Chapter 3

strategic groups

Sets of companies that follow similar strategies.

According to a study by Ketchen, Palmer, and Holt, which of the following is NOT true about strategic group membership? Strategic group membership is as important industry membership. Strategic group membership is often overrated leading to few new opportunities. Strategic group membership must be a point of consideration for corporate managers All of the above are true Strategic group membership in some instances is more important than industry membership

Strategic group membership is often overrated leading to few new opportunities.

potential new entrants

companies that do not currently compete in an industry but might join the industry in the future

The industry, a component of the environment of an organization, is also called the _____. meso-environment competitive environment common environment macro-environment micro-environment

competitive environment

_____________________ consists of multiple organizations that collectively compete with one another by providing similar goods, services, or both. Microenvironment Community environment Competitive environment Macroenvironment Consistent environment

competitive environment

Which of the following is NOT a trend within the general environment? Demographics Economic Conditions Technological Trends Competitors providing similar goods or services Social Trends

competitors providing similar goods or services

_________ barriers that make it difficult or illogical for a company to change groups over time. Research Mobility Stability Creditability Monetary

mobility

backward vertical integration

A strategy that involves a buyer entering the industry that it purchases goods or services from.

forward vertical integration

A strategy that involves a supplier entering the industry that it supplies inputs to.

Which of the following is an example of the importance of strategic groups? All of the above are examples Source of alternative paths to success Source of good ideas Rivalry Identifying untapped opportunities

All of the above are examples

opportunities

Events and trends that create chances to improve an organization's performance level

exit barriers

Factors that make it difficult for a firm to stop competing in an industry.

mobility barriers

Factors that make it unlikely or illogical for a firm to change strategic groups over time.

industry (or competitive environment)

Multiple organizations that collectively compete with one another by providing similar goods, services, or both.

general environment (macroenvironment)

Overall trends and events in society such as social trends, technological trends, demographics, and economic conditions.

suppliers

Providers of inputs that the competitors in an industry need to create goods or services.

buyers

Purchasers of the goods or services that the competitors in an industry create.

intellectual property rights

The ability of an organization to protect intangible goods such as movies, software, and video games from piracy.

PESTEL analysis

The examination of political, economic, social, technological, environmental, and legal factors and their implications for an organization.

social segment

The portion of the general environment that involves demographics and cultural trends.

economic segment

The portion of the general environment that involves economic and financial conditions

political segment

The portion of the general environment that involves governments.

technological segment

The portion of the general environment that involves scientific advances.

legal segment

The portion of the general environment that involves the law and courts.

environmental segment

The portion of the general environment that involves the natural environment.

Which of the following is true about strategic groups? Strategic groups are sets of firms that follow different strategies. A strategic group consists of a set of industry competitors that have similar characteristics to each other but differ in important ways from the members of other groups. A strategic group refers to the group of senior managers in an organization. A strategic group refers to different divisions within one organization. Strategic groups consist of the technical and operational heads of an organization.

a strategic group consists of a set of industry competitors that have similar characteristics to each other but differ in important ways from the members of other groups.

Five Forces Analysis

a technique for understanding an industry by examining the interactions among competitors in an industry, potential new entrants to the industry, substitutes foe the industry's offerings, suppliers to the industry, and the industry's buyers

the five forces analysis differs from the PESTEL analysis in that the five forces analysis is used for: evaluating profit potential of an organization's various business units or product lines. analyzing how much profit potential exists in an industry. organizing factors within the general environment and identifying how these factors influence industries and the firms within them. analyzing a company's strengths and weaknesses along with the opportunities and threats that exist in the company's environment. evaluating strategic groups in order to understand gaps in the industry that represent untapped opportunities.

analyzing how much profit potential exists in an industry

One of the following statements does NOT address why the environment matters. The environment is a source of threats The environment shapes strategic decisions The environment is a source of opportunities The environment provides resources an organization needs to create goods and services. Business always shapes the environment

business always shapes the environment

Buyers are more likely to be powerful relative to the firms from which they purchase goods and services if: the good or service is of significant importance to the quality or price of the buyer's offerings. the good or service purchased by the buyers represents a small percentage of the buyer's costs. there are relatively few firms supplying the industry compared to the number of buyers. buyers have the ability to become a new entrant to the industry if they wish. the industry's goods or services are highly differentiated.

buyers have the ability to become a new entrant to the industry if they wish.

The likelihood of new entrants joining an industry is low if differentiation among existing competitors is high because: new entrants struggle to gather enough cash to get started. this discourages customers from buying a new entrant's offerings. new entrants struggle to get their offerings to customers. new entrants struggle to match incumbents'; prices. each incumbent has a group of loyal customers that enjoy its unique features.

each incumbent has a group of loyal customers that enjoy its unique features.

Which of the following is NOT one of the segments within a PESTEL analysis? technological social political economic educational

educational

threats

events and trends that may undermine an organization's performance

New entrants are more likely to join an industry if: access to distribution channels is limited. switching costs for consumers are high. capital requirements to enter the industry are high. expected retaliation from existing competitors is low. existing competitors enjoy economies of scale.

expected retaliation from existing competitors is low.

Profit potential of an industry is one of the five forces proposed by Michael Porter in his five forces analysis. true false

false

The economic segment of the general environment includes elements such as tax policies, changes in trade restrictions and tariffs, and the stability of governments. true false

false

Rivalry between competitors of an industry tends to be fierce when: fixed costs in the industry are high. exit barriers in the industry are low. the growth rate of demand for the industry's offerings is high. competitors are differentiated from each other. competition is based on the uniqueness of the industry's offerings.

fixed costs in the industry are high

PESTEL analysis is an important tool: for organizing factors within the general environment and identifying how these factors influence industries and the firms within them. for evaluating profit potential of an organization's various business units or product lines. for analyzing how much profit potential exists in an industry. for executives to analyze strategic groups in order to understand gaps in the industry that represent untapped opportunities. that considers a firm's strengths and weaknesses along with the opportunities and threats that exist in the firm's environment.

for organizing factors within the general environment and identifying how these factors influence industries and the firms within them.

substitutes

offerings from other industries that fulfill the same need or a very similar need as an industry's products or services

Which of the following is true about fragmented industries? Over time, some firms will try to steal customers from other firms. A competitive move by one firm will be typically ignored by others. They do not offer similar products in the same city at the same time. Their advertising does not lampoon each other. Rivalry between competitors tends to be polite.

over time, some firms will try to steal customers from other firms

Understanding the nature of strategic groups within an industry is important because: each firm in a firm's group has a group of loyal customers that enjoy its unique features. this provides a better understanding of a new entrant's struggle to match incumbent's prices. placing an emphasis on the members of a firm's group is helpful as these firms are usually its closest rivals. this helps a firm's suppliers streamline their processes and provide cost-effective products and services. this discourages customers from buying a new entrant's offerings.

placing an emphasis on the members of a firm's group is helpful as these firms are usually its closest rivals.

Some hospital executives have noted that illegal immigrants put a strain on the health care system because immigrants seldom can pay for medical services and hospitals cannot, by law, turn them away from emergency rooms. For these hospitals, this aspect of illegal immigration represents the _____ segment of PESTEL analysis. economic technological political social environmental

political

Which of the following is one of the five forces of Michael Porter's five forces analysis? Geographic origin of an industry Cultural and social trends affecting an industry Governmental regulations Economic elements Potential new entrants to an industry

potential new entrants to an industry

Increasing participation of women in the paid workforce has benefited organizations like daycares. This example represents the _____ segment of PESTEL analysis. economic environmental social technological political

social

Understanding the nature of strategic groups within an industry is important because: each firm in a firm's group has a group of loyal customers that enjoy its unique features. this discourages customers from buying a new entrant's offerings. this helps a firm's suppliers streamline their processes and provide cost-effective products and services. this provides a better understanding of a new entrant's struggle to match incumbent's prices. such an analysis can reveal gaps in the industry that represent untapped opportunities.

such an analysis can reveal gaps in the industry that represent untapped opportunities.

Suppliers are more likely to be powerful relative to the firms to which they sell their goods and services if: suppliers have the ability to enter the industry if they wish. Suppliers' products are not differentiated. the suppliers' industry is highly fragmented. suppliers rely heavily on industry members to be profitable. there is an effective substitute for what the supplier group provides.

suppliers have the ability to enter the industry if they wish

Moore's Law is an example of a concept within which segment of a PESTEL analysis? technological political social environmental economic

technological

Which of the following components of the environment consists of organizations with which an organization interacts regularly, such as its suppliers, rivals, and customers? The competitive environment The opportunistic environment The intellectual environment The micro-environment The meso-environment

the competitive environment

Which of the following is also called the macro-environment of a business? The social and cultural environment The economic environment The competitive environment The general environment The political environment

the general environment

competitors

the set of companies that produce goods or services within an industry

environment

the set of external conditions and forces that have the potential to influence the organization

Members of a company's strategic group are usually its closest rivals. true false

true

The environment is a source of opportunities and threats for an organization. true false

true

which of the following is NOT a factor within the social segment of a PESTEL analysis? unemployment rate ethnicity consumer activism cultural trends population size

unemployment rate

Examination of the strategic groups in an industry provides a company's executives with a better understanding of their closest rivals, reveals alternative paths to success, and highlights ___________. mobility barriers Strategic objectives untapped opportunities Industry membership company strengths

untapped opportunities