449

Clare, the CEO of Femica Inc., reads a market report which shows that the price elasticity of demand as measured by the change in demand for the products of Femica Inc. for a given change in the price of the product produced by the firm is around 4. Based on this piece of information, what should Femica do?

Insufficient Information for Pricing decision

Keeping in mind Apple's competitive advantage, which of the following products was introduced by Apple in 2007?

Iphone

The government of Filvia has mandated that the standard minimum wage in the country be increased to $8,000 per year. This has ensured that all firms in the country pay their employees at least $8,000 per year, which has brought about a higher standard of living for the people of Filvia. Which of the following factors in a firm's general environment does this mandate best indicate?

Legal factors

At what point can a firm achieve a profit maximizing quantity?

MR=MC

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.

Balmia Ammunition Inc., a firm controlled and managed by the government of Balmia, 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

3T Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all 3T users are free. When a person switches to a 3T network, his or her entire network of family and friends is likely to switch to the same network to avail the benefit of free calls and messages. In addition, an existing user who gets a new user to register with 3T Inc. is given a free wireless connection. This has helped to keep competition away from 3T. In this scenario, which of the following factors is acting as an entry barrier for 3T Inc.?

Network effects

Eon Inc., Electravia Inc., and FC 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

The telecommunication industry of United Canava is primarily dominated by three large firms, AD Telecom Inc., Mystic Telecom Corp., and Total Talk 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

Which of the following statements about strategy is NOT true?

Operational effectiveness and competitive benchmarking should be treated as strategy

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

PESTEL framework

In Galvania Republic, the federal government owns and manages all the nuclear power plants. This is because the business would not be profitable if there was more than one supplier in the nuclear power industry. Which of the following industry competitive structures does the scenario best illustrate?

Perfect competition

In which of the following industry competitive structures do selling firms have the lowest pricing power?

Perfect competition

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 is NOT an example of a software company's external stakeholder?

Project Managers

Which of the following best describes marginal revenue?

Rate of change in total revenue that results from the sale of ΔQ additional units of output

Motor Cult Inc. is an automobile firm whose core competency lies in manufacturing petrol- and diesel-based cars. The industry has been going through some ups and downs with the advent of electric cars. The firm has observed from experience that more of its potential customers are switching to electric cars. To learn more about the industry the firm is considering looking at market reports offered by different consultants. The firm has received four different market reports with different numbers and hence are confused as to which market report is more accurate. Based on your understanding of industry analysis, which of these market reports are consistent with the observation that electric cars are taking over petrol/diesel-based cars:

Report 2: Buyer Bargaining power = -8 and Threat of substitutes = 6

In the smartphone industry, Google is a complementor to Samsung. Which of the following statements best explains why this is true?

Samsung's smartphones increase in value when they are pre-installed with Google's Android system.

While industry forces have been favorable for a long time in the U.S. automotive industry, recent dynamics have lowered the profit potential of competing in this industry and thus reduced its attractiveness. The continued success of Tesla Motors in the industry will depend on other firm and industry factors. Which of the following represents one such factor that directly affects Tesla Motors?

Since suppliers of its key sources are few, the bargaining power of suppliers is high

is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.

Strategy

In _______, a firm frames a guiding policy to address the competitive challenge.

Strategy Formulation

Through______, a firm puts its guiding policy into practice by employing a set of coherent actions.

Strategy Implementation

Keeping in mind the five forces in the airline industry, which of the following best explains the situation in the industry?

Substitutes are readily available in the form of trains and buses, 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.

Cadia Foods Inc. was the first company to start selling energy drinks in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of energy drinks, thereby giving Cadia Foods ample competition. In response, Cadia Foods decided to limit its variety of energy drinks to only two. However, it ensured that these two flavors were free of calories and low in cost. With this innovation, Cadia Foods Inc. consistently outperformed its competitors for ten years. In this scenario, Cadia Foods Inc. has maintained a ________ through its innovative strategy.

Sustainable Competitive Advantage

Which of the following forces tends to be more important in determining a firm's performance?

The actions of managers within the firm

Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services?

The firms can differentiate their product offerings.

Which of the following best describes marginal cost?

The incremental cost of producing one more unit of output

Which of the following is most likely an implication of new firms entering an industry?

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

The basic law of demand says that all other things being the same, _______________________

The lower the price of a product, the more of it consumers will purchase

Which of the following would not be a characteristic of a good with an elastic demand?

The product has high switching costs

Which of the following do the sociocultural forces in a firm's external environment best represent?

The rate of employee attrition within the firm

Which of the following represents an economic factor in a firm's external general environment?

The stage of the business cycle that the country is in

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

The threat of substitutes

Which of the following statements accurately describes firm effects?

They attribute firm performance to the actions managers take within a chosen industry.

Which of the following scenarios illustrates a firm that has a sustainable competitive advantage?

TrueLink Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years.

For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance?

Trying to be everything to everybody by combining different competitive strategies

If a firm is producing as efficiently as it knows how, then how will the total cost function slope?

Upward

Which of the following features about a buyer indicates that the buyer has high bargaining power?

When the buyer operates in an industry where products are undifferentiated

Beans Inc. operates in a perfectly competitive agricultural industry. Classica Apparel Inc., in contrast, operates in a monopolistically competitive industry. Keeping this information in mind, which of the following statements is true?

While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so

Bill is a strategy consultant who is currently analyzing the medical devices industry. He conducts an industry analysis and find that the Hirschmann-Herfindahl index is at 2700, the buyer bargaining power as measured through the regression coefficient is at 2.7, the supplier bargaining power as measured through the regression coefficient is at 3.8 and the threat of substitutes again as measured through a regression coefficient is at -2.9. What can he best conclude given this analysis?

Willingness to Pay may increase, Price may increase and Costs may increase

Which characteristic is present in a perfectly competitive market?

all of the above

Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a supermarket chain. It demands that All Needs create more shelf space in its stores for Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, it decides to produce its own range of cleaning agents with its own label "All Wash." In this scenario, All Needs Inc. has exercised its bargaining power as a buyer through ________.

backward integration

In an industry, the threat of entry is high when:

capital requirements are low.

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 company is best described as a ________ to an existing company if customers value the existing company's product or service offering more when they are able to combine it with the other company's product or service.

complementor

Demand for traditional fast-food providers such as McDonald's, Burger King, and Wendy's has been on a decline in recent years. Consumers have become more health conscious and demand has shifted to alternative restaurants like Subway, Chick-fil-A, and Chipotle. Attempts by McDonald's and Wendy's to steal customers from one another include frequent discounting tactics such as dollar menus. Such competitive actions are indicative of ________.

cut-throat competition

When applying the five forces model, the first step should ideally be

defining the relevant industry

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

demographic trends

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 the ________ developed by Michael Porter, competition 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.

five forces model

Economies of scale are cost advantages that accrue for firms with:

larger output.

During periods of high industry growth:

price competition among firms frequently decreases

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

Derek, a retired CEO, invests capital in a start-up company that creates mobile applications. He mentors the entrepreneur and the employees of the company because he wants the company to perform well and survive in the market. Thus, Derek is the start-up company's ________.

stakeholder

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

strategic position

The relative bargaining power of suppliers is high when:

suppliers provide products that are differentiated

First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. Since the new software has different features and abilities, First Ledger Inc. has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents First Ledger Inc.'s ________.

switching cost

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

The telecom industry in the country of Andalus 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 telecom industry, the:

threat of new entrants is most likely low

The primary objective of Porter's five forces model is to:

understand the profit potential of different industries.

Which of the following would be the range of elasticity for a product with an "inelastic" demand?

η < 1

Which of the following would be the range of elasticity for a product with an "inelastic" demand?

η > 1

Suppose an entrepreneur starts a business earning $2M in revenue in 2009 while at the same time incurring $1.8M in costs. If the entrepreneur's best outside alternative employment opportunity is to earn $300K, what are the firms accounting and economic profits?

$200K, -$100K

If TC(Q)=1000Q2+100Q+10, what is the formula for AC(Q)

1000Q+100+10/Q

Which of the following statements is NOT true about the five forces in Porter's competitive analysis model?

A) The relative strengths of the five forces that shape competition are context-dependent. B) Competition in the model is described as the tug-of-war between the five forces to capture as much as possible of the economic value created in an industry. C) An analysis of the five forces provides the basis for how a firm should position itself to gain and sustain a competitive advantage. !!!D) The stronger the five forces in an industry, the greater the industry's profit potential.

How can a firm change its industry structure from monopolistically competitive or oligopolistic to a near monopoly?

By developing proprietary technology

Which of the following factors best 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.

________ is best described as cooperation by competitors to achieve a strategic objective

Co-opetition

If SA Pharmaceuticals obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other pharmaceutical companies?

Comparing the return to the return on invested capital obtained by other firms in the industry

Which of the following strategies will be most detrimental to firms that are close rivals operating in an oligopolistic industry structure?

Competing against each other through price-cutting

A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n) ________.

Competitive Advantage

Underperformance relative to other firms in the same industry or the industry average results in a(n) ________ for a firm

Competitive Disadvantage

Exis Inc. and Stelma Inc. are two companies that have been manufacturing typewriters for almost 30 years. Due to the reduced demand for typewriters today, both companies' average return on invested capital is approximately -5 percent. The current industry average is 2 percent. In this scenario, Exis Inc. and Stelma Inc. most likely have:

Competitive parity with each other

Which of the following is an implication of low interest rates?

Consumer demand will increase.

Which of the following is a feature of a monopolistically competitive industry?

Differentiated products

True Cinemas Inc. and Digi Future Inc. are two companies that own and run movie theaters in malls and other commercial areas. While True Cinemas Inc. pursues a cost-leadership strategy, Digi Future Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario?

Digi Future and True Cinemas will not be direct competitors to each other and their customer segments will overlap very little.

Industry effects describe the underlying ________ structure of the industry.

Economic

Pure Food Inc., a multinational company, relies on its media partner Radio Ex to regularly advertise its offers, sales, and new products. Radio Ex is invested in this relationship because it generates most of its revenue from advertising Pure Food's products. In this scenario, Radio Ex is Pure Food Inc.'s ________.

External Stakeholder

Stakeholder strategy is an integrative approach to managing a diverse set of stakeholders effectively in order to ________.

Gain and sustain competitive advantage

Geronimo Inc. is operating in an industry where there are three other competitors. In the previous five years, Geronimo has held a market share of around 60% consistently and the undisputed market leader in the industry. The products produced by Geronimo are generic and not differentiated. However, given their market leadership Geronimo decides to increase its prices for the coming year. Identify the impact of this decision

Geronimo is likely to lose market share

Which of the following is a feature of an oligopolistic industry structure?

High entry barriers

In what special situation might the law of demand not hold?

If high prices confer prestige

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

Green Curry is a restaurant that caters to the needs of a small percentage of highly health-conscious consumers. It has an all-organic, vegan menu. Sincere there are very few restaurants that offer the same unique services, customers are willing to pay a premium price for its products and services. Through market research the company estimates that if they increase price by 1%, their demand is likely to increase by around 3%. Meanwhile, Red Curry is a restaurant that does not offer organic vegan menu. Through market research, Green Curry also finds that increase their price by 1% will lead to a decline in demand for Red Curry's products by around 2% In this backdrop the optimal decision for Green Curry is to?

Increase price over its competitors.