MGT449 Chapter 3 Quiz (for exam)

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 Tesla is hoping to benefit from economies of scale in this market niche. Economies of scale are cost advantages that accrue for firms with larger output because they can spread fixed costs over more units, can employ technology more efficiently, can benefit from a more specialized division of labor, and can demand better terms from their suppliers.

For-profit businesses operating in long-standing fields such as energy and transportation usually operate in an environment of price stability. True or false?

False Price stability—the lack of change in price levels of goods and services—is rare. Therefore, companies will often have to deal with changing price levels.

Because competitors in oligopolistic industries are so interdependent, it is especially important for managers in those firms to monitor and respond to changes their competitors make. True or false?

True A key feature of an oligopoly is that the competing firms are interdependent. With only a few competitors in the mix, the actions of one firm influence the behaviors of the others. Each competitor in an oligopoly, therefore, must consider the strategic actions of the other competitors.

Quick Market 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 Quick Market. To accomplish this, they are using ________ to influence the political process.

lobbying forces Many large companies use powerful lobbying forces to influence the political process.

Luz manages a chain of bars and restaurants in a tri-county area that has recently experienced an economic boom because of fracking and high oil prices. What is most likely to happen when there is too much money in the tri-county economy?

an increase in prices Too much money in an economy is characterized by rising prices—inflation. Inflation tends to go along with higher interest rates and lower economic growth.

In the five forces model developed by Michael Porter, ________ is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes.

competition In Porter's five forces model, competition is not defined narrowly as a firm's closest competitors but rather more broadly to include other forces in an industry: buyers, suppliers, potential new entry of other firms, and the threat of substitutes.

Fadia Ammunition Inc., a firm controlled and managed by the government of Fadia, 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 This best illustrates a monopoly. An industry is a monopoly when there is only one (large) firm supplying the market.

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

only achieve competitive parity. Since the company operates in an industry where many other suppliers sell standardized products, it can most likely only achieve competitive parity. Firms in perfect competition have difficulty achieving even a temporary competitive advantage and can achieve only competitive parity.

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 External factors in a firm's task environment are ones that managers do have some influence over, such as the composition of their strategic groups (a set of close rivals) or the structure of the industry.

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

the steel industry in which the company has obligations like severance pay toward employees Peerless Inc. would find it most difficult to exit the steel industry in which the company has obligations like severance pay toward employees. Exit barriers are comprised of both economic and social factors. A company exiting an industry may still have contractual obligations to suppliers, such as employee health care and retirement benefits, as well as severance pay.