MGT 499 3

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True or false: The relationship between firms and the natural environment must be adversarial.

False

Which of the following are examples of economies of scale? (Check all that apply.)

Having more negotiating power vis-à-vis suppliers Spreading fixed costs over more units

Which of the following are examples of demographic factors?

age gender sexual orientation

Redbox offers DVD rentals for $2, which is inexpensive when compared to the price of purchasing a DVD, which may be $10 or more. This is an example of ______.

an attractive price-performance trade off resulting in a high threat of substitution

The most rigorous means of analyzing the profit potential within a specific industry is to conduct ______.

an industry analysis

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

The ______ rate determines how many dollars one must pay for a unit of foreign currency.

currency exchange

For consumers who only watch a couple of movies per month, Redbox, which offers movie rentals for just $2, offers an attractive price-performance trade-off with low switching costs in comparison to which of the following?

Netflix's streaming service DVD purchases movie theater tickets

Which statements about the threat of retaliation are true?

New entrants must anticipate how incumbent firms will react to their entry. The threat of retaliation often acts as a deterrent to entry. Incumbent firms may retaliate in ways that go beyond price competition.

______ factors result from the processes and actions of government bodies that influence the decisions and behavior of firms.

Political

Which of the following helped Airbnb develop a successful business in the peer-to-peer rental space? (Select all that apply.)

Presenting a well-designed website Ensuring a smooth transaction between hosts and guests Fortuitous timing that led to growing demand

Which statement about the five forces that shape competition is true?

Their strengths are context-dependent.

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 force the cost of production to increase. They can capture part of the economic value created by firms.

Michael Porter developed the five forces model to help firms do which of the following? (Check all that apply.)

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

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

government bodies

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

high

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

high

When there are a few buyers and each buyer purchases large quantities relative to the size of a single seller, the power of buyers is ______.

high

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

how much money is in the economy

The relationship between the natural environment and business organizations can best be described as ______.

interdependent

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

lean manufacturing

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

legal

Managers have ______ direct influence over external forces in the firm's general environment than those in the firm's task environment.

less

Consumers tend to buy homes, automobiles, and computers when interest rates are ____ because credit is inexpensive.

low

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

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 an example of __.

network effects

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

nonmarket strategies

Which of the following are advantages, independent of size, that incumbent firms possess? (Check all that apply.)

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

Which of the following are employed as nonmarket strategies to influence government bodies? (Check all that apply.)

public relations litigation lobbying

The economic recession that began in 2008 in the United States was the result of unwise investment in ______.

real estate

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

sociocultural

Price ______ is the lack of change in price levels of goods and services.

stability

Managers are able to influence which of the following types of external forces? (Check all that apply.)

strategic group composition the structure of their industry

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

strong

The expected competitive intensity is stronger when the other four forces are ______, and weaker when the other four forces are ______.

stronger; weaker

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), that person will incur significant customer ______________.

switching costs

According to the PESTEL model, which of the following are kinds of forces that exist in the general external environment? (Check all that apply.)

technological economic ecological?

When a firm is able to maximize the gap between ______, it increases its competitive advantage.

the cost of production and the value of what it produces

The risk that potential competitors will enter the industry is known as the ______.

threat of entry

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

To determine economic value, one must subtract the cost of production from the ______.

value of a firm's product or service

True or false: Sociocultural factors tend to be fixed.

False

True or false: The only legal means of retaliation against new entrants is price competition.

False

When companies seek ways to recharge car batteries in a sustainable way, it is an example of ______ factors creating business opportunities.

ecological

Which of the following are important factors in determining the intensity of rivalry among existing competitors? (Check all that apply.)

exit barriers competitive industry structure industry growth

The weaker the five forces in Porter's model, the _______ the industry's profit potential.

greater

An increase in the overall price level is also called ______.

inflation

The economic factors that affect a firm's external environment are ______.

largely macroeconomic

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

network effect

The ______ is a measure of the change in the amount of goods and services produced by a nation's economy.

economic growth rate

Which of the following are examples of commonly encountered capital requirements? (Check all that apply.)

paying for start-up losses setting up production facilities managing a production process

The cost advantages that a firm obtains by increasing output, such as by spreading fixed costs over more units, are called economies of _________________.

scale

What might potential substitutes do to make themselves more attractive to customers?

offer a higher value proposition offer a lower price

When suppliers can demand higher prices for their inputs or reduce the quality of the input factor delivered, they demonstrate that they are ______.

powerful

The five forces of Porter's model include the threat of entry and substitutes, rivalry among existing competitors, and the power of ______.

suppliers and buyers

In the early 2000s, easy credit made real estate the investment of choice in the United States. By the end of the decade, however, a recession had set in, impacting almost all businesses in the country. This example shows that _____.

economic boom periods can overheat and lead to speculative bubbles

The threat of ______ is one of the five forces and can be exemplified by the threat that videoconferencing presents to business travel.

substitutes

Global warming would be an example of ______ factor in a firm's external environment.

an ecological

Which of the following are examples of sociocultural factors? (Check all that apply.)

an increased demand by consumers for gluten-free products the growth of the Hispanic population the widespread adoption of smart phones

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

an industry

The external forces called technological factors ______.

capture the application of knowledge to create new process and products

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

economic

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

True

Through use of the PESTEL model, firms are able to do which of the following? (Check all that apply.)

evaluate external trends monitor external factors

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

entry barriers

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

Which of the following statements about legal factors as an external force is true?

Regulatory changes tend to affect entire industries at once.

Which of the following are important sources of entry barriers? (Check all that apply.)

credible threat of retaliation government policy capital requirements network effects economies of scale

When suppliers do not depend heavily on the industry for a large portion of their revenues, the power of suppliers is ______.

high

The intensity with which companies in an industry jockey for market share and profitability is known as ______.

rivalry

The fact that tax preparation software such as Intuit's TurboTax is a valid alternative for professional services offered by H&R Block and others, is an example of ______.

the threat of substitutes

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

threat

Which of the following conditions lead to a strong threat of substitutes? (Check all that apply.)

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

When a new firm enters an industry, which of the following often occur? (Check all that apply.)

Incumbent firms lower prices. Incumbent firms spend more to satisfy customers. Industry profit potential declines.

Deflation is a serious threat to economic growth for which of the following reasons?

It stops companies from investing in new production capacity because they expect a further decline in prices. It distorts expectations about the future.

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

backward integration

When a buyer moves upstream in the industry value chain, into the suppliers' business, ______ occurs.

backward integration

A rise in economic growth is reflected by ______.

businesses expanding operations to satisfy demand

Production costs can increase when ______.

buyers demand higher quality and more service

Which of the following are ways in which the power of buyers affects producers? (Check all that apply.)

by obtaining price discounts by requesting more service by demanding higher quality Need help? Review these concept resources.Read About the Concept Question Feedback Next Question Reading

New firms have been established in the airline and telecommunications industries after ______.

deregulation

It might be a good idea to expand or upgrade a firm's human capital base during a ______, because unemployment is high and therefore human capital is abundant and wages usually _____.

downturn; fall

True or false: The relative strengths of the five forces that shape competition are largely dependent on the context.

True

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

increasing its competitive advantage

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

intensity of rivalry

Which of the following are factors in a firm's legal environment? (Check all that apply.)

laws regulations mandates

If the US dollar depreciates compared to the euro, it will take ______ dollars to buy one euro.

more

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

small

In Porter's model, there are five key ______ forces, including threat of entry, power of suppliers, and threat of substitute products.

competitive

According to Michael Porter, the profit potential of an industry is ______.

a function of five forces related to competition

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

advantages independent of size


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