MGT6890 Chapter 2

Political and legal forces:

significantly affect managers and companies.

Regarding industry competitive structure, which of the following statements is true?

A consolidated industry is dominated by a small number of large companies (an oligopoly) or, in extreme cases, by just one company (a monopoly).

_____ is a cost advantage that is enjoyed by incumbents of an industry and that new entrants cannot expect to match.

Absolute cost advantage

Which of the following statements describes an industry?

An industry is a group of companies offering products or services that are close substitutes for each other.

Regarding the bargaining power of buyers, which of the following statements is true?

An industry's buyers are the individual customers who consume its products or the companies that distribute those products.

Different strategic groups can have different relationships to each of the competitive forces; thus, each strategic group may face a different set of opportunities and threats. Which of the following is NOT a relatively strong or weak competitive force depending on the competitive positioning approach adopted by each strategic group in the industry?

Bargaining power of buyers but not suppliers

Mohican Hill Company can create _____ by continuously advertising its brand-name products and company name and emphasizing its high-quality products and its exceptional after-sales service.

Brand loyalty

_____ exists when consumers have a preference for the products of established companies.

Brand loyalty

Some industries can remain in the mature life-cycle stage almost indefinitely. An example of this is the:

Car industry

How do changes in the forces within the macroenvironment impact any or all of the forces in Porter's model?

Changes in the forces within the macroenvironment can have a direct impact on any or all of the forces in Porter's model.

Which of the following statements about industry boundaries is true?

Coca-Cola (a manufacturer of soft drinks) competes with the manufacturers of bottled water and fruit-based soft drinks, a blurring of industry boundaries.

Suppliers are most powerful in which of the following circumstances?

Companies in the industry cannot threaten to enter their suppliers' industry.

Which of the following is the most immediate threat to a company's profitability?

Competitors within its own strategic group

A company that makes software applications is a _____ to the personal computer industry.

Complementor

Which of the following statements is true regarding Andrew Grove's sixth force, which Porter did not recognize?

Complementors are companies that sell products that add value to the products of a company in an industry.

A declining dollar relative to other currencies would have which of the following impacts?

Create opportunities for increased sales overseas

In regard to demographic forces, which of the following statements is true?

Currently, most industrialized nations are experiencing the aging of their population.

Park Company is experiencing falling demand, leading to the emergence of excess capacity. Park's industry is in which of the following stages?

Declining

Which of the following statements is true regarding rivalries among established companies?

Dell and Hewlett-Packard are considered an intense rivalry.

A general slump in economic activity can do which of the following to demand in a mature industry?

Depress it

Which of the following statements is true?

Desktop computers, laptop computers, and tablets are viewed as close substitutes for each other.

Price wars in mature industries are frequently triggered by:

Economic decline

The risk of entry by potential competitors is the first step in Porter's competitive forces model. This risk of entry is a function of the factors that make it costly for companies to enter an industry. Which of the following statements is true of the risks of entry?

Economies of scale arise as a firm expands its output.

A(n) _____ industry is just beginning to develop.

Embryonic

Coastal Rock Corporation is experiencing slow growth because of buyers' unfamiliarity with the industry's product, high prices, and poorly developed distribution channels. Coastal Rock's industry is in which of the following stages?

Embryonic

Regarding global forces, which of the following statements is true?

Falling barriers to international trade and investment have made it much easier to enter foreign nations.

Regarding industry competitive structure, which of the following statements is true?

Fragmented industries are characterized by low-entry barriers and commodity-type products that are difficult to differentiate.

If first-time demand for Rosebud Corporation's products is expanding rapidly, in which stage does Rosebud fall in the industry life cycle?

Growth

Which of the following statements about embryonic industries is true?

Growth at the embryonic stage in the industry life cycle is slow.

Which of the following has a major impact on the intensity of rivalry among established companies within an industry?

Height of exit barriers in the industry

In an external analysis that is part of a strategic planning process, what is the starting point?

Identifying the company in which a company competes

Which of the following statements about the effects of cost conditions on an industry's rivalry is true?

In industries where the cost of production is high, firms cannot cover their fixed costs and will not be profitable if sales volume is low.

Which of the following statements is true?

In order to succeed, a company must fit its strategy to the external environment in which it operates or be able to reshape the environment to its advantage through its chosen strategy.

Regarding government regulations, which of the following statements is true?

In the mid-1990s, U.S. government regulation prohibited providers of long-distance telephone service from competing for local telephone service and vice versa, but that changed when the government significantly deregulated the industry.

_____ is frequently the major factor in industry evolution, propelling a company's movement through the industry life cycle.

Innovation

_____ can determine the demand for a company's products and thus are important whenever customers routinely borrow money to finance their purchase of those products.

Interest rates

In regard to social forces, which of the following statements is true?

Like other macroenvironmental forces, social change creates opportunities and threats.

_____ refers to the broader economic, global, technological, demographic, social, and political context in which companies and industries are embedded.

Macroeconomics

As an industry enters the _____ stage, barriers to entry increase and the threat of entry from potential competitors decreases.

Mature

At Mesa Incorporated, the market is completely saturated, demand is limited to replacement demand, and growth is low or zero. Mesa's industry is in which of the following stages?

Mature

n the _____ stage, the market is completely saturated, demand is limited to replacement demand, and growth is low or zero.

Mature

Which of the following statements about the competitive structure of an industry is true?

Minimizing costs is the best strategy for a company in a fragmented industry that strives to be profitable in a boom and survive any subsequent bust.

Regarding strategy formulation, which of the following statements is NOT true?

One goal of strategy formulation is to ignore the threats a company faces, focusing solely on the positive aspects of the company.

_____ are elements and conditions in a company's environment that allow it to formulate and implement strategies that enable it to become more profitable.

Opportunities

Estrada Corporation is not currently competing in the athletic shoe industry but has the capability to do so. Which of the following terms describes Estrada Corporation?

Potential competitor

Companies that do not currently compete in an industry but have the capability to do so are:

Potential competitors

_____ can destabilize the economy, producing slower economic growth, higher interest rates, and volatile currency movements.

Price Inflation

_____ has a destabilizing effect on economic activity—if prices fall, the real price of fixed payments rises, which is damaging for companies and individuals with a high level of debt who must make regular, fixed payments on that debt.

Price deflation

Besides distribution channels used, market segments served, quality of products, technological leadership, customer service, pricing policy, and advertising policy, which of the following also affects product position?

Promotions

Another task of industry analysis is to identify the opportunities and threats that are characteristic of different kinds of environments in order to develop effective strategies. Which of the following managers is not completing this task?

Sandra relies on the organization's sales force to communicate any market problems to her.

Explosive growth of an industry cannot be maintained indefinitely. The rate of growth eventually slows, and the industry enters the _____ stage.

Shakeout

Just prior to entering the mature stage, an industry will experience which stage in the industry life cycle?

Shakeout

Retail chain organizations can be distinguished on many different levels. For example, Gucci, Chanel, and Neiman Marcus strive for exclusivity and high quality and operate in fewer locations, while Walmart, Kmart, and Target have many locations and lower prices. Although all these companies are retail chains, they are grouped differently here by pricing and number of locations. These different groups of companies are known as _____ groups.

Strategic

Important barriers to entry include all of the following EXCEPT:

Substitue products

Which of the following statements about innovation is true?

Successful innovation can transform the nature of industry competition.

Kelson received a Keurig coffee brewer as a gift. Now Kelson must buy K-cups for brewing a cup of coffee rather than buying the cans of coffee used with his old Cuisinart automatic drip coffee maker. The higher costs related to this shift to Keurig from Cuisinart are known as:

Switching costs

In regard to technological forces, which of the following statements is true?

Technological change can render established products obsolete overnight while creating a host of new product possibilities.

Which of the following statements is true regarding the analysis of competition?

The analysis of competition in an industry is a powerful tool for managers.

Which of the following statements regarding company differences is true?

The results of a number of studies suggest that a company's individual resources and capabilities may be more important determinants of its profitability than the industry or strategic group of which the company is a member.

Which of the following statements regarding the life cycle of an industry is true?

The strength and nature of each competitive force change as an industry evolves.

Which of the following statements about the bargaining power of suppliers is true?

The term "suppliers" refers to organizations that provide materials, services, and labor to the industry.

An industry entering its growth stage would be most likely to experience which of the following?

The threat from potential competitors is typically highest.

Which of the following is a force in Michael Porter's Five Forces model?

Threat of substitute products

_____ are elements in the external environment that could endanger the integrity and profitability of the company's business.

Threats

Companies in mature industries are more likely to recognize their interdependence and:

Try to avoid price wars

Buyers are most powerful in which of the following circumstances?

When the buyers have choice

Mobility barriers are _____ factors that inhibit the movement of companies between strategic groups.

Within-Industry

Companies entering the shakeout stage are likely to experience all of the following EXCEPT:

capacity that is added at rates consistent with past growth.

As telecommunications equipment has moved from analog technology to digital technology, this equipment now resembles computers. This is an example of:

industry boundaries changing over time.

As companies fight to maintain their revenues in the face of declining demand:

price-leadership agreements break down, rivalry increases, and prices and profits fall.

All of the following provide a useful template for managers to use in identifying an organization's opportunities and threats EXCEPT:

reputation and goodwill assessments.

Mackenzie has used Windows computers for the past 20 years but is now considering purchasing an Apple computer. A primary factor that will drive Mackenzie's decision is her:

switching costs.

The four primary macroeconomic forces include:

the growth rate of the economy, interest rates, currency exchange rates, and inflation (or deflation) rates.

All of the following are included in Porter's model as one of the five competitive forces EXCEPT:

the power of complement providers.

Rail travel would be in which type of industry?

Declining