External Environment Analysis

A firm always operates in a single, distinct industry.

• True

• False

All industries follow the stages of the industry life cycle model.

• True

• False

The likelihood that new firms will enter an industry is contingent on the extent to which barriers to entry have been erected.

• True

• False

Higher capital requirements for entering an industry ultimately raise average profitability within that industry.

• True

• False

Substitute products are produced by competitors in the same industry.

• True

• False

The intensity of rivalry among firms in an industry is dependent on __________.

• Concentration of competitors

• High fixed or storage costs

• High exit barriers

• All of the above

The decline in unit costs of a product or service that occurs as the absolute volume of production increases is known as ___________:

• Production effectiveness

• Effective operations management

• Economies of scale

• Technological analysis

When switching costs are high, __________.

• Customers are less likely to try a new competitor.

• Companies spend more on technology.

• Companies seek new suppliers to reduce costs

• None of the above

Which of the following is not a cost advantage independent of scale?

• Proprietary technology

• Favorable locations

• Experience in the industry

• High volume of production

What is occurring when those who purchase an industry’s goods and services exercise great control over pricing and other terms?

• High bargaining power of suppliers

• A low bargaining power of suppliers

• A balance of power among suppliers

• None of the above