Chapter 3 Review Quiz

Sonia, the owner of a local consulting business that provides small and medium-sized organizations with hardware and software and support for information systems has asked you to explain the five forces model of industry attractiveness to her. What would not be considered one of the five forces? a. competitive pressures stemming from incremental innovations within the information systems industry b. competitive pressures coming from the providers of substitute information systems services c. competitive pressures stemming from the relative bargaining power of suppliers to the information systems industry d. competitive pressures stemming from the threat of rivals entering the information systems industry e. competitive pressures stemming from existing rival firms in the information systems industry

a. competitive pressures stemming from incremental innovations within the information systems industry

Rivalry among competing sellers is generally more intense when a. industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit volume. b. the industry's driving forces are strong, and rivals have strongly differentiated products. c. barriers to entry are high, and buyer switching costs are high. d. barriers to entry are moderately high, and the pool of likely entry candidates is small. e. buyer demand is growing rapidly.

a. industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit volume.

When the collective impact of the five competitive forces is rated as moderate to weak a. it is the best of all possible worlds for companies with mediocre strategies and second-rate implementation. b. existing industry members cannot expect to earn good profits and a nice return on investment. c. suppliers and customers are in strong bargaining positions, there are plentiful substitutes, and low barriers allow ease of entry to new rivals. d. an industry is said to be competitively unattractive. e. rivalry among present sellers is intense.

a. it is the best of all possible worlds for companies with mediocre strategies and second-rate implementation.

The COVID-19 pandemic and other societal shocks are not considered to be among the principal components of strategic significance in the PESTEL analysis because they are a. much harder for companies to anticipate and prepare for because they often begin with little warning. b. associated with anticipated sociocultural forces that include societal values, attitudes, cultural factors, and lifestyles that impact business. c. caused by political factors including the extent to which government intervenes in the economy in an ongoing manner. d. the result of technological factors that include the pace of change and technical developments that have the potential for improving society. e. dictated by foreseeable economic conditions that include the general economic climate and specific factors such as interest rates, inflation rate, and unemployment rate, as well as conditions in the stock and bond markets that can affect consumer confidence.

a. much harder for companies to anticipate and prepare for because they often begin with little warning.

Which of the following is generally not considered as a barrier to entry? a. rapid market growth b. strong buyer loyalty to existing brands c. difficulties in gaining access to distribution and securing adequate space of retailers' shelves d. sizable economies of scale in production e. sizable capital requirements and an array of regulatory requirements

a. rapid market growth

Each of the following exemplifies the impact of the macro-environment on a company's strategic opportunities except a. Manchester, England craft brewer Seven Brothers partners with the American cereal manufacturer Kellogg's to create Throw Away I.P.A., a smooth, mellow beer made from Corn Flakes, in an effort to help reduce the amount of greenhouse gas emissions from food wastes. b. Jeff Bezos's Amazon.com Inc. announces plans to launch 3,236 communications satellites, joining in a new space race to offer Internet service from low orbits and squaring off to challenge the fleet of communications satellites planned by Elon Musk's SpaceX. c. Samsung, stung by a burgeoning trade war between the United States and China that is impacting the sales of smartphones in both nations, forecasts a 56 percent drop in quarterly operating profits. d. Ford and Volkswagen announce a strategic partnership to cooperate on the development of autonomous electric vehicles in order to shorten the development cycle and share the enormous costs of deploying new technologies. e. concerned over unfair trade practices and diminishing consumer choices, Great Britain's competition regulator announces an investigation

b. Jeff Bezos's Amazon.com Inc. announces plans to launch 3,236 communications satellites, joining in a new space race to offer Internet service from low orbits and squaring off to challenge the fleet of communications satellites planned by Elon Musk's SpaceX.

Audrey and Javier are co-owners of five specialty cupcake and dessert bakeries in their region. Which of the following questions would not help them to predict the next strategic moves and countermoves of their rivals? a. Why are the rival's cupcakes so popular among customers? b. Which mode of transport does the rival's supplier use? c. How frequently does their rival fulfill special orders for custom cupcakes and how large are those special orders? d. What percentage of customers frequent the rival's store? e. How does the rival manage door-to-door deliveries at no extra cost?

b. Which mode of transport does the rival's supplier use?

Which of the following factors was probably the most important consideration in Uber's decision to purchase Postmates, with respect to whether or not the meal delivery services industry presented a sufficiently attractive business opportunity? a. using value chain analysis to determine the relative cost positions of rival firms in the food delivery industry and who is the industry's lowest-cost producer b. determining the outlook for future profitability in the food delivery industry c. constructing a strategic group map to assess the attractiveness of the competitive position of each strategic group to determine the overall attractiveness of all the strategic groups in the food delivery industry d. determining which firms in in the food delivery industry have a competitive advantage and how they attained their advantage e. determining the overall strength of the five competitive forces shaping the food delivery industry

b. determining the outlook for future profitability in the food delivery industry

You have been asked by your manager at E.L.F. Beauty to provide up-to-date competitive intelligence about rivals' strategies and moves to improve their situation in the cosmetics industry. Good competitive intelligence is important at E.L.F. Beauty because a. it helps identify which of at E.L.F. Beauty's rivals is in which strategic group. b. it allows E.L.F. Beauty to anticipate what moves its rivals are likely to make next and to craft its own strategic moves with some confidence. c. it identifies who the cosmetics industry's current market share leaders are. d. it enables more accurate predictions about how long it will take a particular rival in the cosmetics industry to copy most of what the industry leader, Ulta Beauty, is doing. e. it enables E.L.F. Beauty's company managers to determine which rival has the worst strategy and how to avoid repeating the same strategic errors.

b. it allows E.L.F. Beauty to anticipate what moves its rivals are likely to make next and to craft its own strategic moves with some confidence.

Competitive pressures stemming from buyer bargaining power tend to be weaker when a. the buyer group consists of a few large buyers, and the seller group consists of numerous small firms. b. the costs incurred by buyers in switching to competing brands or to substitute products are relatively high. c. the number of buyers is small, such that each customer's business tends to be particularly important to a seller. d. buyer demand is growing slowly or maybe even declining. e. buyers are well informed about sellers' products, prices, and costs.

b. the costs incurred by buyers in switching to competing brands or to substitute products are relatively high.

In identifying an industry's key success factors, strategists should a. focus their attention on what it will take to capitalize on impacts of the industry's driving forces. b. consider whether the number of strategic groups is increasing or decreasing and whether the five competitive forces are powerful or relatively weak. c. consider on what basis customers choose between competing brands, what resources and competitive capabilities firms need to be competitively successful, and what shortcomings are almost certain to put a company at a significant competitive disadvantage. d. try to single out all factors that play a major role in shaping whether buyer demand grows rapidly or slowly. e. consider what it will take to overtake the company with the industry's overall best strategy.

c. consider on what basis customers choose between competing brands, what resources and competitive capabilities firms need to be competitively successful, and what shortcomings are almost certain to put a company at a significant competitive disadvantage.

Which of the following factors usually is not a consideration involved with evaluating whether an industry presents a sufficiently attractive business opportunity? a. determining the overall strength of the five competitive forces b. using value chain analysis to determine the relative cost positions of rival firms and who is the industry's lowest-cost producer c. determining the industry outlook for future profitability d. determining which firms in the industry have a competitive advantage and how they attained their advantage e. constructing a strategic group map to assess the attractiveness of the competitive position of each strategic group to determine the overall attractiveness of all the strategic groups

c. determining the industry outlook for future profitability

A competitive environment characterized by moderate to weak rivalry among sellers, high entry barriers, moderate to weak competition from substitute products, and moderate to low bargaining leverage on the part of both suppliers and customers a. offers incumbent firms the ability to build a sustainable competitive advantage. b. requires that industry members have a strongly differentiated product offering in order to be profitable. c. is considered to be competitively attractive from the standpoint of earning good profits. d. promises poor prospects for making a reasonable profit and building a sustainable competitive advantage. e. is unlikely to be conducive to achieving high customer loyalty to the company's brand.

c. is considered to be competitively attractive from the standpoint of earning good profits.

What is the most appropriate analytical tool for revealing the different market or competitive positions that rival firms occupy in an industry? a. five forces framework b. competitor analysis c. strategic group mapping d. PESTEL analysis e. SWOT analysis

c. strategic group mapping

Whether supplier-seller relationships in an industry represent a strong or weak source of competitive pressure is a function of a. the number of suppliers that each seller/industry member purchases from on average. b. whether the profits of suppliers are relatively high or low. c. the extent to which suppliers can exercise sufficient bargaining power to influence the terms and conditions of supply in their favor and the extent of seller-supplier collaboration in the industry. d. how aggressively rival industry members are trying to differentiate their products. e. whether the prices of the items being furnished by the suppliers are rising or falling.

c. the extent to which suppliers can exercise sufficient bargaining power to influence the terms and conditions of supply in their favor and the extent of seller-supplier collaboration in the industry.

Which of the following factors represents the strategically relevant political factors in the macro-environment that will influence the performance of all firms across the board? a. the exogenous forces related to the general environmental demand b. tax policy, fiscal policy, and tariffs providing impetus for antitrust matters c. the strength of the federal banking system d. social factors that could fuel a political agenda and create greater transparency e. bailouts and energy policies that are industry-specific

c. the strength of the federal banking system

In which one of the following instances is supplier bargaining power and leverage not weakened? a. when industry members pose a credible threat of backward integration into the business of suppliers b. when the item being supplied is a commodity c. when the items purchased from suppliers are in short supply d. when the cost of switching from one supplier to another is low e. when the buying firms purchase in large quantities and thus are important customers of the suppliers

c. when the items purchased from suppliers are in short supply

The macro-environment's impact on strategic opportunities is unlikely to be exemplified by the following situation? a. Traffic increases at the outlets of Whole Foods following its introduction of stores comprised solely of generic products. b. Consumer confidence in Wells Fargo Bank drops precipitously because of allegations that Wells Fargo misrepresented its efforts to increase its hiring diversity by interviewing more women and people of color for jobs that were no longer available. c. Sales of Green Mark and Russian Standard vodkas in the United States dwindle on account of a boycott of Russian products after that country's invasion of Ukraine. d. Hulu squares off with Disney+ as its most potent rival in the streaming television and film industry. e. Sales of FitBit surge on account of new features that monitor users' blood pressure and detects atrial fibrillation.

d. Hulu squares off with Disney+ as its most potent rival in the streaming television and film industry.

Which one of the following increases the competitive pressures associated with the threat of entry? a. Buyer demand for the product is growing fairly slowly. b. Buyers have a high degree of loyalty to the brands and product offerings of existing industry members. c. Incumbent firms are likely to launch competitive initiatives to strongly contest the entry of newcomers. d. Newcomers can expect to earn attractive profits. e. Few outsiders have the expertise and resources to hurdle whatever entry barriers exist.

d. Newcomers can expect to earn attractive profits.

__________ is the most powerful and widely known tool used to assess the state of competition in an industry. a. Financial ratio analysis b. PESTEL analysis c. Strategic group mapping d. Porter's Five Force Model. e. SWOT analysis

d. Porter's Five Force Model.

Based on an analysis of the five forces that increase or decrease competitive pressures in an industry, in which of the following industries is profitability likely to be lowest? a. natural cosmetics products b. oil pipeline transportation c. tax preparation software developers d. dine-in pizza restaurants e. private banking services

d. dine-in pizza restaurants

Amazon Prime Video, Apple, Disney+, and Netflix have increased bargaining power over content providers (suppliers) because they a. are producing standardized content for their video-streaming services. b. have the option to delay their purchases of streaming content. c. are well-informed about competing sellers' products, prices, and costs to stream videos. d. have integrated backward into the business of producing film and video content for their streaming portals. e. are large and few in number relative to the number of sellers in the video-streaming industry.

d. have integrated backward into the business of producing film and video content for their streaming portals.

A competitive environment in which there is weak to moderate rivalry among sellers, high entry barriers, weak competition from substitute products, and little bargaining leverage on the part of both suppliers and customers a. requires that industry members have low costs. b. gives each industry competitor the best potential for building sustainable competitive advantage. c. lacks powerful driving forces. d. is conducive to industry members earning attractive profits. e. makes it hard for industry members to pursue a differentiation strategy.

d. is conducive to industry members earning attractive profits.

The most powerful of the five typical sources of competitive pressures is usually a. the benefits that emerge from close collaboration with suppliers and the competitive pressures that such collaboration creates. b. the competitive pressures that stem from the ready availability of attractively priced substitute products. c. associated with the potential entry of new competitors. d. the competitive pressures associated with the market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry. e. the bargaining power and leverage that large customers are able to exercise.

d. the competitive pressures associated with the market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry.

You are considering starting a business to provide high quality bookkeeping services targeted to restaurants and other food service providers in your region. Which factors would you evaluate to determine whether or not the food service industry offers good prospects for attractive profits? a. an assessment of which firms in the industry have the best and worst competitive strategies, whether the number of strategic groups in the industry is increasing or decreasing, and whether economies of scale and experience curve effects are a key success factor b. whether the market leaders enjoy competitive advantages and how difficult it is to promote innovation to develop a strongly differentiated product or service for which a price premium may be charged c. constructing a strategic group map and assessing the attractiveness of the competitive position of each strategic group d. the industry's growth potential, whether competition appears destined to become stronger or weaker, how the industry's driving forces might affect overall industry profitability, the company's competitive position relative to rivals, and the company's proficiency in performing industry key success factors

d. the industry's growth potential, whether competition appears destined to become stronger or weaker, how the industry's driving forces might affect overall industry profitability, the company's competitive position relative to rivals, and the company's proficiency in performing industry key success factors

Andrea, the COO of a wine country luxury tourist train business, has been asked to present her company with an evaluation of strong prospects for attractive profits. What would she normally not include in her analysis? a. whether industry profitability will be favorably or unfavorably affected by the prevailing driving forces b. the industry's growth potential c. how well the company's strategy delivers on the industry's key success factors d. the industry's opportunities for international expansion e. whether the company occupies a stronger market position than rivals

d. the industry's opportunities for international expansion

Aleida, the COO of a gourmet food-truck business that specializes in Spanish cuisine such as paella and tapas, has been asked to present her company's investors with an evaluation of strong prospects for attractive profits. What would she normally exclude from her analysis? a. whether or not the food-truck industry is impacted by changes in the macro-environment b. whether or not food-truck industry profitability will be impacted by the prevailing driving forces c. whether or not the company occupies a stronger market position than rivals d. whether or not the food-truck industry's opportunities for international expansion are promising e. whether or not her gourmet food-truck company can deliver on the industry's key success factors

d. whether or not the food-truck industry's opportunities for international expansion are promising

Increasing globalization can be a driving force in an industry because a. it results in companies having fewer competitors and a strategic group map with fewer circles. b. market growth rates go up, product innovation speeds up, and new firms are likely to enter the industry. c. the products and services of foreign competitors are nearly always cheaper or of better quality than those of domestic companies. d. foreign producers typically have lower costs, greater technological expertise, and more product innovation capabilities than domestic firms. e. companies need to spread their operating reach into more and more country markets to meet consumer demand and take advantage of available operating activities.

e. companies need to spread their operating reach into more and more country markets to meet consumer demand and take advantage of available operating activities.

You have been asked to analyze the major regions of the California wine industry and have observed close relationships between wineries and local hospitality businesses (such as restaurants and lodging facilities) in the regions under study. Those local hospitality businesses can be said to be a. competitors. b. imitators. c. replacements. d. substitutes. e. complementors.

e. complementors.

Factors that cause the rivalry among competing sellers to be weak include a. low barriers to entry and weakly differentiated products among rival sellers. b. slow growth in buyer demand and strongly differentiated products. c. a recent acquisition of a weak rival by an industry outsider with the intent of turning the acquisition into a major contender. d. low buyer switching costs and rival sellers that are relatively equal in size and capability. e. rapid growth in buyer demand and high buyer switching costs.

e. rapid growth in buyer demand and high buyer switching costs.