chapter 3 pt 1

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

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

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

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

consumer demand will increase

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?

economies of scale

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

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

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

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 & buses, thus reducing the profit potential in the industry

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

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

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

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

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