Chapter 3 LearnSmart

Obstacles that determine how easily a firm can enter an industry, are called __. -threats of substitutes -supplier barriers -threats to entry -rivalry barriers -entry barriers

entry barriers

A(n) __ group is a set of companies within a specific industry that seek to achieve competitive advantage in similar ways.

strategic

T/F: Airlines that are strategically committed to the hub-and-spoke model face high fixed costs to maintain their network of routes that affords global coverage. Such strategic commitment leads to high fixed costs and therefore decreased rivalry.

False

T/F: Substitutes meet the same basic customer needs as the industry's products in the same way.

False

T/F: The only legal means of retaliation against new entrants is price competition.

False

T/F: The stronger the five forces, the greater the industry's ability to earn above-average competitive advantage.

False

T/F: According to the five forces model, competition involves not only creating economic value but also capturing a significant share of the economic value created.

True

Price discounts, frequent new product releases with minor modifications, and intense promotional campaigns are all tactics indicative of an industry with __ growth. -fast and positive -exponential -stable -slow or negative

slow or negative

Which of the following is an example of a demographic factor? (Check all that apply.) -sexual orientation -gender -labor-force size -age

-age -gender -sexual orientation

Which of the following are forces in Porter's five forces model? (Check all that apply.) -bargaining power of buyers -differentiated price parity -threat of substitute products or services -revered oligopoly -threat of new entrants

-bargaining power of buyers -threat of new entrants -threat of substitute products or services

The pressures that industry suppliers can exert on an industry's profit potential, is also called the __. -threat of new entry -rivalry among existing competitors -bargaining power of suppliers -bargaining power of buyers

-bargaining power of suppliers

Which of the following are ways in which the power of buyers affects producers? (Check all that apply.) -by reducing economies of scale -by obtaining price discounts -by requesting more service -by demanding higher quality

-by obtaining price discounts -by requesting more service -by demanding higher quality

Managers are able to influence which of the following types of external forces? (Check all that apply.) -the structure of their industry -interest rates -strategic group composition -currency exchange rates

-strategic group composition -the structure of their industry

The expected competitive intensity is __, when the other four forces are __. (Select two.) -weaker; stronger -stronger; stronger -weaker; weaker -stronger; weaker

-stronger; stronger -weaker; weaker

Which of the following have helped increase the rate of convergence in the media industries? (Check all that apply.) -telecommunications advances -digital media -new kinds of delivery vans -improved IT

-telecommunications advances -digital media -improved IT

Many firms of all sizes actively compete in the computer hardware industry, and there are no firms with a large market share. Product offerings tend to be similar but are differentiated in ways that enable some firms to raise or impact pricing. The computer hardware industry is an example of __. -natural monopoly -perfectly competitive industry -oligopolistic industry -monopolistic competition

Monopolistic competition

The most rigorous means of analyzing the profit potential within a specific industry is to conduct __. -a PESTEL analysis -an industry PET scan -an industry analysis -a market analysis

an industry analysis

Walmart producing private-label brands such as Equate health and beauty items and Parent's choice baby products, is an example of __. -horizontal integration -forward integration -backward integration -skip-hop integration

backward integration

The obstacles that determine how easily a firm can leave an industry, are called __. -leaving barriers -entry barriers -exit barriers -out barriers

exit barriers

Although __ coordination such as price fixing is illegal in the United States, __ coordination such as "an unspoken understanding" is not.

explicit; tacit

Consumers tend to buy homes, automobiles, and computers when interest rates are __ because credit is inexpensive. -low -fluctuating -variable -high

low

In a period of economic boom, unemployment is __ and human resources become expensive. -low -variable -high -fluctuating

low

Recessions are less likely to harm __-cost airlines, which appeal more to budget-conscious travelers than legacy carriers.

low

The threat of entry is high when capital requirements are __ in comparison to the expected returns.

low

In the airline industry, the __ barrier of offering international routes restricts movement between hub-and-spoke and point-to-point airlines.

mobility

An industry in which only one firm supplies the market is known as a(n) __. -monopoly -monopolistic competition -oligopoly -perfect competition

monopoly

Firms are able to create a near monopoly by maximizing __. -prices and costs -product differentiation -their advertising revenue -competition

product differentiation

The economic recession that began in 2008 in the United States was the result of unwise investment in __. -the online economy -real estate -commodities -stocks

real estate

The intensity with which companies in an industry jockey for market share and profitability is known as __. -barriers -threats -identification -rivalry

rivalry

When a person that has been using a PC with a Microsoft Windows operating system starts using an Apple computer (which has a different operating system), she will incur significant customer __ costs.

switching

When restrictive government policies do not exist or when industries become deregulated, the __ of entry is high.

threat

The risk that potential competitors will enter the industry is known as the __. -power of suppliers -power of buyers -threat of substitutes -threat of entry -rivalry among existing competitors

threat of entry

Which of the following are advantages, independent of size, that incumbent firms possess? (Check all that apply.) -preferential access to distribution channels -fast reaction times to environmental changes due to their small size -cumulative experience effects -inertia related to their structure -proprietary technology -brand loyalty

-brand loyalty -proprietary technology -preferential access to distribution channels -cumulative experience effects

Michael Porter developed the five forces to model to help firms do which of the following? (Check all that apply.) -understand the strengths and weaknesses of a firm's resources -analyze PESTEL forces -gain and sustain a competitive advantage -determine the profit potential different industries

-determine the profit potential different industries -gain and sustain a competitive advantage

The closer firms are on the strategic group map, the more __ they are competing with each other. (Check the two that apply.) -directly -intensely -indirectly -differently

-directly -intensely

Which of the following are important strategic dimensions in mapping strategic groups? (Check all that apply.) -planned emergence and strategic intent -cost structure -expenditures on advertising and HR -expenditures on research and development -product and service offerings

-expenditures on research and development -product and service offerings -cost structure

In an oligopoly, which of the following conditions exist? (Check the three that apply.) -abundant commodity products -few large firms -high barriers to entry -differentiated products

-few large firms -differentiated products -high barriers to entry

The closer firms are on the strategic group map, the more __ they are competing with each other. (Check the two that apply.) -indirectly -differently -intensely -directly

-intensely -directly

Which of the following are considered nonmarket strategies? (Check all that apply.) -lobbying -public relations -advertising -litigation

-lobbying -public relations -litigation

Through the use of the PESTEL model, firms are able to do which of the following? (Check all that apply.) -evaluate their resources -monitor external factors -determine internal decision-making processes -evaluate external trends

-monitor external factors -evaluate external trends

Which of the following are likely outcomes of a competitive rivalry based entirely on price cutting? (Check all that apply.) -most or value is transferred to customers -product offerings improve -firms struggle to make profits -investments from firms drop off

-most or value is transferred to customers -firms struggle to make profits -investments from firms drop off

Which of the following statements about industry dynamics is true? (Check all that apply.) -over time, industry structures are not stable -firms in an industry have a tendency to fragment in order to increase profitability -the five forces model is a static model -the five forces model takes into account industry dynamics

-over time, industry structures are not stable -the five forces model is a static model

According to the five forces model, a firm seeking to compete in an established industry should seek to do which of the following? (Check all that apply.) -position itself in a way that relaxes the constraints of strong forces -ignore the strength of competitive forces and focus on functional strategy -partner with the most established company possible -position itself in a way that leverage weak forces

-position itself in a way that relaxes the constraints of strong forces -position itself in a way that leverages weak forces

Which of the following help determine competitive industry structure? (Check all that apply.) -composition of the board directors -size and number of competitors -firms' degree of pricing power -the firm's resources -height of entry barriers

-size and number of competitors -firms' degree of pricing power -height of entry barriers

Managers are able to influence which of the following types of external forces? (Check all that apply.) -interest rates -the structure of their industry -currency exchange rates -strategic group composition

-strategic group composition -the structure of their industry

Which of the following are ways that powerful suppliers are a threat to firms? (Check all that apply.) -they can reduce the industry's profit potential -they can capture part of the economic value created by firms -they can drive away the consumer market directly -they can force the cost of production to increase

-they can reduce the industry's profit potential -they can capture part of the economic value created by firms -they can force the cost of production to increase

Which of the following conditions lead to a strong threat of substitutes? (Check all that apply.) -when the price-performance trade-off is attractive -when the established firms have many loyal customers -when new firms lack a "cool" factor -when the cost of switching to substitute is low

-when the price-performance trade-off is attractive -when the cost of switching to substitute is low

Which of the following are essential questions that strategic leaders need to consider to increase the probability of entering an industry successfully? (Check all that apply.) -what type of entry should be made? -why is it important to study the external environment? -who are the players? -when to enter? -how to enter?

-who are the players? -when to enter? -how to enter? -what type of entry should be made?

Rivalry among existing competitors has __ with the height of the industry's exit barriers. -a bi-model relationship -a direct relationship -an indirect relationship -an inverted relationship

a direct relationship

In a perfectly competitive industry, firms have difficulty __. -keeping prices low -avoiding profitability -making purchasing decisions -achieving competitive advantage

achieving competitive advantage

A rise in economic growth is reflected by __. -businesses expanding operations to satisfy demand -businesses closing operations due to lack of demand -businesses staying the same

businesses expanding operations to satisfy demand

Product costs can increase when __. -buyers demand lower quality and less service -buyers demand higher quality and more service -the power of suppliers goes down

buyers demand higher quality and more service

When Samsung and Google cooperate as complementors to compete against Apple's strong position in the mobile device industry while at the same time becoming increasingly competitive with each other, this is referred to as __. -rivallaboration -collaboration -co-opetition -collaboration

co-opetition

Exit barriers, strategic commitments, and competitive industry structure are important factors in determining the intensity of __.

competitors

A __ is a product or service that adds value to the original product offering. -significant reduction -strategic intent -complement -co-opetitive potential

complement

Firms have a tendency to change the industry structure in their favor, for example by making industries more __ through mergers and acquisitions. -diffuse -intuitive -consolidated -competitive

consolidated

Firms that have a tendency to change the industry structure in their favor, for example by making industries more __ through mergers and acquisitions. -intuitive -consolidated -competitive -diffuse

consolidated

The __ rate determines how many dollars one must pay for a unit of foreign currency. -interest fluctuation -labor exchange -dollar growth -currency exchange

currency exchange

Firms within the same strategic group are __ competitors.

direct

When companies seek ways to recharge car batteries in a sustainable way, it is an example of __ factors creating business opportunities. -economic -ecological -legal -political

ecological

Exit barriers are composed of __ factors. -political and legal -technological and demographic -economic and social -political and economic

economic and social

When buyers can credibly threaten to backwardly integrate into the industry, the power of buyers is __. -low -high -insignificant -moderate

high

When suppliers offer products that are differentiated, the power of suppliers is __. -insignificant -low -high -moderate

high

Changes in prices (a lack of price stability) is a direct function of __. -how much money is in the economy -dividend payments by companies -how many people live in a country

how much money is in the economy

An increase in the overall price level is also called __. -economic growth -inflation -recession -deflation

inflation

One would expect low-cost grocery stores such as Safeway and Piggly Wiggly to compete __ with each other than higher-end grocery stores such as Whole Foods and Trader Joe's. -more intensely -less directly -less intently -more easily

more intensely

The online auction site eBay has more than 100 million active users, so buyers are more likely to find what they are looking for while sellers are more likely to find buyers for the items they are offering. This is a example of __. -competition effects -buyer-meets-seller effects -network effects -online effects

network effects

A firm's strategic position relates to its ability to create __ for customers while containing the __ to do so.

value; cost

Governments sometimes set up a natural monopoly when a venture __. -is not wanted by the public -would otherwise not be profitable -is in the exclusive interest of private wealth creation -could otherwise draw in a large number of rival firms

would otherwise not be profitable