MGMT 481 chapter 3
Georgia Power and Philadelphia Gas Works are two examples of firms in what type of industry structure?
Natural monopoly
As natural monopolies are shrinking due to global governmental privatizations, another competitive landscape is emerging. Firms like Intel that have 80 percent market share in some markets would be called what?
Near monopoly
________ reveals which companies are in the strongest or weakest position relative to your company.
Strategic group mapping
What is NOT a main industry group in the SCP model?
A strategic group
A ____________ is a product or service that can help raise demand in an industry by indirectly enhancing performance or decreasing prices.
Complement
What is the sixth force of industry attractiveness?
Complements
Which of the following is NOT one of Porter's five forces?
Complements
The profit potential for strategic groups within an industry is __________ between groups.
Different
One of the consequences of the five forces analysis is that a firm must ask itself what?
Does the company strategy match the competitive landscape?
All of the following are aspects of sociocultural factors influencing industry attractiveness EXCEPT?
Environmental protection laws
Competitive rivalry will get weaker when all of the following happen EXCEPT?
Exit barriers are low
Industry structures are not stable over time. The U.S. banking industry has seen major consolidation in recent years. We would expect the result of this dynamic change to be what?
Generally higher industry profits
In 1996, GM, Toyota, and Honda introduced electric vehicles into the California market. This was in response to a regulation passed by the state in 1990 requiring some percentage of zero-emissions vehicles from auto companies be sold in the state. When the regulation was rescinded in the late 1990s, all three firms pulled their electric vehicles out of the market. GM terminated its electric vehicle program, whereas Toyota and Honda used it to introduce hybrid cars only a few years later. What is NOT a valid conclusion to draw from this series of events?
Government regulations are always bad for U.S. businesses
Which of the following would NOT explain why managers track interest rates?
High interest rates make the cost of capital cheaper for a firm
A process whereby formerly unrelated industries begin to satisfy the same customer need is often brought on by technological advances. What is this process called?
Industry convergence
Generally, perfectly competitive industries such as paper and steel (commodities) are deemed to be ________ in profits to more differentiated industries like pharmaceuticals and cosmetics.
Inferior
Microsoft, Nintendo, and Epic are in the video gaming industry. Microsoft and Nintendo produce and sell video game consoles and games. Epic is a video game publisher. When Sony creates a strategic map, it will place Nintendo as a(n)?
Intra-group rival and expect a more intense rivalry from Nintendo than from Epic.
A firm's pricing power?
Is stronger in monopolistic competition than in perfect competition.
Exit barriers are obstacles that determine how easily a firm can leave the industry. When exit barriers are high, what happens to industry attractiveness?
It decreases
When a buyer has a credible threat of backward integration, what happens to their power in the industry?
It increases
When a supplier has a credible threat of forward integration, what happens to their power in the industry?
It increases
Court decisions and regulations such as CARB zero-emissions are elements of which macro environmental force?
Legal factors
The __________ environment affects a firm's industry environment.
Macro
Which of the main industry groups in the SCP model is described as having many firms, some pricing power, and differentiated products?
Monopolistic competition
Competitive rivalry among firms in the same strategic group is generally?
More intense than competition between strategic groups.
A ____________ is created when the government believes the product or service would not be supplied by the market under free market conditions.
Natural monopoly
When there is pressure to innovate, advertising is key and improved service is important for competition, competitors are engaging in ______________ and prices will ________.
Non-price competition; be higher
Competition by offering unique product or service features rather than competing on price is called what?
Non-price competiton
If a rival makes a strategic move in a(n) _________ industry, the dominant firm is most likely to respond with its own initiative to counter (or coordinate) the effects of the first firm.
Oligopolistic
Which of the main industry groups in the SCP model is described as having a few large firms, differentiated products, and high entry barriers?
Oligopoly
An industry with three firms and a differentiated product is most likely a(n) ________, while an industry with three thousand firms and a differentiated product is most likely a(n) ________ industry.
Oligopoly; monopolistic competitive
Agriculture is generally considered a perfect competition industry with largely commodity products. However, there is an aspect of the industry that can be classified as monopolistic competition with differentiated products and price premiums. Which part of the industry is it?
Organic milk
Many Internet entrepreneurs have learned that it is difficult to beat the forces of perfect competition. In perfect competition, there are many small stores with largely commodity products and low entry barriers. Which industry has got caught up in the Internet bubble and has tried to join with online models, most of whom closed after a couple of years?
Pet supply stores
A firm's six PESTEL environmental forces include ______________.
Political, economic, legal, and technological
Which of the following is NOT a major consideration of barriers to entry?
Positive growth rate
Competitive intensity will increase when all of the following happen EXCEPT?
Proprietary technology is a core capability
An ideal competitive environment from a profit-making standpoint is when?
Rivalry is moderate, and high entry barriers and good substitutes do not exist
Mr. Smith was looking to buy a car but decided to buy a motorcycle instead. The motorcycle is a _______ and comes from outside the original industry.
Substitute
Which of the following would NOT indicate that sellers are a strong competitive force?
Substitutes exist for their components
The innovations in process efficiencies such as Six Sigma, the Internet, and biotechnology are all elements of which macro environmental force?
Technological factors
In Strategy Highlight 3.1, why was the U.S. government putting pressure on UBS, the venerable Swiss bank?
The U.S. government wanted information on potential tax evaders.
A key feature of an oligopoly is that the firms are interdependent, which allows them to be good examples in game theory. What does it mean when firms are interdependent?
The actions of one competitor influences the behavior of the others
A small-scale appliance manufacturer has been producing goods for a private label company for 25 years. This manufacturer has no brand image, a small production facility, and scarce capital resources. The company has made several strategic attempts to increase market share and create a nationally branded appliance market presence. So far, it has been unsuccessful. Why is this most likely so?
The company is limited by inter-group mobility barriers based on economies of scale and brand loyalty.
The five-forces-plus-complements model is useful in understanding industry profit potential, but it is only a snapshot in time. Managers must also consider ___________.
The industry dynamics
According to the SCP model, what is the relationship between firms and their industries?
The industry structure determines firm conduct and these combine to determine firm performance
The level of entry barriers is only relevant to potential competitors because?
The level of entry barriers is relevant to both existing and potential firms due to the competitive consequences for both.
Applying the five forces model to the airline and soft drink industries demonstrates all EXCEPT which of the following?
The macro environmental forces are similar between the airline and soft drink industries
When the collective strength of the five forces works against an industry?
The profit potential is weak.
A large textile manufacturer located in South Carolina had to exit the industry because it could no longer compete with firms from overseas. The company laid off hundreds of employees, its suppliers started to struggle, and several local establishments closed their doors. It can be said that the local economy in South Carolina was experiencing what?
The ripple effects through the supply chain
Which of the following would NOT indicate that buyers are a strong competitive force?
They are reliant on the industry's product
Suppliers are powerful when which of the following happens?
They offer a credible threat of forward integration
What is BYD using to avoid entry barriers upon entering the automotive industry?
They used proprietary battery technology for use in electric vehicles
Given its size and industry influence, Walmart would be a powerful buyer. Which of the following is NOT an indication of Walmart's strength as a buyer?
Three suppliers merge together to gain economy of scale.
Microsoft and Intel are complements to each other. Their alternating advances over time have created a ________.
Virtuous cycle
Non-price competition such as today's rivalry between Coca-Cola and Pepsi refers to?
When a firm is offering unique products and services as opposed to competing on price.
The soft drink industry has been one of the most profitable industries for years. There are two key competitors, Coke and Pepsi, who compete on product innovation and lifestyle advertising. Additionally, barriers to entry are high and supplier power is weak. Michael Porter calls this industry?
A "five-star" industry
The U.S. airline industry has intense rivalry, primarily undifferentiated products, low entry barriers, and low switching costs. Furthermore, suppliers of aircraft engines to the industry have strong bargaining power. It is no surprise that this industry has been one of the least profitable for years. Michael Porter calls this industry what?
A "zero-star" industry
John Connelly went to the grocery store to buy some butter. As he was looking at the butter offerings, he noticed that Pam cooking spray was advertised as $1.00 less for the same amount of product. John purchased the spray. The spray is considered to be a what?
A substitute
The United Auto Workers (UAW) union is which of the five forces in the automotive industry?
A supplier
The worldwide car industry has had few new entrants in the past couple of decades due to very large entry barriers. How is BYD getting around these barriers?
All of these
Macro-environmental PESTEL analysis considers the effects of forces on ________.
An entire industry
The type of industry most likely to engage in non-price competition is ___________.
An oligopolistic industry
Recessions are often viewed as a period of defensive position for firms. However, shrewd managers initiate strategic successes during downturns. What is an example of this provided in the text?
Apple's increased R&D spending that lead to the launch of iPod
The objective of Porter's five forces model is to?
Asses the potential for profits within an industry
Which of the following is NOT a benefit about the background of BYD that may help it be successful in overcoming barriers to enter the electric vehicle market?
BYD is the only car company focused on electric cars
When firms that provide key raw materials to an industry can frequently negotiate for higher prices, the?
Bargaining power of suppliers is high.
BYD is an example of a new firm entering the global auto industry. With more firms vying for a U.S. market that is not growing very fast, what will happen?
Competitive intensity is sure to rise
Strategic group mapping tells us that?
Competitive pressures in an industry favor some strategic groups while threatening others