Business Policy Ch 1-4 & 6.1
complementor
A company is best described as a _____ to an existing company if customers value the existing company's product or service offering more when they are able to combine it with the other company's product or service.
solve a problem for a consumer.
A customer-oriented vision statement focuses employees to think about how best to
the gap between the value the firm's product generates and the cost to produce it is large.
A firm's strategic position is likely to be strong when
horizontal mergers and acquisitions.
A fragmented industry is made into a consolidated industry through
decreased industry profit potential.
A new company named Far Reach Inc. entered the radio retail business. In response, two incumbent radio retailers, Smooth Waves and Clear Signal, lowered the cost of their travel alarm radios and long-distance radios. Also, they spent more money to improve these radios. By doing this, Smooth Waves and Clear Signal
firms within the same industry.
A strategic group will typically include
monopolistic competition.
An industry has many firms that compete in it. While products between competitors tend to be similar, they are by no means identical. As a consequence, managers selling a product with unique features tend to have some ability to raise prices. This type of industry is an example of
While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so.
Beans Inc. operates in a perfectly competitive agricultural industry. Classica Apparel Inc., in contrast, operates in a monopolistically competitive industry. Keeping this information in mind, which of the following statements is true?
they earn low profits or are strapped for cash.
Buyers are highly price sensitive when
monopolistic competition
Corner Market Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Corner Market has aggressively used branding, pricing, and superior customer service to uniquely position itself in the market. As a result, the supermarket chain has been able to differentiate itself from its competitors and sell its products at higher prices. Which of the following industry competitive structures does this scenario best illustrate?
cutthroat competition.
Demand for traditional fast-food providers such as McDonald's, Burger King, and Wendy's has been on a decline in recent years. Consumers have become more health conscious and demand has shifted to alternative restaurants like Subway, Chick-fil-A, and Chipotle. Attempts by McDonald's and Wendy's to steal customers from one another include frequent discounting tactics such as dollar menus. Such competitive actions are indicative of
the e-commerce retail business where investments on assets are low
Due to economic regression in United Filipia, the profitability of the large conglomerate Blue Wing Products Inc. (BWP) was poor. An analysis of the company's business showed that the company could become profitable if it divested a few strategic business units under its banner. From which of the following businesses would BWP find it most easy to exit?
price competition among firms frequently decreases.
During periods of high industry growth
The travel industry changed from a consolidated structure to a fragmented one
Earlier, the travel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets, and hotels for their customers. However, with the emergence of the Internet, smaller travel agencies started mushrooming in the industry and customers started making their own reservations. Which of the following can be inferred from this information?
oligopoly
Eon Inc., Electravia Inc., and FC Inc., the three largest firms in the consumer electronics industry, hold close to 85 percent of the industry's market share. These companies mainly compete against each other by providing unique features in their products rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate?
monopoly
Fadia Ammunition Inc., a firm controlled and managed by the government of Fadia, is the only company that has the license to produce defense arms in the country. Which of the following industry competitive structures does this best illustrate?
switching cost
First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. Since the new software has different features and abilities, First Ledger Inc. has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents First Ledger Inc.'s
switching cost.
First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. Since the new software has different features and abilities, First Ledger Inc. has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents First Ledger Inc.'s
low entry barriers
Five years ago, Palomino Airline was able to get a strong foothold in the airline industry by hiring a few pilots and crew and renting two airplanes, which flew routes between Denver, Omaha, Pierre, Cheyenne, and Helena. Which of the following summarizes the above factors that enabled Palomino to get started?
All nations around the globe should have access to a sustainable energy source.
Free Winds, Inc. is a company that manufactures a variety of generators that run on wind power. The company wants to ensure that wind technology replaces all forms of exhaustible energy sources in the near future. Which of the following statements will make an accurate vision for Free Winds?
Blue Skies Airlines Inc., which follows a low-cost strategy
Go West Airlines Inc. follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor?
a premium rooftop restaurant in the same city
Golden Harvest is a restaurant located inside a five-star hotel. It caters mainly to customers who are concerned about quality dining rather than the prices. In this scenario, which of the following will be a part of Golden Harvest's strategic group?
strategic group.
Home Savings, Good Deals, Hank's Store, and King Bargains are all departmental stores that compete for advantage against each other through everyday low-pricing and discounts on bulk purchases. All four stores cater to the needs of highly price-sensitive customers. Thus, together Home Savings, Good Deals, Hank's Store, and King Bargains form a
Threat of new entrants will be low.
How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces?
by developing proprietary technology
How can a firm change its industry structure from monopolistically competitive or oligopolistic to a near monopoly?
Virgin America offered low-cost service between major metropolitan cities on the American East and West coasts.
How did Virgin America enter the airline industry despite the industry's notoriously low profitability?
Firms can easily borrow money to finance future growth.
How do low interest rates affect a business?
Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.
How is a firm's task environment different from its general environment?
BlackBerry failed to change its device into one that could perform multiple tasks effectively.
In 2008, BlackBerry's market cap peaked at $75 billion. By 2015 this valuation had fallen more than 90 percent, to less than $7 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry's decline?
natural monopoly
In Rozinia Republic, the federal government owns and manages all the nuclear power plants. This is because the business would not be profitable if there was more than one supplier in the nuclear power industry. Which of the following industry competitive structures does the scenario best illustrate?
capital requirements are low.
In an industry, the threat of entry is high when
entering the aircraft manufacturing industry requires huge capital investments.
In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because
Samsung's smartphones increase in value when they are preinstalled with Google's Android system.
In the smartphone industry, Google is a complementor to Samsung. Which of the following statements best explains why this is true?
assessing the overall industry structure.
In the step-by-step process of industry analysis, identifying the underlying drivers of each force is followed by
if the industry has recently become deregulated
In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry?
Suppliers' industry is more concentrated than the industry it sells to
In which of the following situations is the power of suppliers high in an industry?
Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry.
Keeping in mind the five forces in the airline industry, which of the following best explains the situation in the industry?
the steel industry in which the company has obligations like severance pay toward employees
Peerless Inc., a large conglomerate, wants to liquidate its business in certain industries to improve its overall profitability. Which of the following industries would Peerless Inc. find it most difficult to exit?
only achieve competitive parity
Pure Carat Inc. is a company that sells 24-carat gold biscuits to companies that manufacture jewelry. Since the company operates in an industry where many other suppliers sell standardized products, it can most likely
lobbying forces
Quick Market Inc. is a food supply company that wants to sell its products directly to consumers through mail order instead of going through supermarkets and other stores. However, supermarket chains want to make this transaction either illegal or more difficult for Quick Market. To accomplish this, they are using _______ to influence the political process.
co-opetition.
Samsung and Google cooperate as complementors to compete against Apple's strong position in the mobile device industry, while at the same time Samsung and Google are increasingly becoming competitive with one another. This scenario best illustrates the process of
a premium car manufactured and sold by Mova Autos Inc., a rival company
Shield Autos Inc. has newly launched a luxury car into the European market. Which of the following would most likely not be a complement to the car?
complementor
SooGood Inc. produces a dip that goes extremely well with Crunchy Potato Chips Inc. SooGood Inc., therefore, is a _____ of Crunchy.
costly, long-term oriented, and difficult to reverse.
Strategic commitments are actions that are
long-term oriented
Strategic commitments are actions that are
corporate executives
Strategic leadership pertains to the use of power and influence by _____ to direct the activities of others when pursuing an organization's goals.
an industry convergence.
The Beacon is a newspaper that sold print copies of its paper in a medium-sized town in Kansas for more than 100 years. Recently, the Beacon signed a deal with IntelNews Inc. to present the paper digitally to homes and businesses. This example shows
by making the user experience of the mobile Internet easy and fun
The Chief Executive Officer (CEO) of Yahoo, Marissa Mayer, established a mission by building on her vision. Considering this, how did Mayer implement the mission of Yahoo?
to make the world's daily habits more inspiring and entertaining
The Chief Executive Officer (CEO) of Yahoo, Marissa Mayer, maintains that if a company builds the best product possible, profits will come. Identify the phrase that represents the new vision she developed for Yahoo.
define a firm's vision, mission, and values.
The first step in the strategic management process is to
legal factors
The government of Filvia has mandated that the standard minimum wage in the country be increased to $8,000 per year. This has ensured that all firms in the country pay their employees at least $8,000 per year, which has brought about a higher standard of living for the people of Filvia. Which of the following factors in a firm's general environment does this mandate best indicate?
understand the profit potential of different industries.
The primary objective of Porter's five forces model is to
suppliers provide products that are differentiated.
The relative bargaining power of suppliers is high when
threat of new entrants is most likely low.
The telecom industry in the country of New Taria is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the telecom industry, the
oligopoly
The telecommunication industry of United Canava is primarily dominated by three large firms: AD Telecom Inc., Mystic Telecom Corp., and Total Talk Inc. Instead of cutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in?
back up their visions with strategic commitments that are costly and difficult to reverse
To be effective, firms need to
We help the homeless gain and sustain financial independence by providing employment opportunities.
True Help is a nonprofit organization that works toward rehabilitating the homeless. The credo of the organization is "help us help you." For an organization like True Help, which of the following statements would make an appropriate mission?
they provide more aspirational visions
Visionary companies are able to outperform their competitors because
There is an increase in prices.
What is most likely to happen when there is too much money in an economy?
. the executives' use of power and influence to direct the activities of others when pursuing an organization's goals
What is strategic leadership?
Strategic leaders design a method to formulate and implement strategy.
What is the strategic management process?
perfect competition
When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate?
the threat of substitutes
When fashion magazines face competition from fashion blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger?
when firms make strategic commitments to compete in an industry
When is the rivalry among existing competitors in an industry likely to be more intense?
An automobile manufacturer uses branding, pricing, and superior advertising to differentiate itself from a large number of other automobile manufacturers.
Which of the following best illustrates a firm operating in a monopolistically competitive industry?
the family size of the firm's target market
Which of the following do the sociocultural forces in a firm's external environment best represent?
At Fuentes Electronics, all employees are motivated to make the best microwave ovens on the market
Which of the following examples reflects the strongest vision?
the composition of the strategic group to which the firm belongs
Which of the following external forces is a part of a firm's task environment?
Car manufacturers require large-scale production in order to be cost-competitive.
Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers?
when the buyer operates in an industry where products are undifferentiated
Which of the following features about a buyer indicates that the buyer has high bargaining power?
a company that manufactures its own brand of desktops and laptops
Which of the following firms will most likely not be a complementor to a firm that manufactures computers?
Any of the five forces on its own, if sufficiently strong, can extract industry profitability.
Which of the following fundamental insights was provided by Porter's five forces framework from the completion of the Alta Velocidad Española (AVE) in 2008?
Managers cannot determine the changing speed of an industry or the rate of innovation.
Which of the following is a drawback of Porter's five forces model?
levels of employment
Which of the following is a macroeconomic factor that can affect a firm's strategy?
It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.
Which of the following is a primary feature of the five forces model?
Near monopolies are firms that have accrued significant market power and thereby are changing the industry structure in their favor.
Which of the following is an accurate statement about near monopolies?
Andrea, Ltd. wants to be the best manufacturer of picture frames in the industry.
Which of the following is an example of a product-oriented vision statement?
The industry will face excess capacity.
Which of the following is an implication of high exit barriers in an industry?
The overall industry profitability will increase.
Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines?
The incumbent firms will spend more to satisfy their existing customers
Which of the following is most likely an implication of new firms entering an industry?
The incumbent firms will spend more to satisfy their existing customers.
Which of the following is most likely an implication of new firms entering an industry?
the stage of the business cycle that the country is in
Which of the following represents an economic factor in a firm's external general environment?
Competition must be defined in a broad way to incorporate all of the key factors that influence profit potential.
Which of the following statements about Porter's five forces model is accurate?
In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.
Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly?
The stronger the five forces in an industry, the greater the industry's profit potential
Which of the following statements is not true about the five forces in Porter's competitive analysis model?
The stronger the five forces in an industry, the greater the industry's profit potential.
Which of the following statements is not true about the five forces in Porter's competitive analysis model?
Profitability varies between different strategic groups
Which of the following statements is true about strategic groups?
competing against each other through price-cutting
Which of the following strategies will be most detrimental to firms that are close rivals operating in an oligopolistic industry structure?
A vision states what a firm wants to accomplish; a mission states how a firm plans to accomplish this vision.
Which of the following summarizes the difference between a firm's vision and mission?
when the buyers' cost of switching to substitutes is low
Which of the following would most likely not indicate that sellers are a strong competitive force in an industry?
The threat of new entrants will be higher for Burger Cult Inc. than Citizen Telecom Inc
While Burger Cult Inc. operates in a monopolistically competitive industry, Citizen Telecom Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true?
Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines.
While implementing strategic group mapping for the U.S. domestic airline industry, two strategic groups become apparent: low-cost, point-to-point airlines (Virgin Atlantic, Alaska Airlines, JetBlue, and Southwest Airlines) versus differentiated airlines using a hub-and-spoke system (American, Delta, and United). Which of the following statements is true about these two strategic groups?
Since suppliers of its key sources are few, the bargaining power of suppliers is high.
While industry forces have been favorable for a long time in the U.S. automotive industry, recent dynamics have lowered the profit potential of competing in this industry and thus reduced its attractiveness. The continued success of Tesla Motors in the industry will depend on other firm and industry factors. Which of the following represents one such factor that directly affects Tesla Motors?
The firms can differentiate their product offerings.
Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services?
industry convergence
With the emergence of smartphones, users no longer have to carry a separate music player, a video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone is loaded with a variety of applications to satisfy all the customer needs that different industries or products individually satisfied earlier. As a result, the smartphone industry has been posing a threat to a lot of other unrelated industries. What is this phenomenon best known as?
