MGMT 434 Learnsmart Ch.3 Quiz

(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

Many drivers find a GPS navigation system useful. Because installing a GPS system in an automobile adds value to the vehicle, the system functions as _______________.

a complement

Advantages based on brand loyalty, proprietary technology, preferential access to raw materials, and favorable geographic locations are examples of __________.

advantages independent of size

A group of companies that deal with more or less the same set of suppliers and buyers make up ____________.

an industry

The amount that savers are paid for use of their money and the amount that borrowers pay for that use is known as _______

an interest rate

A key feature of an oligopoly is that the competing firms in the industry _________, meaning the actions of any one firm will influence the behaviors of the other firms.

are interdependent

In Porter's model, there are five key _______ factors, including threat of entry, power of suppliers, and threat of substitute products

competitive

What characteristics of the companies in a strategic group?

The companies form part of a specific industry, the companies pursue similar strategies, the companies differ in important dimensions from companies in other strategic groups

What ways do powerful suppliers threat firms?

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

(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

What are 3 likely outcomes of a competitive rivalry based entirely on price cutting?

firms struggle to make profits, most or all value is transferred to customers, and investments from firm drop off

In the PESTEL model, political factors are those that relate to __________.

government bodies

When suppliers offer products that are differentiated, the power of suppliers is ___________.

high

Changes in prices (a lack of price stability) is a direct function of ________.

how much money is in the economy

An example of a recent innovation in process technology is _______.

lean manufacturing

"Dergulation of industries leads to intensified competition and higher value at lower prices for consumers. This is an example of _________ factors influencing business.

legal

In a period of economic boom, unemployment is __________, and human resources become expensive.

low

When managers understand the forces in the external environment, they are better able to _________.

mitigate threats and leverage opportunities

Industry-specific factors known as ________ separate one strategic group from another.

mobility barriers

Through use of the PESTEL model, firms are able to do which of the following?

monitor external factors and evaluate external trends

The computer hardware industry is an example of ____________.

monopolistic competition

The positive effect that one user of a product or service has on the value of the product or service for other users is known as the ___________.

network effect

Firms within the same strategic group tend to follow a(n) ______ strategy.

similar

There is a(n) _________ relationship between competitive intensity and the power of the five forces.

strong

What is a positive response to ecological factors in the PESTEL model?

sustainable economic growth

If a business considers changing vendors, but doing so would require that business to alter product specifications, retrain employees, and/or modify existing processes, we would say the business faces significant __________.

switching costs

The key take away from the five forces model is that ________________.

the stronger the forces, the lower the industry's ability to earn profits.

The _________ is the idea that products or services available from outside the given industry will come close to meeting the needs of current customers.

threat of substitutes

What conditions lead to a strong threat of substitutes?

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

Firms have a tendency to change the industry structure in their favor, for example by making industries more _______ through mergers and acquisitions.

consolidated

What are examples of demographic factors?

gender, age, and sexual orientation

In general, a firm improves its strategic position by _______.

increasing its competitive advantage

What are important factors in determining the intensity of rivalry among existing competitors?

industry growth, exit barriers, and competitive industry structure

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

low

The stronger the five forces in Porter's model, the __________ the industry's profit potential.

lower

An industry in which only one firm supplies the market is known as a(n) _________.

monopoly

As utility companies tend to serve a whole market exclusively, they are known as __________ because the governments involved believe that the product or service would not be supplied otherwise.

natural monopolies

In order to influence changes in their political environment, firms pursue _______.

nonmarket strategies

In the five forces model, threat of entry refers to the risk that ________.

potential competitors will enter a given industry

Th cultures, norms, and values of the society in which a firm competes are considered _______ factors.

sociocultural

The pressure of rivalry increases when which of the following forces increase in intensity?

the treat of substitutes, the threat of entry, and the power of buyers and suppliers.

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

threat

When buyers can credibly threaten to backwardly integrate into the industry, the power of buyers is ___________.

high

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

low

A ________ occurs when a firm has accrued significant market power and is changing the industry structure in its favor

near monopoly

What helped Airbnb develop a successful business in the peer-to-peer rental space?

Developing a smooth transaction between hosts and guests, presenting a well-designed website, fortuitous timing that led to growing demand

What is likely to be true about a fragmented industry?

It consists of small firms

Walmart producing private- label brands, such as Equate health and beauty items and Parent's choice baby products, is an example of ___________.

backward integration

The power of ______________ is the pressure they can put on the margins of producers in the industry by demanding a lower price or higher product quality.

buyers

According to Porter's model, which of the following should be considered when analyzing a firm's competition?

buyers, suppliers, and the threat of substitutes

The closer firms are on the strategic group map, the more ________ they are competing with each other.

directly and intensely

Growth rates, interest rates, and levels of employment would be considered ___ factors in a firm's general environment.

economic

cost advantages that accrue for firms with larger output because they can spread fixed costs over more units and can employ technology more efficiently are called _________.

economies of scale

Obstacles that determine how easily a firm can enter an industry, are called ____________.

entry barriers

Although __________ coordination, such as price fixing, is illegal in the US, ___________ coordination such as "an unspoken understanding" is not.

explicit; tacit

In a perfectly competitive industry, firms have difficulty __________.

achieving competitive advantage