Strategic Management- Chapter 3

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

False. Although business has contributed to pollution that has damaged the environment, environmental concerns have also created beneficial opportunities.

True or false: Sociocultural factors tend to be fixed.

False. Sociocultural factors tend to be in flux.

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

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

Which of the following statements is likely to be true about a fragmented industry?

It consists of small firms.

Which of the following are characteristics of the companies in a strategic group? (Check all that apply.)

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.

Which of the following statements about industry dynamics is true?

The five forces model is a static model. Over time, industry structures are not stable.

Which of the following are essential questions that strategic leaders need to consider to increase the probability of entering an industry successfully? (Check all that apply.)

What type of entry should be made? How to enter? When to enter? Who are the players?

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

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

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

The external forces called technological factors ______.

capture the application of knowledge to create new process and products

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

consolidated

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

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

Firms within the same strategic group are _____ competitors.

direct

The closer firms are on the strategic group map, the more ______ they are competing with each other. (Check the two that apply

directly intensely

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

What are the three aspects of mapping strategic groups?

graphing the firms in the strategic group and indicating each firm's market share identifying the most important strategic dimensions choosing two key dimensions for the horizontal and vertical axes

The closer firms are on the strategic group map, the more ______ they are competing with each other. (Check the two that apply.)

intensely directly

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

interdependent

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

largely macroeconomic

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

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

low

In the airline industry, the ______________ of offering international routes restricts movement between hub-and-spoke and point-to-point airlines.

mobility barrier

One would expect low-cost grocery stores such Safeway and Piggly Wiggly to compete ______ with each other than with higher-end grocery stores such as Whole Foods and Trader Joe's.

more intensely

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 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 the four main competitive industry structures? (Check all that apply.)

oligopoly monopolistic competition perfect competition monopoly

Although the five forces model is useful in understanding an industry's profit potential, it provides only a ___.

point-in-time snapshot of a moving target

According to the five forces model, a firm seeking to compete in an established industry should seek to do which of the following? (Check all that apply.)

position itself in a way that leverages weak forces position itself in a way that relaxes the constraints of strong forces

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

substitutes

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

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

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

an industry analysis

When Samsung and Google cooperate as complementors to compete against Apple's strong position in the mobile device industry while at the same time becoming increasingly competitive with each other, this is referred to as __.

co-opetition

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

Political

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

government bodies

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

mandates regulations laws

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? (Check all that apply.)

monitor external factors evaluate external trends

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

sociocultural

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

spreading fixed costs over more units having more negotiating power vis-à-vis suppliers

A(n) _____ group is a set of companies within a specific industry that seek to achieve competitive advantage in similar ways.

strategic

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. : Competitive intensity moves in the same direction as the other forces (positive relationship). The greater the power of suppliers and buyers, the more difficult it is for companies to survive. As a consequence, rivalry or competitive intensity will be higher.

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

High oil prices, governmental restrictions, and economic downturns are all examples of ______.

external factors

Production costs can increase when ______.

buyers demand higher quality and more service

Which of the following are important strategic dimensions in mapping strategic groups? (Check all that apply.)

expenditures on research and development product and service offerings cost structure

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

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

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 ecological economic

Which of the following have helped increase the rate of convergence in the media industries?

technological progress in AI telecommunications advances digital media

An industry analysis provides which of the following? (Check all that apply.)

the level of profitability that can be expected for the average firm in the industry insight into a firm's strategic position within an industry a rigorous way of identifying the industry's profit potential

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

an industry

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

The pressures that industry suppliers can exert on an industry's profit potential, is also called the ______

bargaining power of suppliers

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

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

What are competitors engaged in when they work together to achieve a strategic objective?

co-opetition

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

competitive

Industry _______ is the process by which formerly unrelated industries begin to satisfy the same customer need.

convergence

A company is a complementor to your company if ______.

customers value your product more when they can use it with the other company's product

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

exit barriers industry growth competitive industry structure

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

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

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

greater

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

increasing its competitive advantage

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

lower

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

potential competitors will enter a given industry

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

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

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

Along which of the following dimensions do strategic groups differ from one another? (Check all that apply.)

research and development distribution channels market segments customer service

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

scale

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

by demanding higher quality by obtaining price discounts by requesting more service

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

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. existing competitors

buyers

Which of the following help determine competitive industry structure? (Check all that apply.)

firms' degree of pricing power height of entry barriers size and number of competitors

Which of the following are examples of demographic factors?

gender age sexual orientation

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

high

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

suppliers and buyers

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

entry barriers

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

less

Which of the following tend to result from strong competitive rivalry?

limits to the industry's profit potential

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

lobbying public relations litigation

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

low

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

ecological

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

powerful

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

similar

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

stronger; weaker. Competitive intensity moves in the same direction as the other four forces. A weaker threat of entry and weaker threat of substitutes and less power of suppliers and buyers, means that the industry is more attractive and easier for everyone to compete in. As a consequence, rivalry or competitive intensity will be weaker as well.

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

Regulatory changes tend to affect entire industries at once.

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

Which of the following are approaches for answering the question "How to enter?" when a firm is considering entering an industry?

Reconfiguring value chains Establishing a niche Leverage existing assets