BT9.3

F Co sells motor vehicles in country V. It has recently discovered that the government is planning a major overhaul of the public transport system in country V, which will significantly increase its speed and comfort, while lowering the cost to make it attractive to individual drivers. Under which heading of Porter’s five forces model would this issue be included?

• Barriers to entry

• Power of suppliers

• Threat of substitutes

• Power of buyers

Answer explanation

The planned overhaul of the public transport system in country V represents a potential alternative to using motor vehicles, making it a substitute. This falls under the 'Threat of substitutes' in Porter's five forces model.

X Co offers accountancy training courses. The market is growing quickly and X’s courses are significantly different to those offered by its rivals. Any new company wishing to teach accountancy courses must obtain accreditation by the various accountancy organisations — a process which can take several years. Based on the above information, which of the following statements can be made about X’s competitive environment?

• Competitive rivalry is likely to be low

• Supplier power is likely to be low

• Barriers to entry are likely to be low

• The threat of new entrants is likely to be low

Answer explanation

The accreditation process for new companies takes several years, creating a significant barrier to entry. This suggests that the threat of new entrants is likely to be low, as it deters potential competitors from entering the market.

High industry fixed costs would NOT be expected to be an issue within which one of Porter’s five forces?

• Competitive rivalry

• Threat of substitutes

• Barriers to entry

• Power of customers

Answer explanation

High industry fixed costs primarily affect barriers to entry and competitive rivalry, as they deter new entrants and intensify competition. However, they do not directly impact the threat of substitutes, which is influenced by alternative products.

When considering Porter’s value chain analysis, outbound logistics is:

• receiving, handling and distributing inputs to the production system

• using rational approach to solving problems

• informing customers about the products a company has to offer

• distributing the products to the customer

Answer explanation

In Porter’s value chain analysis, outbound logistics specifically refers to the activities involved in distributing the products to the customer, making this the correct choice.

AAH Co buys cable from a number of manufacturers, cuts it into shorter lengths and sells it to various retailers. One of its departments is solely responsible for the cutting of the cable. Which of Porter’s value chain activities is the department responsible for

• Procurement

• Operations

• Inbound logistics

• Infrastructure

Answer explanation

The department responsible for cutting the cable is engaged in transforming inputs (cable) into outputs (shorter lengths), which aligns with Porter's value chain activity of Operations.

Porter’s value chain determines whether and how a firm’s activities contribute to which of the following?

• its long term survival

• its competitive advantage

• its profitability

• its productive capacity

BCD Co is a large trading company. Steve is the administration manager and is also responsible for legal and compliance functions. Sheila is responsible for customer service and has responsibility for ensuring that customers who have purchased goods from BCD Co are fully satisfied. Sunny deals with suppliers and negotiates on the price and quality of inventory. He is also responsible for identifying the most appropriate suppliers of plant and machinery for the factory. Sam is the information technology manager and is responsible for all information systems within the company. According to Porter’s value chain, which of the managers is involved in a primary activity as opposed to a support activity?

• Steve

• Sheila

• Sunny

• Sam

Answer explanation

The term ‘administration’ indicates that Steve’s role is a support activity, as this term is used in the model. The description of his role could only reinforce this conclusion. Likewise, ‘information technology’ indicates that Sam performs a support role. Finally, although Porter’s term ‘procurement’ is not included in the statement, Sunny’s responsibilities for dealing with suppliers of inventory and capital equipment are sufficient to conclude that Sunny also occupies a support role.

AZ Co is performing a SWOT analysis and notes that it has a large cash balance. Which of the SWOT headings would this be most likely to fall under?

• Strengths

• Weaknesses

• Opportunities

• Threats

Answer explanation

A large cash balance is a positive asset for AZ Co, indicating financial stability and resources for investment. Therefore, it is categorized as a Strength in the SWOT analysis.

E Ltd is a company that buys, cleans and then sells vegetables. It has recently introduced a new automated inventory system that allows management to identify older inventory quickly. This will allow the company to reduce its currently high level of wastage. Which activity within E’s value chain will the new system improve?

• Operations

• Outbound logistics

• Inbound logistics

• Procurement

Answer explanation

The statement is TRUE because a value network indeed examines the connections between the supply chains of various organizations, including suppliers and their customers.

When analysing its strategic position, an organisation may use one of several models, including: (i) SWOT (ii) Five forces (iii) PEST (iv) Value chain OIU company is undertaking a strategic analysis of its operations. It has discovered government plans to write new legislation that would result in OIU’s closure. Which of the strategic models should have identified this issue?

• (i) and (ii)

• (ii) and (iii)

• (i) and (iii)

• (i) and (iv)

Answer explanation

H is adopting a focus strategy by offering products and services specifically tailored to pregnant women, targeting a niche market rather than a broad audience.