MGMT 434 Chapter 3
When a firm enters an industry, which of the following can occur?
Firms spend more money to satisfy customers, firms lower prices, profit potential declines
Which of the following statements best supports the fact that even during a low period of low demand in the US auto industry, excess capacity remained?
GM and Chrysler, which both filed for bankruptcy in 2009, restructured instead of exiting the industry
Rivalry among existing competitors has _________ with the height of the industry's exit barriers
a direct relationship
Rivalry among existing competitors has _________ with the height of the industry's exit barriers
a direct relationsip
Which of the following is an example of a demographic factor?
age, sexual orientation, gender
Firms have a tendency to change the industry in their favor, for example by making industries more _________ through mergers and acquisitions
consolidated
A company is a complementor to your company if:
customers value your product more when they can use it with the other company's product
Which of the following are likely outcomes of a competitive rivalry based entirely on price cutting?
Most or all value is transferred to customers, firms struggle to make profits, and investments from firms drop off
Which of the following are the four main competitive industry structures?
Perfect Competition, Monopolistic Competition, Oligopoly, Monopoly
According to the PESTEL model, which of the following are kinds of forces that exist in the general external environment?
Political, Technological, and Economic
According to the five forces model, a firm seeking to compete in an established industry should seek to do which of the following?
Position itself in a way that relaxes the constraints of strong forces and position itself in a way that leverages weak forces
Which of the following are advantages, independent of size, that incumbent firms possess?
Preferential access to distribution channels, proprietary technology, brand loyalty, and cumulative experience effects
Which of the following are the primary factors in the emergence of "green" technology companies that provide new means of extracting energy from renewable resources?
Technological and ecological
When buyers can credibly threaten to backwardly integrate into the industry, the power of buyers is _________
high
When suppliers do not depend on the industry for a large portion of their revenues, the power of suppliers is _________
high
In a period of economic boom, unemployment is ________ and human resources become expensive
low
When managers understand the forces in the external environment, they are better able to:
mitigate threats and leverage opportunities
An industry in which only one firm supplies the market is known as a _________
monopoly
When firms compete by offering unique product features rather than competing on price, _________ occurs
non-price competition
Firms are able to create a near monopoly by maximizing _________
product differentiation
The economic recession that began in 2008 in the United States was the result of unwise investment in _________
real estate
Exit barriers, strategic commitments, and competitive industry structure are important factors in determining the intensity of _________
rivalry
Price __________ is the lack of change in price levels of goods and services
stability
The expected competitive intensity is _______, when the other four forces are ________.
stronger stronger; weaker weaker
If a business considers changing vendors, but doing so would require that business to alter product specifications, retrain employees, and/or modify existing processes, we would say the business faces significant ________
switching costs
Despite high barriers to entry, startups such as Tesla have been able to break into the US car market through:
technological innovations
When a firm is able to maximize the gap between __________, it increases its competitive advantage
the cost of production and the value of what it produces
The key take away from the five forces model is that:
the stronger the forces, the lower the industry's ability to earn profits
The _________ is the idea that products or services available from the outside the given industry will come close to meeting the needs of current customers
threat of substitutes
Governments sometimes set up a natural monopoly when a venture _________
would otherwise not be profitable
Along which of the following dimensions do strategic groups differ from one another?
Pricing, customer service, market segments, and research and development
In order to influence changes in their political environment, firms pursue:
nonmarket strategies
There is a ________ relationship between competitive intensity and the power of buyers and suppliers
positive
The intensity with which companies in an industry jockey for market share and profitability is:
rivalry
Firms within the same strategic group tend to follow a _________ strategy while firms in a different strategic group follow a _________ strategy
similar; different
Price discounts, frequent new products releases with minor modifications, and intense promotional campaigns are all tactics indicative of an industry with __________ growth.
slow or negative
To determine economic value, one must subtract the cost of production from the _________
value of a firm's product or service
The closer firms are on the strategic group map, the more _________ they are competing with each other
intensely and directly
As strategic commitments increase, rivalry within an industry _________
intensifies
The fact that tax preparation software such as TurboTax is a valid alternative for professional services offered by HR Block and others, is an example of ________
the threat of substitutes
A firm's strategic position relates to its ability to create __________ for customers while containing the ________ to do so
value, cost
Which of the following are characteristics of a monopolistically competitive industry?
A differentiated product, obstacles to entry, and the ability to raise prices for differentiated products
Through use of the PESTEL model, firms are able to do which of the following?
Evaluate external trends, monitor external factors
Deflation is a serious threat to economic growth for which of the following reasons?
It distorts expectations about the future and it stops companies from investing in new production capacity because they expect a further decline in prices
Walmart producing private-label brands such as Equate health and beauty items and Parent's Choice baby products, is an example of ________
backward integration
The pressures that industry suppliers can exert on an industry's profit potential, is also called the:
bargaining power of suppliers
Growth rates, interest rates, and levels of employment would be considered ________ factors in a firm's general environment
economic
Exit barriers are composed of __________ factors
economic and social
Cost advantages that accrue for firms with larger output because they can spread fixed costs over more units and can employ technology more efficiently are called:
economies of scale
Obstacles that determine how easily a firm can enter an industry, are called
entry barriers
A group of companies that deal with more or less the same set of suppliers and buyers make up:
an industry
Which of the following are important factors in determining the intensity of rivalry among existing competitors?
Exit barriers, industry growth, and competitive industry software
Which of the following are important strategic dimensions in mapping strategic groups?
Product and service offerings, expenditures on research and development, and pricing
When competitors cooperate in the name of a shared strategic objective, they engage in:
co-opeition
In addition to the static nature of the strategic group model, what is its other shortcoming?
It does not help us understand why there are performance differences among firms in the same strategic group
