existing user who gets a new user to register with All Signal Inc. is given a free wireless connection. This has helped to keep competition away from All Signal. In this scenario, which of the following factors is acting as an entry barrier for All Signal Inc.?

network effects

ABC Inc., It's Electric Inc., and Wares Inc., the three largest firms in the consumer electronics industry, hold close to 85 percent of the industry's market share. These companies mainly compete against each other by providing unique features in their products rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate?

oligopoly

When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate?

perfect competition

Which of the following external forces is a part of a firm's task environment?

the composition of the strategic group to which the firm belongs

Jalen Corp., a large conglomerate, wants to liquidate its business in certain industries to improve its overall profitability. Which of the following industries would Jalen Corp. find it most difficult to exit?

the steel industry in which the company has obligations like severance pay toward employees

When automobile magazines face competition from automobile blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger?

the threat of substitutes

While implementing strategic group mapping for the U.S. domestic airline industry, two strategic groups become apparent: low-cost, point-to-point airlines (Virgin Atlantic, Alaska Airlines, JetBlue, and Southwest Airlines) versus differentiated airlines using a hub-and-spoke system (American, Delta, and United). Which of the following statements is true about these two strategic groups?

Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines.

How is a firm's task environment different from its general environment?

Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.

Which of the following is NOT considered an important macro-environmental influence on businesses (that is, a potential influence beyond that of the industry alone)?

bargaining power of suppliers

In a firm's external environment, ________trends primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.

demographic

In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because

entering the aircraft manufacturing industry requires huge capital investments.

In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry?

if the industry has recently become deregulated

The government of Pentsu has mandated that the standard minimum wage in the country be increased to $8,000 per year. Which of the following factors in a firm's general environment does this mandate best indicate?

legal factors

Which of the following options below would serve as a feasible option when deciding how to enter an established industry?

leverage existing assets

Hot Wok Cuisine is a premium Asian restaurant chain that differentiates itself from a large number of competitors by providing exclusively organic Chinese cuisine. It has some pricing power because it provides differentiated products and therefore, has some entry barriers in place. In this scenario, Hot Wok Cuisine is most likely operating in a(n)

monopolistically competitive industry.

Firms that compete within the same strategic group generally experience

more competitive rivalry than firms outside their strategic group.

Firms that are classified as operating in an oligopoly tend to have some pricing power if they are able to differentiate their product or service offerings from those of their competitors, so the recommended mode of competition is

non-price-based competition.

Nye Studios is a large production company that controls a major portion of the television industry's market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Nye Studios is most likely functioning in a(n) ________ industry.

oligopolistic

New Diamond Inc. is a company that sells 24-carat gold biscuits to companies that manufacture jewelry. Because the company operates in an industry where many other suppliers sell standardized products, it can most likely

only achieve competitive parity.

According to Porter's Five Forces approach, the overall goal of applying the Five Forces analysis to an industry is to make a judgment about its

overall attractiveness.

Competitive rivalry based solely on ________ is destructive to firms as it transfers most of the value created in the industry to the customers.

price-cutting

In recent years a growing number of U.S. consumers have become more health-conscious about what they eat. According to the PESTEL Framework this trend could best be classified as a ________ trend.

sociocultural

A firm's ________ relates to its ability to create value for customers (V) while containing the cost to do so (C).

strategic position

We Ensure Inc., an insurance firm, replaced its existing project management software with new software from another supplier. Since the new software has different features and abilities, We Ensure has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents We Ensure's

switching cost.

Which of the following is not captured when examining a competitive industry structure?

the ability to engage in forward vertical integration

Tommy, a manager, is writing an analysis of his employer's current and possible future revenues. Which of the following could he identify as an economic factor in his firm's external general environment?

the stage of the business cycle that the country is in