Ch. 3
When restrictive government policies do not exist or when industries become deregulated, the _______ is high
Threat of entry
High exit barriers lead to intense rivalry. T/F
True
To determine economic value, one must subtract the cost of production from the ____
Value of a firm's product or service
What are three factors in determining the intensity of rivalry among existing competitors?
1. Competitive industry structure 2. Exit barriers 3. Industry growth
Through the PESTEL model, firms are able to do what 2 things?
1. Evaluate external trends 2. Monitor external factors
In an oligopoly, which of the following conditions exist?
1. Few large firms 2. High barriers to entry 3. Differentiated products
When a new firm enters an industry, what 3 things happen?
1. Industry profit potential declines 2. Incumbent firms spend more to satisfy customers 3. Incumbent firms lower prices
Managers are able to influence what two types of external forces?
1. Strategic group composition 2. The structure of their industry
What are two statements about industry dynamics?
1. The five forces model is a static model 2. Over time, industry structures are not stable
What 2 conditions lead to a strong threat of substitutes?
1. When the price-performance trade-off is attractive 2. When the cost of switching to the substitute is low
Exit barriers are composed of ____ factors (2 things)
Economic and social
In the PESTEL model, political factors are those that relate to _____
Government bodies
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 example of what?
Advantages independent of size
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
When a buyer moves upstream in the industry value chain, into the supplier's business, ____ occurs
Backward integration
The closer firms are on the strategic group map, the more ____ & _____ they are competing with each other
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
The ____ is a measure of the change in the amount of goods and services produced by a nation's economy
Economic growth rate
Although ____ coordination, such as price fixing, is illegal in the United States, ____ coordination such as "an unspoken understanding" is not
Explicit ; tacit
What is a true statement about a fragmented industry
It consists of small firms
An example of a recent innovation in process technology is _____
Lean manufacturing
What tends to result from strong competitive rivalry?
Limits to the industry's profit potential
Recessions are less likely to harm ____-cost airlines, which appeal more to budget-conscious travelers than legacy carriers
Low
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
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
What is a true statement about legal factors as an external force
Regulatory changes tend to affect entire industries at once
The cost advantages that a firm obtains by increasing output, such as by spreading fixed costs over more units, are called economies of _____
Scale
The cultures, norms, and values of the society in which a firm competes are considered ____ factors
Sociocultural
A _____ group is a set of companies within a specific industry that seek to achieve competitive advantage in similar ways
Strategic
There is a ____ relationship between competitive intensity and the power of the five forces
Strong
The threat of ____ is one of the five forces and can be exemplified by the threat that videoconferencing presents to business travel
Substitutes
What is a positive response to ecological factors in the PESTEL model?
Sustainable economic growth
Governments sometimes set up a natural monopoly when a venture ____
Would otherwise not be profitable
