Chapter 3: External Analysis: Industry Structure, Competitive Forces, and Strategic Groups

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

(a) strategic

Which of the following are ways in which the power of buyers affects producers? -by reducing economies of scale -by demanding higher quality -by requesting more service -by obtaining price discounts

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

The risk that potential competitors will enter the industry is known as the ______. -power of buyers -power of suppliers -threat of entry -threat of substitutes -rivalry among existing competitors

-threat of entry

The _______ is the idea that products or services available from outside the given industry will come close to meeting the needs of current customers. -rivalry of existing competitors -power of buyers -threat of substitutes -threat of new entrants

-threat of substitutes

A group of companies that deal with more or less the same set of suppliers and buyers make up ______. -a multi-environment -a state -a business group -an industry

-an industry

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. -new entrants -existing competitors -buyers -supplier

-buyers

The external forces called technological factors ______. -capture the application of knowledge to create new process and products -quantify characteristics of the economy and business climate -describe society's norms and values -represent official government decisions and regulations

-capture the application of knowledge to create new process and products

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

-substitutes

The relationship between the natural environment and business organizations can best be described as ______. -a U-shape -unconnected -interdependent -insignificant

-interdependent

In the airline industry, the ______________ of offering international routes restricts movement between hub-and-spoke and point-to-point airlines. -strategic commitment -exit barrier -supplier power -mobility barrier

-mobility barrier

Industry-specific factors known as ______ separate one strategic group from another. -competitive rivalries -planned emergencies -mobility barriers -oligopolies

-mobility barriers

In the five forces model, threat of entry refers to the risk: -that firms face due to strict government regulation. -of potential competitors entering the industry. -that firms face due to lack of funds. -of excessive startup costs.

-of potential competitors entering the industry.

Which of the following are examples of sociocultural factors? -A growing number of U.S. consumers have become more health-conscious about what they eat. -The growth of the Hispanic population. -An extended period of low interest rates. -The method of raising income.

-A growing number of U.S. consumers have become more health-conscious about what they eat. -The growth of the Hispanic population.

Which of the following innovative ideas helped Airbnb develop a successful business in the peer-to-peer rental space? -Following the traditional rental model offered by hotels -Ensuring a smooth transaction between hosts and guests -Fortuitous timing that led to growing demand -Presenting a well-designed website

-Ensuring a smooth transaction between hosts and guests -Fortuitous timing that led to growing demand -Presenting a well-designed website

Although the five forces model is useful in understanding an industry's profit potential, it provides only a ___. -dynamic view of a moving target -point-in-time snapshot of static industries -point-in-time snapshot of a moving target -fixed view of a static competitive market

-point-in-time snapshot of a moving target

Along which of the following dimensions do strategic groups differ from one another? (Check all that apply.) -profit motive -research and development -customer service -market segments -distribution channels

-research and development -customer service -market segments -distribution channels

Managers are able to influence which of the following types of external forces? (Check all that apply.) -currency exchange rates -strategic group composition -the structure of their industry -interest rates

-strategic group composition -the structure of their industry

Which of the following are approaches for answering the question "How to enter?" when a firm is considering entering an industry? (Check all that apply.) -Establishing a niche -Reconfiguring value chains -Timing of the entry -Leverage existing assets

-Establishing a niche -Reconfiguring value chains -Leverage existing assets

Place the three frameworks used in industry analysis in the order they should be used, with the first at the top. -strategic group mapping -Porter's five forces -PESTEL analysis

-PESTEL analysis -Porter's five forces -strategic group mapping

______ factors result from the processes and actions of government bodies that influence the decisions and behavior of firms. -Technological -Economic -Profitable -Political

-Political

Which of the following statements about legal factors as an external force is true? -The courts do not allow the government to use legal factors to exert its political will on businesses. -The U.S. government has allowed very few industries to be deregulated. -Regulatory changes tend to affect entire industries at once. -Legal factors affect a firm's profit potential only indirectly.

-Regulatory changes tend to affect entire industries at once.

Global warming would be an example of ___ factor in a firm's external environment. -a sociocultural -a political -an ecological -a technological

-an ecological

Michael Porter developed the five forces model to help firms do which of the following? (Check all that apply.) -analyze PESTEL forces -gain and sustain a competitive advantage -determine the profit potential of different industries -understand the strengths and weaknesses of a firm's resources

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

An example of a recent innovation in process technology is ______. -the microwave -the BP oil spill -lean manufacturing -the smartphone

-lean manufacturing

Sociocultural factors are constantly in flux and also differ across groups. -True -False

-True

The intensity with which companies in an industry jockey for market share and profitability is known as ___. -identification -threats -barriers -rivalry

-rivalry

In addition to the static nature of the PESTEL, Porter's five forces, and strategic group mapping frameworks, what is their other shortcoming? -It does not account for the threat of new entrants or proposed governmental legislation. -It does not refer to the international nature of the PESTEL factors. -It does not help us understand why there are performance differences among firms in the same strategic group.

-It does not help us understand why there are performance differences among firms in the same strategic group.

Which of the following statements about Airbnb is correct? -It was spun off as a service developed by Google, Inc. -It handles more accommodations than the three biggest hotel chains combined. -It was founded before the Internet was created. -It operates only in North America and Europe.

-It handles more accommodations than the three biggest hotel chains combined.

Which of the following reduces profit margins for air carriers? -Entry barriers in the airline industry -Nationalization of the U.S. airline industry -The presence of monopoly power -Large corporate customers contracting with the U.S. airline industry

-Large corporate customers contracting with the U.S. airline industry

A company is a complementor to your company if ______. -customers private label your product -that company praises your company for excellence -the market is fragmented and you can gain solidarity with a former rival -customers value your product more when they can use it with the other company's product

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

Growth rates, interest rates, and levels of employment would be considered ______ factors in a firm's general environment. -technological -sociocultural -political -economic

-economic

In the PESTEL model, political factors are those that relate to ______. -employment -banking organizations -climate and weather -government bodies

-government bodies

Which of the following are examples of economic factors in the firm's general environment? (Check all that apply.) -interest rates -government regulations -price stability -technological advancements -growth rates

-interest rates -price stability -growth rates

Which of the following tend to result from strong competitive rivalry? -less product differentiation -limits to the industry's profit potential -a reduction in the threat of substitutes -industry-wide price increases

-limits to the industry's profit potential

Which of the following contribute to consumer buying power? -low switching costs -high levels of product differentiation -real time, accurate price comparisons -moderately high barriers to entry

-low switching costs -real time, accurate price comparisons

Which of the following are factors in a firm's legal environment? (Check all that apply.) -mandates -regulations -laws -innovative technology -demographic trends

-mandates -regulations -laws

When managers understand the forces in the external environment, they are better able to ______. -understand the firm's internal resources -illustrate the impact of strategic actions -achieve price stability -mitigate threats and leverage opportunities

-mitigate threats and leverage opportunities

An industry analysis provides which of the following? -The stability of the firm's internal structure -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

-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

Which of the following are ways that powerful suppliers are a threat to firms? -They can drive away the consumer market directly. -They can force the cost of production to decrease. -They can force the cost of production to increase. -They can reduce the industry's profit potential.

-They can force the cost of production to increase. -They can reduce the industry's profit potential.

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.) -Why is it important to study the external environment? -Who are the players? -How to enter? -What type of entry should be made? -When to enter?

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

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 ______. -loss leader -a complement -mobility barrier -co-opetition

-a complement

According to Michael Porter, the profit potential of an industry is ______. -largely random -similar for all service industries -a function of five forces related to competition -entirely determined by industry-specific factors

-a function of five forces related to competition

What are the three aspects of mapping strategic groups? -choosing two key dimensions for the horizontal and vertical axes -graphing the firms in the strategic group and indicating each firm's market share -calculating the shareholder value of the two firms selected -identifying the most important strategic dimensions

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

Firms have a tendency to change the industry structure in their favor, making it more ________ through horizontal mergers and acquisitions, since this tends to be more profitable than a fragmented one. -competitive -intuitive -diffuse -consolidated

-consolidated

Which of the following are important strategic dimensions in mapping strategic groups? (Check all that apply.) -cost structure -expenditures on advertising and HR -product and service offerings -expenditures on research and development

-cost structure -product and service offerings -expenditures on research and development