MGT491 CH3

Years ago, the travel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets, and hotels for their customers. However, with the emergence of the internet, smaller travel agencies started mushrooming in the industry and customers started making their own reservations. Which of the following can be inferred from this information? (PICK A LETTER FOR ANSWER) A. The travel industry changed from a consolidated structure to a fragmented one. B. The structure of the travel industry changed from monopolistic competition to an oligopolistic one. C. The pricing power of the incumbent firms in the travel industry has increased. D. The bargaining power of buyers in the travel industry has decreased.

A

Which of the following is a drawback of Porter's five forces model? The model describes competition narrowly as a firm's closest competitors. It fails to provide a basis for deriving implications for a firm's strategic position within an industry. Managers cannot determine the changing speed of an industry or the rate of innovation. The model fails to consider that threat of substitutes can come from outside a given industry.

managers cannot determine the changing speed of an industry or the rate of innovation

Curry Rush is a premium Asian restaurant chain that differentiates itself from a large number of competitors by providing exclusively organic Vietnamese cuisine. It has some pricing power because it provides differentiated products and therefore, has some entry barriers in place. In this scenario, Curry Rush is most likely operating in a(n) perfectly competitive industry. monopolistically competitive industry. monopoly. oligopoly.

monopolistically competitive industry

Which of the following external forces is a part of a firm's task environment? the interest rates prevalent in the economy in which the firm operates the inflation level in the economy in which the firm operates the composition of the strategic group to which the firm belongs the recent innovations in process technology, including lean manufacturing

the composition of the strategic group to which the firm belongs

While Tender Chicken Inc. operates in a monopolistically competitive industry, Future Wireless Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true? The number of buyers will be limited for both Tender Chicken and Future Wireless. Tender Chicken will have more pricing power than Future Wireless does. The threat of new entrants will be higher for Tender Chicken than for Future Wireless. Tender Chicken will have more profit potential than Future Wireless.

the threat of new entrants will be higher for tender chicken than for future wireless

Which of the following factors most contributes to the U.S. automotive industry being characterized by high entry barriers? (PICK LETTER FOR ANSWER) A. New entrants in the automotive industry expect that incumbents will not or cannot retaliate. B. New auto companies create electric cars powered by simpler motors and gearboxes. C. Car manufacturers require large-scale production in order to be cost-competitive. D. Few industrial products are as easy to build as cars powered by internal combustion engines.

C

Which of the following statements with regard to industry structures is true? Having few but large competitors increases the threat of strong competitive forces such as supplier or buyer power. Having a large number of competitors generally equates to higher industry profitability. They are stable over time, not dynamic. A consolidated industry tends to be more profitable than a fragmented one.

a consolidated industry tends to be more profitable than a fragmented one

Which of the following is the best characterization of sociocultural forces? a society's culture, norms, and values a focus group's culture, norms, and values a firm's culture, norms, and values a competitor's culture, norms, and values

a society's culture, norms and values

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 retroactive market share. price stability. backward integration. enhanced technology.

backward integration

Which of the following is a macroeconomic factor that can affect a firm's strategy? power of suppliers threat of substitutes power of buyers levels of employment

levels of employment

In an industry, the threat of entry is high when expected returns are low. technological know-how is industry specific. switching costs are high. capital requirements are low.

capital requirements are low

In the five forces model developed by Michael Porter, ________ is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes. a stakeholder a barrier to entry competition regulation

competition

Managers at Sandburg Real Estate are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates? Consumer demand will increase. Economic growth rate will fall. Cost of capital for firms will be high. Firms will invest less in future growth

consumer demand will increase

Given the structure of the automobile industry, entering the auto manufacturing industry seemed risky. Yet Tesla Motors joined the fray. Rather than attempting to compete head-on with internal combustion engines, Tesla Motors entered the all-electric car segment, a much less crowded niche in the overall car industry. Which of the following is Tesla most hoping to benefit from in this market niche? customer switching costs network effects capital requirements economies of scale

economies of scale

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 there is expected to be a huge return on investment within this industry. entering the aircraft manufacturing industry means violating government policies. there is no credible threat of retaliation from the incumbents. entering the aircraft manufacturing industry requires huge capital investments.

entering the aircraft manufacturing industry requires huge capital investments

Federal and regional laws prevent incumbent firms from dramatically lowering prices or otherwise retaliating when a new entrant joins an industry. T/F

false

With the emergence of smartphones, users no longer have to carry a separate music player, a video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone is loaded with a variety of applications to satisfy all the customer needs that different industries or products individually satisfied earlier. As a result, the smartphone industry has been posing a threat to a lot of other unrelated industries. What is this phenomenon best known as? customer myopia industry convergence backward integration product differentiation

industry convergence

Fadia Ammunition Inc., a firm controlled and managed by the government of Fadia, 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? monopolistic competition perfect competition monopoly oligopoly

monopoly

Clear Calls Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all Clear Calls users are free. When a person switches to a Clear Calls network, his or her entire network of family and friends is likely to switch to the same network to receive the benefit of free calls and messages. In addition, an existing user who gets a new user to register with Clear Calls Inc. is given a free wireless connection. This has helped to keep competition away from Clear Calls. In this scenario, which of the following factors is acting as an entry barrier for Clear Calls Inc.? network effects economies of scale high fixed costs high capital requirement

network effects

Magical Productions is a large production company that controls a major portion of the television industry's market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Magical Productions is most likely functioning in a(n) ________ industry. perfectly competitive monopolistic monopolistically competitive oligopolistic

oligopolistic

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? perfect competition monopolistic competition oligopoly monopoly

oligopoly

Pure Carat Inc. is a company that sells 24-carat gold biscuits to companies that manufacture jewelry. Since the company operates in an industry where many other suppliers sell standardized products, it can most likely maintain its absolute advantage for long time. easily achieve a sustainable competitive advantage. easily achieve a temporary competitive advantage. only achieve competitive parity.

only achieve competitive parity

In which of the following situations is the power of suppliers high in an industry? Suppliers' industry is more concentrated than the industry it sells to. Suppliers can credibly threaten to backward integrate into the industry. Suppliers depend heavily on the industry for their revenues. Suppliers offer products that are undifferentiated.

suppliers' industry is more concentrated than the industry it sells to

Which of the following external forces is a part of a firm's task environment? the recent innovations in process technology, including lean manufacturing the composition of the strategic group to which the firm belongs the interest rates prevalent in the economy in which the firm operates the inflation level in the economy in which the firm operates

the composition of the strategic group to which the firm belongs

A company that owns failing movie theaters could leverage existing assets by turning the buildings into performance spaces and conference sites. T/F

true

Because competitors in oligopolistic industries are so interdependent, it is especially important for managers in those firms to monitor and respond to changes their competitors make. T/F

true

Keeping in mind the five forces in the airline industry, which of the following best explains the difficulty airlines have in generating a profit? (PICK LETTER FOR ANSWER) A. Entry barriers in the industry are high, resulting in hardly any new airlines popping up. B. Suppliers have weak bargaining power because they offer products that are not differentiated. C. Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry. D. Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry.

C

Bryan is a manager at a software firm. The CEO tells him that the industry as a whole has become increasingly profitable over the past five years. Based on this information, Bryan is most likely to expect (PICK LETTER FOR ANSWER) A. a leveling off of profitability in the next few years and therefore he should recommend that the company cooperate with its rivals to stimulate the industry. B. increased profitability in the future and therefore he should recommend that the company remain on its current course. C. decreased competition in the next few years and therefore he should recommend that the company take advantage of its pricing power. D. increased competition in the future and therefore he should recommend that the company upgrade its products to slow the entry of rival companies.

D

During an interview for a CEO position, Elena's potential employers ask her, "If you get this job, will you focus more on industry effects or firm effects?" What should her answer be? (PICK A LETTER FOR ANSWER) A. "Neither. I would focus on business cycle effects. These are the most predictable, so they are worth the most effort." B. "Industry effects. They have the most substantial effect on superior firm performance." C. "Neither. I would focus on unexplained variances. They are the most mysterious effects and the most powerful." D. "Firm effects. I will be able to have the most impact on those."

D

Which of the following is a primary feature of the five forces model? (PICK LETTER FOR ANSWER) A. It is concerned exclusively about the intensity of rivalry among direct competitors. B. It helps managers determine the changing speed of an industry or the rate of innovation. C. It takes into account a firm's internal resources, capabilities, and core competencies. D. It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

D

Luz manages a chain of bars and restaurants in a tri-county area that has recently experienced an economic boom because of fracking and high oil prices. What is most likely to happen when there is too much money in the tri-county economy? high economic growth too many goods and services a drop in interest rates an increase in prices

an increase in prices

Sleeprite Mattresses Inc. wants to become the largest and most profitable mattress supplier in a three-state area. To do this, Sleeprite should try to create the smallest possible difference between the value that its mattresses create and the expense that the company must spend to produce the mattresses. T/F

false

How do low interest rates affect a business? Firms tend to defer investments until rates rise. Firms can easily borrow money to finance future growth. Consumer demand slows down. Business credit is harder to obtain.

firms can easily borrow money to finance future growth

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? monopoly perfect competition oligopoly monopolistic competition

perfect competition

A firm's strategic position is likely to be strong when the entry barriers within the industry it operates in are low and the exit barriers are high. the gap between the value the firm's product generates and the cost to produce it is large. its suppliers and vendors can easily forward integrate and buyers can backward integrate. all the five forces in Porter's model are strong.

the gap between the value the firm's product generates and the cost to produce it is large