MGT 449 Exam 1 review (Ch. 3)
How can a firm change its industry structure from monopolistically competitive or oligopolistic to a near monopoly?
By developing proprietary technology
In an industry, the threat of entry is high when:
Capital requirements are low
Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers?
Car manufacturers require large-scale production in order to be cost-competitive
Samsung and Google cooperate as complementors to compete against Apple's strong position in the mobile device industry, while at the same time Samsung and Google are increasingly becoming competitive with one another. This scenario best illustrates the process of:
Co-opetition
___ is best described as cooperation by competitors to achieve a strategic objective
Co-opetition
When applying the 5 forces model, the first step should ideally be:
Defining the relevant industry
Which of the following is a feature of a monopolistically competitive industry?
Differentiated products
In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because:
Entering the aircraft manufacturing industry requires huge capital investments
Which of the following is a feature of an oligopolistic industry structure?
High entry barriers
In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry?
If the industry has recently become deregulated
Economies of scale are cost advantages that accrue for firms with:
Larger output
The government of Filvia has mandated that the standard minimum wage be increased to $8,000/year. This has ensured that all firms in the country pay their employees at least $8,000, which has brought about a higher standard of living for the people of Filvia. Which of the following factors in a firm's general environment does this mandate best indicate?
Legal factors
Balmia Ammunition Inc., a firm controlled and managed by the government of Balmia, is the only company that has the license to produce defense arms in the country. Which of the following industry competitive structures does this best illustrate?
Monopoly
The __ allows the scanning, monitoring and evaluating of changes and trends in a firm's macro environment
PESTEL framework
In which of the following industry competitive structures do selling firms have the lowest pricing power?
Perfect competition
In the smartphone industry, Google is a complementor to Samsung. Which of the following statements best explains why this is true?
Samsung's smartphones increase in value when they are pre-installed with Google's Android system
A firm's ___ relates to its ability to create value for customers (V) while containing the cost to do so (C)
Strategic position
Keeping in mind the 5 forces in the airline industry, which of the following best explains the situation in the industry?
Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry
The relative bargaining power of suppliers is high when
Suppliers provide products that are differentiated
Which of the following do the sociocultural forces in a firm's external environment best represent?
The family size of the firm's target market
Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services?
The firms can differentiate their product offerings
A firm's strategic position is likely to be strong when:
The gap between the value the firm's product generates and the cost to produce it is large
Which of the following is most likely an implication of new firms entering an industry?
The incumbent firms will spend more to satisfy their existing customers
When fashion magazines face competition from fashion blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger?
The threat of substitutes
The telecom industry in the country of Andalus is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the telecom industry, the:
Threat of new entrants is lost likely low
Beans Inc. operates in a perfectly competitive agricultural industry. Classica Apparel Inc., in contrast, operates in a monopolistically competitive industry. Keeping this information in mind, which of the following statements is true?
While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so
In the ____ developed by Michael Porter, competition is not defined narrowly as a firm's closest competitors buy rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes
5 forces model
Which of the following represents an economic factor in a firm's external general environment?
The stage of the business cycle that the country is in
Which of the following statements is NOT true about the 5 forces in Porter's competitive analysis model?
The stronger the 5 forces in an industry, the greater the industry's profit potential
The primary objective of Porter's 5 forces model is to:
Understand the profit potential of different industries
Which of the following features about a buyer indicates that the buyer has high bargaining power?
When the buyer operates in an industry where products are undifferentiated
Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a supermarket chain. It demands that All Needs create more shelf space in its stores for Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, it decides to produce its own range of cleaning agents with its own label "All Wash." In this scenario, All Needs Inc. has exercised its bargaining power as a buyer through _____.
Backward integration
Which of the following strategies will be most detrimental to firms that are close rivals operating in an oligopolistic industry structure?
Competing against each other through price-cutting
A company is best described as a _____ to an existing company if customers value the existing company's product or service offering more when they are able to combine it with the other company's product or service.
Complementor
Which of the following is an implication of low interest rates?
Consumer demand will increase
Demand for traditional fast-food providers such as McDonald's, Burger King, and Wendy's has been on a decline in recent years. Consumers have become more health conscious and demand has shifted to alternative restaurants like Subway, Chick-fil-A, and Chipotle. Attempts by McDonald's and Wendy's to steal customers from one another include frequent discounting tactics such as dollar menus. Such competitive actions are indicative of _____.
Cut-throat competition
In a firm's external environment, _____ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.
Demographic trends
Which of the following is a drawback of Porter's 5 forces model?
Managers cannot determine the changing speed of an industry or the rate of innovation
In Galvania Republic, the federal government own and manages all of the nuclear power plants. This is because the business would not be profitable if there was more than one supplier in the nuclear power industry. Which of the following industry competitive structures does the scenario best illustrate?
Natural monopoly
3T Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all 3T users are free. When a person switches to a 3T network, his or her entire network of family and friends is likely to switch to the same network to avail the benefit of free calls and messages. In addition, an existing user who gets a new user to register with 3T Inc. is given a free wireless connection. This has helped to keep competition away from 3T. In this scenario, which of the following factors is acting as an entry barrier for 3T Inc.?
Network effects
Eon Inc., Electravia Inc., and FC Inc., the three largest firms in the consumer electronics industry, hold close to 85 percent of the industry's market share. These companies mainly compete against each other by providing unique features in their products rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate?
Oligopoly
The telecommunication industry of United Canava is primarily dominated by three large firms. Instead of cutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in?
Oligopoly
When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate?
Perfect competition
During periods of high industry growth:
Price competition among firms frequently decreases
Competitive rivalry based solely on ___ is destructive to firms as it transfers most of the value created in the industry to the customers
Price-cutting
While industry forces have been favorable for a long time in the U.S. automotive industry, recent dynamics have lowered the profit potential of competing in this industry and thus reduced its attractiveness. The continued success of Tesla Motors in the industry will depend on other firm and industry factors. Which of the following represents one such factor that directly affects Tesla Motors?
Since suppliers of its key sources are few, the bargaining power of suppliers is high
In which of the following situations is the power of suppliers high in an industry?
Suppliers' industry is more concentrated that the industry it sells to
First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. Since the new software has different features and abilities, First Ledger Inc. has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents First Ledger Inc.'s _____.
Switching cost
