Business Strategy Chapter 3
complementor
A company is best described as a _________ to an existing company if customers value the existing product or service offering more when they are able to combine it with the other company's product or service
strategic position
A firms ______ relates to its ability to create value for customer (V) while containing the cost to do so (C).
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
Benas Inc. operates in a perfectly competitive agricultural industry. Classic Apparel Inc., operates in a monopolistically competitive industry. keeping this information in mind, which of the following statements is true?
network effects
Clear Calls Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all Clear Calls user are free. This has helped to keep competition away from Clear Calls. In this scenario, which of the following factors is acting as an entry barrier for Clear Calls Inc.?
monopolistic competition
Corner Market Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Corner Market has aggressively used branding, pricing, and superior customer service uniquely position itself in the market. which of the following industry competitive structures does this scenario best illustrate?
monopolistically competitive industry
Curry Rush is a premium Asian restaurant chain that differentiates itself from a large number of competitors by providing exclusively organic Vietnamese cuisine. In this scenario, Curry Rush is most likely operating in a(n)
cutthroat competition
Demented for traditional fast food providers such McDonalds, Burger King, and Wendy's has been on a decline in recent years. Such competitive actions are indicative of
the e-commerce retail business where investments on assets are low
Due to economic regression in United Fillip, the profitability of the large conglomerate Blue Wing Products Inc. (BWP) was poor. from which of the following businesses would BWP find it most easy to exit?
oligopoly
Eon Inc., Electravia Inc., and FC Inc., the three largest firms in the consumer electronics industry, hold close to 85% of the industry market share. which of the following industry competitive structures does this scenario best illustrate?
switching cost
First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. In this scenario, $10,000 represents First Ledger Inc.'s
low entry barriers
Five years ago, Palomino Airline was able to get a strong foothold in the airline industry by hiring a few pilots and crew and renting two airplanes, which flew routes between Denver, Omaha, Pierre, Cheyenne, and Helena. which of the following summarizes the above factors that enabled Palomino to get started?
economies of scale
Given the industry structure in the automobile business, entering the auto manufacturing industry doesn't seem advisable. Yet Tesla motors is joining the fray. Rather than attempting to compete head on in internal combustion engines, Tesla motors is entering 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?
Blue Skies Airlines Inc., which follows a low cost strategy
Go West Airlines Inc. follows a cost leadership strategy. which of the following firms will most likely be its direct competitor?
a premium rooftop restaurant in the same city
Golden Harvest is a restaurant located inside a five star hotel. In this scenario, which of the following will be a part of Golden Harvest's strategic group?
strategic group
Home Savings, Good Deals, Hanks Store, and King Bargains are all departmental stores that compete or advantage against each other through everyday low pricing and discounts on bulk purchases. Thus together HS, GD, HS, and KB form a
Virgin America offered low cost service between major metropolitan cities on the American East and West coasts
How did Virgin America entire the airline industry despite the industry notoriously low profitability?
five forces model
IN the _____ developed by Michael Porter, competition is not defined narrowly as a firms 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.
natural monopoly
In Rozinia Republic, the federal government owns and manages all the nuclear power plants. Which of the following industry competitive structures does the scenario best illustrate?
monopoly
Nadia 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?
the steel industry in which the company has obligations like severance pay toward employees
Peerless Inc., a lare 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?
only achieve competitive parity
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
lobbying forces
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. to accomplish this, they are using __________ to influence the political process
oligopolistic
Rhino Pictures Inc. is a large production company that controls a major portion of the movie industry's market share along with two other firms. in this scenario, Rhino Pictures Inc. is most likely functioning in a(n) _____________ industry
co-opetition
Samsung and Google cooperate as complementary to compete against Apples 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
a premium car manufactured and sold by Mova Autos Inc., a rival company
Shield Autos Inc. has newly launched a luxury car into the European market. which of the following would most likely not be a complement to the car?
backward integration
Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a supermarket chain. IN this scenario, All Needs Inc. has exercised its bargaining power as a buyer through
understand the profit potential of different industries
The primary objective of Porter's five forces model is to
the travel industry changed from a consolidated structure to a fragmented one
The ravel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets and hotels for their customers. which of the following can be inferred from this information?
threat of new entrants is most likely low
The telecom industry in the country of New Taria 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
oligopoly
The telecommunication industry of United Canava is primarily odminicated by three large firms: AD Telecom Inc., Mystic Telecom Corp., and Total Talk Inc.which of the following industry competitive structures are these companies most likely in?
the threat of new entrants will be higher for Burger Cult Inc. than Citizen Telecom Inc.
While Burger Cult Inc. operates in a monopolistically competitive industry, Citizen Telecom Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true?
Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines
While implementing strategic group mapping for the US domestic airline industry, two strategic groups become apparent: low cost, point, point to point airlines. which of the following statements is true about these two strategic groups?
mobility barriers
______ are best described as industry- specific factors that separate one strategic group form another
co-opetition
__________ is best described as cooperation by competitors to achieve a strategic objective
the gap between the value the firms product generates and the cost to produce it is large
a firms strategic position is likely to be strong when
horizontal mergers and acquisitions
a fragmented industry is made into a consolidated industry through
are interdependent
a key feature of an oligopoly is that the competing firms
firms within the same industry
a strategic group will typically include
they earn low profits or are strapped for cash
buyers are highly price sensitive when
direct competitors
companies in the same strategic group are ______ to each other
price-cutting
competitive rivalry based solely on _____ is destructive to firms as it transfers most of the value created in the industry to the customers
price competition among firms frequently decreases
during periods of high industry growth
larger output
economies of scale are cost advantages that accrue for firms with
threat of new entrants will be low
how are cumulative learning and experience effects of a company most likely to affect Michael Porters five forces?
by developing proprietary technology
how can a firm change its industry structure from monopolistically competitive or oligopolistic to a near monopoly?
firms can easily borrow money to finance future growth
how do low interest rates affect a business?
managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment
how is a firms task environment different form its general environment?
BlackBerry failed to change its device into one that could perform multiple tasks effectively
in 2008, BlackBerrys market cap peaked at $75 billion. By 2015 this valuation had fallen more than 90 percent, to less than $7 billion. Blackberry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerrys decline?
demographics trends
in a firms external environment, _____ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.
incumbent firms are highly committed to the business
in an industry, the rivalry among existing competitors is high when
capital requirements are low
in an industry, the threat of entry is high when
entering the aircraft manufacturing industry requires huge capital investments
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
Samsung smartphones increase in value when they are preinstalled with googles android system
in the smartphone industry, Google is a complementor to Samsung. which of the following statements best explains why this is true?
perfect competition
in which of the following industry competitive structures do selling firms have the lowest pricing power?
if the industry has recently become deregulated
in which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry?
suppliers industry is more concentrated than the industry it sells to
in which of the following situations is the power of suppliers high in an industry?
formerly unrelated industries begin to ratify the same customer need
industry convergence is a process whereby
substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry
keeping in mind the five forces in the airline industry, which of the following best explains the situation in the industry?
PESTEL framework
the _______ allows the scanning, monitoring, and evaluating of changes and trends in a firms macro environment
draw a strategic group map
the final step in industry analysis is to
legal factors
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 firms general environment does this mandate best indicate?
suppliers provide products that are differentiated
the relative bargaining power of suppliers is high when
there is an increase in prices
what is most likely to happen when there is too much money in an economy?
the weaker the five forces, the greater the industry's profit potential - making the industry more attractive
what is the rule of thumb behind Porters five forces model?
defining the relevant industry
when applying the five forces model, the first step should ideally be
perfect competition
when companies that manufacture shipping containers wants to buy iron ore, the purchase decision is solely based on price. which of the following industry competitive structures does the iron ore industry best illustrate?
the threat of substitutes
when fashion magazines face competition from fashion blogs on the web, which of the following forces in Porters five forces model primarily gets stronger?
when firms make strategic commitments to compete in an industry
when is the rivalry among existing competitors in an industry likely to be more intense?
an automobile manufacturer uses branding, pricing, and superior advertising to differentiate itself from a large number of other automobile manufacturers
which of the following best illustrates a firm operating in a monopolistically competitive industry?
the family size of the firms target market
which of the following do the social cultural forces in a firms external environment best represent?
the composition of the strategic group to which the firm belongs
which of the following external forces is a part of a firms task environment?
car manufacturers require large scale production in order to be cost-competitive
which of the following factors best contributes to the US automotive industry being characterized by high entry barriers?
when the buyer operates in an industry where products are undifferentiated
which of the following features about a buyer indicates that the buyer has high bargaining power?
a company that manufactures its own brand of desktops and laptops
which of the following firms will most likely not be a complementor a firm that manufactures computers?
strategic role of complements
which of the following forces was not originally a part of Porters five forces model?
any of the five forces on its own, if sufficiently strong, can extract industry profitability
which of the following fundamental insights was provided by Porters five forces framework form the completion of the Alta Velocidad Espanola (AVE) in 2008?
there are many small firms
which of the following is a characteristic of a fragmented industry?
managers cannot determine the changing speed of an industry or the rate on innovation
which of the following is a drawback of Porters five forces model?
differentiated products
which of the following is a feature of a monopolistically industry?
high entry barriers
which of the following is a feature of an oligopolistic industry structure?
levels of employment
which of the following is a macroeconomic factor that can affect a firms strategy?
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 primary feature of the five forces model?
computer hardware industry
which of the following is an example of monopolistic competition?
the industry will face excess capacity
which of the following is an implication of high exit barriers in an industry?
consumer demand will increase
which of the following is an implication of low interest rates?
the overall industry profitability will increase
which of the following is lily to happen due to horizontal mergers between competitors such as Delta and Northwest airlines?
the incumbent firms will spend more to satisfy their existing customers
which of the following is most likely an implication of new firms entering an industry?
a society's culture, norms, and values
which of the following is the best characterization of sociocultural forces?
the stage of the business cycle that the country is in
which of the following represents an economic factor in a firms external general environment?
competition must be defined in a broad way to incorporate all of the key factors that influence profit potential
which of the following statements about Porters five forces model is accurate?
in monopolistic competition, may firms compete against each other, in an oligopoly, there are few large firms competing against each other
which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly?
the stronger the five forces in an industry, the greater the industry profit potential
which of the following statements is not true about the fire forces in Porters competitive analysis model
Profitability varies between different strategic groups
which of the following statements is true about strategic groups?
a consolidated industry tends to be more profitable than a fragmented one
which of the following statements with regard to industry structures is true?
competing against each other through price cutting
which of the following strategies will be most detrimental to firms that are close rivals operating in an oligopolistic industry structure?
when the buyers cost of switching to substitutes is low
which of the following would most likely not indicate that sellers are a strong competitive force in an industry?
oligopolistic
which type of industry structure is often analyzed using game theory?
since suppliers of its key sources are few, the bargaining power of suppliers is high
while industry forces have been favorable for a long time in the US 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?
the firms can be differentiate their product offerings
why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services?
industry convergence
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. what is this phenomenon best known as?
