Capstone Exam 1.3

A fragmented industry is made into a consolidated industry through

horizontal mergers and acquisitions

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

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

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

Co-opetition

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

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

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 arethese companies most likely in?

Oligopoly

The _____ allows the scanning, monitoring, and evaluation of change and trends in a firm's macro environment

PESTEL framework

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

Samsung's smartphones increase in value when they are preinstalled with Google's Android system

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

The firms can differentiate their product offerings

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?

a premium car manufactured and sold by Mova Autos Inc., a rival company

A key feature of an oligopoly is that the competing firms

are interdependent

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

A large fabricator of building components purchased a steel company to provide raw materials for its production process. This is an example of

backwards integration

In an industry, the threat of entry is high when

capital requirements are low

Which of the following factors best contributes to the US automotive industry being characterized by high entry barriers?

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

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

complementor

Which of the following is an example of monopolistic competition?

computer hardware industry

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

consumer demand will increase

The aging of the population, changes in ethic composition, and effects of the baby boom are

demographic changes

The final step in industry analysis is to

draw a strategic-group map

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

entering the aircraft manufacturing industry requires huge capital investments

A strategic group will typically include

firms within the same industry

industry convergence is a process whereby

formerly unrelated industries begin to satisfy the same customer need

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

in an industry, the rivalry among existing competitors is high when

incumbent firms are highly committed to the business

In Rozinia Republic, the federal government owns and manages all the nuclear power industry. Which of the following industry competitive structures does the scenario best illustrate?

natural monopoly

Interest-rate increases have a ____ impact on the residential home construction industry and a _____ effect on industries that produce consumers necessities such as prescription drugs or basic grocery items

negative; negligible

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 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 structure does the iron ore industry best illustrate?

perfect competition

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

Increasingly larger numbers of women entering the work force since the early 1970s is an example of

sociocultural changes

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 Frist Ledger Inc.'s

switching cost

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

Buyers are highly price sensitive when

they earn low profits or are strapped for cash

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

understand the profit potential of different industries

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?

The threat of new entrants will be higher for Burger Cult Inc. than Citizen Telecom Inc.

Which of the following best illustrates a firm operating in a monopolistic competitive industry?

An automobile manufacturer using branding, pricing, and superior advertising to differentiate itself from a large number of other automobile manufacturers

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

Demographic Trends

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. Despite its competitiveness with 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, Rhino Pictures Inc. is most likely functioning in a(n)______ industry.

Oligopolistic

Consider 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 of 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

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

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

The overall industry profitability will increase AND there will be fewer competitors

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

The stronger the five forces in an industry, the greater the industry's profit potential

Earlier, the travel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets, and hotels for their customers. 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

What is the rule of thumb behind Porter's five forces model?

The weaker the five forces, the greater the industry's profit potential - making the industry more attractive

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

Threat of substitutes

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

While Apparal Co. will have the power to set the prices for its products, Beans Co. will have little to no ability to do so.

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

cutthroat competition

Given the industry structure in the automobile business, entering the auto manufacturing industry does not 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 this market niche?

economies of scale

The government of Filvia has mandated that the standard minimum wage in the country can be increased to $8000 per year. This has ensured that all firms in the country pay their employees at least $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

An industry has many firms that compete in it. While products between competitors tend to be similar, they are no by means identical. As a consequence, managers selling a product with unique features tend to have some ability to raise prices. This type of industry is an example of

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 to uniquely position itself in the market. As a result, the supermarket chain has been able to differentiate itself from its competitors ad sell its products at a higher prices. Which of the following industry competitive structures does this scenario best illustrate?

monopolistic competition

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

monopolistically competitive industry

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

the family size of the firm's target market