MAN4720 Chapter 3 True & False
A consolidated industry is dominated by a large number of small or medium sized companies which are in a position to determine industry prices.
False
A fragmented industry consists of a small number of large companies, none of which is in a position to determine industry prices.
False
As an industry enters maturity, barriers to entry decrease, and the threat of entry from potential competitors increases.
False
As an industry enters the shakeout stage of the industry life cycle, the rivalry between companies decreases.
False
Economies of scale arise when unit costs increase as a firm expands it output.
False
Explosive growth cannot be maintained indefinitely. Sooner or later, the rate of growth slows, and the industry enters the mature stage.
False
Historically, government regulation has constituted a minor entry barrier into many industries.
False
In a declining industry, competition usually decreases.
False
Mobility barriers are factors that help the movement of companies between strategic groups.
False
Potential competitors are companies that are currently competing in an industry, but have the capability to do so if they choose.
False
Strategic groups are groups of companies in which each company follows a strategy that is similar to that pursued by other companies in the group, and is the same strategy followed by companies in other groups.
False
The growth industry is where demand is expanding as second-time consumers enter the market.
False
The industry life cycle model identifies four sequential stages in the evolution of an industry that lead to four distinct kinds of industry environment.
False
A company's closest competitors, its rivals are those that serve the same basic customer needs.
True
Absolute cost advantage is enjoyed by incumbents in an industry and that new entrants cannot expect to match.
True
An important determinant of the strength of the competitive forces in an industry is the changes that take place in it over time.
True
As an industry enters the shakeout stage, rivalry between companies becomes intense.
True
Brand loyalty exists when consumers have a preference for the products of established companies.
True
Exit barriers are the economic, strategic, and emotional factors that prevent companies from leaving an industry.
True
Fixed costs refer to the costs that must be born before a firm makes a single sale.
True
Growth in an embryonic industry is slow because of buyers' unfamiliarity with the industry's product, high prices due to the inability of companies to reap any significant scale of economies, and poorly developed distribution channels.
True
In mature industries, companies tend to recognize their interdependence and try to avoid price wars.
True
Managers must anticipate how the strength of industry competitive forces will change as the industry evolves and then formulate appropriate strategies to take advantage of opportunities.
True
Many fragmented industries are characterized by low entry barriers and commodity-type products that are hard to differentiate.
True
Michael Porter argues that the stronger each of the five forces, the more limited the ability of established companies to raise prices and earn greater profits.
True
Normally, the importance of control over technological knowledge as a barrier to entry has diminished by the time an industry enters its growth stage.
True
Once the boundaries of an industry have been identified, the task facing managers is to analyze competitive forces in the industry environment to identify opportunities and threats.
True
One of the defining characteristics of the mature stage of the industry life cycle is that growth is low or zero.
True
Opportunities arise when a company can take advantage of conditions in its environment to formulate and implement strategies that allow it to be more profitable.
True
Rivalry in embryonic industries is based not so much on price as on educating customers, opening up distribution channels, and perfecting the design of the product.
True
Rivalry refers to the competitive struggle between companies in an industry to gain market share from each other.
True
Substitute products are the products of different businesses or industries that can satisfy similar customer needs.
True
Switching costs are those costs that consumers must bear to switch from the products offered by one established company to the products offered by another established company.
True
The bargaining power of buyers is the ability to bargain down prices charged by companies in the industry or to raise the costs of companies in the industry by demanding better product quality and service.
True
The bargaining power of suppliers is the ability to raise the price of inputs or to raise the costs of the industry in other ways.
True
The risk of entry by potential competitors is a function of the height of barriers to entry.
True
The stability of a mature industry is threatened by price wars.
True
The starting point of strategy formulation is an analysis of the forces that shape competition in the industry in which a company is based.
True
The systematic analysis of forces in the industry environment using the Porter framework is a powerful tool that helps managers to think strategically.
True
Within an industry, each strategic group may face a different set of opportunities and threats.
True
