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Worksheetschap 3
Total questions: 102
Worksheet time: 51mins
As a rule of thumb, the stronger the five forces, the higher the industry’s profit potential, which causes the industry to become less attractive for competitors.
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false
TRUE/FALSE — Mark whether the statement is true or false: A key feature of an oligopoly is that competing firms behave interdependently with each other.
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false
TRUE/FALSE — Mark whether the statement is true or false: For-profit businesses operating in long-standing fields such as energy and transportation usually operate in an environment of price stability.
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TRUE/FALSE — Mark whether the statement is true or false: To become the largest and most profitable mattress supplier in a three-state area, a firm should try to create the smallest possible difference between the value its mattresses create and the expense the company must spend to produce the mattresses.
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false
TRUE/FALSE — Mark whether the statement is true or false: A small used tire shop faces significant potential competition because of the low capital requirements compared with business environments such as universities and laboratories.
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TRUE/FALSE — Mark whether the statement is true or false: Federal and regional laws prevent incumbent firms from dramatically lowering prices or otherwise retaliating when a new entrant joins an industry.
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TRUE/FALSE — Mark whether the statement is true or false: 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.
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TRUE/FALSE — Mark whether the statement is true or false: A video‑streaming service such as Amazon Prime is a complement to a manufacturer of streaming video devices such as Roku and the Amazon Firestick.
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TRUE/FALSE — Mark whether the statement is true or false: A company that owns failing movie theaters could leverage existing assets by turning the buildings into performance spaces and conference sites.
true
false
TRUE/FALSE — Mark whether the statement is true or false: When smartphone manufacturers began including cameras and voice recorders in their products, that was an example of industry convergence.
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TRUE/FALSE — Mark whether the statement is true or false: A local manufacturer that wants to be a global manufacturer faces few mobility barriers because it has not yet invested in supply chains, which can become outdated and expensive.
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false
TRUE/FALSE — Mark whether the statement is true or false: Firms within the same industry automatically belong to the same strategic group.
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false
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: In recent years a growing number of U.S. consumers have become more health‑conscious about what they eat. According to the PESTEL Framework this trend could best be classified as a ______ trend.
sociocultural
healthy eating
political
legal
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: Tesla is addressing environmental concerns regarding the carbon emissions of gasoline‑powered cars by building zero‑emission battery‑powered vehicles. This best represents which of the following PESTEL categories?
ecological
economic
political
technological
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: A firm’s ______ relates to its ability to create value for customers (V) while containing the cost to do so (C).
strategic position
growth strategy
industry analysis
co‑operative strategy
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: According to Porter’s Five Forces approach, the overall goal of applying the Five Forces analysis to an industry is to make a judgment about its
overall attractiveness
revenue streams
future volatility
market share
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: Which of the following is NOT considered an important macro‑environmental influence on businesses (that is, a potential influence beyond that of the industry alone)?
bargaining power of suppliers
economic factors
political changes
technological factors
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: In nearly every case, which of the Five Forces is the most important in determining the relative power structure in an industry?
No single force is dominant in most every case.
current competitors
potential entrants
past participants
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: If you examine various barriers to entry facing firms that might wish to enter the airline industry, this would be most helpful in assessing which of the five forces in that industry?
threat of new entrants
power of supplier
competitive rivalry
threat of substitute products
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: A new U.S.‑based client in the bicycle industry produces only bicycles for riding on the road and they are used for reliable general‑purpose transportation. When asked to identify a potential substitute for the bicycle industry from the Five Forces perspective, you would select
motorcycles
hot air balloons
tractors
None of these are substitutes.
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: Which of the following is NOT captured when examining a competitive industry structure?
the ability to engage in forward vertical integration
the number and size of an industry’s competitors
the firm’s degree of pricing power
the type of product or service (commodity or differentiated product)
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: A “perfectly competitive” industry is one that
has commodity product offerings
usually exhibits low profitability
have difficulty achieving even a temporary competitive advantage
All of the answers are correct.
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: Firms that are classified as operating in an oligopoly tend to have some pricing power if they are able to differentiate their product or service offerings from those of their competitors, so the recommended mode of competition is
non‑price‑based competition
price‑based competition
hypercompetition
service‑based competition
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: Which of the following options below would serve as a feasible option when deciding how to enter an established industry?
leverage existing assets
initiate a greenfield operation
raise stakeholder capital by issuing stock
only enter if it’s an oligopoly
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: Firms that compete within the same strategic group generally experience
more competitive rivalry than firms outside their strategic group.
less competitive rivalry than firms outside their strategic group.
the same competitive rivalry than firms outside their strategic group.
no competitive rivalry because they are substitutes.
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: The ______ allows the scanning, monitoring, and evaluating of changes and trends in a firm’s macro environment.
VRIO framework
SWOT analysis
BCG matrix
PESTEL framework
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: Which of the following external forces is a part of a firm’s task environment?
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 recent innovations in process technology, including lean manufacturing
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: The government of Pentsu has mandated that the standard minimum wage in the country be increased to $8,000 per year. Which of the following factors in a firm’s general environment does this mandate best indicate?
ecological factors
sociocultural factors
technological factors
legal factors
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: A manager is writing an analysis of his employer’s current and possible future revenues. Which of the following could he identify as an economic factor in his firm’s external general environment?
the government regulations and laws in the country in which the firm exists
the stage of the business cycle that the country is in
the values and norms prevalent in the society in which the firm operates
the bargaining power of the firm’s suppliers and buyers
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: Managers 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?
Cost of capital for firms will be high.
Firms will invest less in future growth.
Economic growth rate will fall.
Consumer demand will increase.
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: A manager oversees 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?
too many goods and services
a drop in interest rates
high economic growth
an increase in prices
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: A supply chain manager for a company that sells diamond watches learns that economists are predicting a moderate to severe recession in the next six to eight months. Based on that information, what action should be recommended to the company’s owner?
Increase supply. During recessions, businesses that focus on low‑cost solutions make significant profits.
Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters.
Maintain the supply at its current rate. Economic forecasts are rarely accurate.
Wait six months and see what happens. Recessions rarely affect consumer spending.
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: In a firm’s external environment, ______ trends primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.
political
demographic
ecological
economic
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: When researching sociocultural factors related to a sporting goods manufacturer, which of the following would be part of the sociocultural forces in a firm’s external environment?
the interest rates prevalent in an economy
the laws protecting small enterprises in a nation
the family size of the firm’s target market
the rate of employee attrition within the firm
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: In 2008, BlackBerry’s market cap peaked at 75billion.By2017thisvaluationhadfallenmorethan90percent,to 3.9 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry’s decline?
BlackBerry failed to offer strong security features for its device.
BlackBerry failed to change its device into one that could perform multiple tasks effectively.
BlackBerry failed to adapt to a groundswell that involved workers bringing mobile devices to work.
BlackBerry failed to produce an efficient emailing system using a keyboard.
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: How is a firm’s task environment different from its general environment?
Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.
Managers have no direct effect over external factors in the task environment; they have some influence over external forces in the general environment.
Managers have no direct effect over external factors in the task environment; they have influence over all external forces in the general environment.
Managers have influence over all external factors in the task environment; they have no direct effect over external forces in the general environment.
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: Which of the following is a macroeconomic factor that can affect a firm’s strategy?
power of buyers
power of suppliers
levels of employment
threat of substitutes
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: 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.
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: Which of the following is the best characterization of sociocultural forces?
a firm’s culture, norms, and values
a society’s culture, norms, and values
a competitor’s culture, norms, and values
a focus group’s culture, norms, and values
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: A food supply company wants to sell its products directly to consumers through mail order instead of going through supermarkets and other stores. However, supermarket chains want to make this transaction either illegal or more difficult for the company. To accomplish this, they are using ______ to influence the political process.
ecological factors
lobbying forces
interest rates
demographic research
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: A firm’s ______ relates to its ability to create value for customers (V) while containing the cost to do so (C).
strategic position
industry effects
advantage of the marketplace
industry analysis
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: The primary objective of Porter’s five forces model is to
understand valuable, rare, and hard‑to‑imitate resources.
understand the profit potential of industries.
reduce the gap between the value of a firm’s product and its cost of production.
break down a firm’s value chain activities into primary and support.
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: 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
regulation
competition
a barrier to entry
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: Which of the following is a primary feature of the five forces model?
It is concerned exclusively about the intensity of rivalry among direct competitors.
It takes into account a firm’s internal resources, capabilities, and core competencies.
It helps managers determine the changing speed of an industry or the rate of innovation.
It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: 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.
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.
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: During an interview for a CEO position, potential employers ask, “If you get this job, will you focus more on industry effects or firm effects?” What should the answer be?
“Neither. I would focus on unexplained variances. They are the most mysterious effects and the most powerful.”
“Firm effects. I will be able to have the most impact on those.”
“Industry effects. They have the most substantial effect on superior firm performance.”
“Neither. I would focus on business cycle effects. These are the most predictable, so they are worth the most effort.”
MULTIPLE CHOICE — Choose the one alternative that best completes the statement or answers the question: Keeping in mind the five forces in the airline industry, which of the following best explains the difficulty airlines have in generating a profit?
Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry.
Suppliers have weak bargaining power because they offer products that are not differentiated.
Entry barriers in the industry are high, resulting in hardly any new airlines popping up.
Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry.
Andrew is a management consultant. Hard Supplies Inc. asks him to evaluate their company, and he finds that the difference between the cost of producing the firm’s products and the value of those products is extremely narrow. What should Andrew suggest that Hard Supplies Inc. management do?
Find a way to widen the gap between cost and value.
Find a way to pass on as much profit as possible to suppliers and customers.
Shore up the company’s strong position by erecting entry barriers.
Encourage customers to buy complements to their products.
The internet service provider industry in the country of Wakanda 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 internet service provider industry, the
threat of substitutes is most likely high.
threat of new entrants is most likely low.
bargaining power of buyers is most likely low.
entry barriers are most likely nonexistent.
A new company named Waves Inc. entered the radio retail business, which is a fairly consolidated industry. In response, two large incumbent radio retailers, SMS Radio and TruRadio, lowered the price of their radios. Also, they spent more money to improve their radios and on additional marketing. By doing this, SMS Radio and TruRadio
decreased industry exit barriers.
increased industry exit barriers.
decreased industry profit potential.
increased industry profit potential.
TicToc Corp. is a manufacturer of smart watches that track the wearer’s heart rate and sleep patterns. Which of the following is most likely an implication of new firms entering this industry?
The bargaining power of buyers will reduce.
The industry’s overall profit potential and sales will increase.
The rivalry among existing competitors will reduce.
The incumbent firms will spend more to satisfy their existing customers.
Economies of scale are cost advantages that accrue for firms with
high fixed costs.
low employee turnover.
larger output.
high capital risks.
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?
network effects
economies of scale
customer switching costs
capital requirements
In which of the following situations is the power of suppliers high in an industry?
Suppliers offer products that are undifferentiated.
Suppliers can credibly threaten to backward integrate into the industry.
Suppliers depend heavily on the industry for their revenues.
Suppliers’ industry is more concentrated than the industry it sells to.
All Signal Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all All Signal users are free. When a person switches to an All Signals 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 All Signal Inc. is given a free wireless connection. This has helped to keep competition away from All Signal. In this scenario, which of the following factors is acting as an entry barrier for All Signal Inc.?
economies of scale
high capital requirement
network effects
high fixed costs
We Ensure Inc., an insurance firm, replaced its existing project management software with new software from another supplier. Since the new software has different features and abilities, We Ensure has had to spend 10,000ontrainingitsemployeestouseit.Inthisscenario, 10,000 represents We Ensure’s
opportunity cost.
switching cost.
octroi charge.
excise duty.
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.
there is expected to be a huge return on investment within this industry.
there is no credible threat of retaliation from the incumbents.
entering the aircraft manufacturing industry means violating government policies.
In an industry, the threat of entry is high when
capital requirements are low.
expected returns are low.
technological know-how is industry-specific.
switching costs are high.
How are cumulative learning and experience effects of a company most likely to affect Michael Porter’s five forces?
Threat of new entrants will be low.
Bargaining power of suppliers will be high.
Availability of complements will be low.
Threat of substitute products and services will be high.
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 company is able to put up a credible threat of retaliation
if the capital requirements in the industry are high
if the customer switching costs in the industry are high
if the industry has recently become deregulated
WeClean Inc., a manufacturer of cleaning agents, supplies its products to Goodings Inc., a supermarket chain. It demands that Goodings create more shelf space in its stores for WeClean’s products. However, Goodings 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, Goodings Inc. has exercised its bargaining power as a buyer through
price stability.
retroactive market share.
enhanced technology.
backward integration.
Which of the following features about a buyer indicates that the buyer has high bargaining power?
when the buyer cannot credibly threaten to backwardly integrate into the industry
when the buyer cannot purchase specific products from other sellers
when the buyer faces high switching costs
when the buyer operates in an industry where products are undifferentiated
When automobile magazines face competition from automobile blogs on the web, which of the following forces in Michael Porter’s five forces model primarily gets stronger?
the emergence of entry barriers
the bargaining power of suppliers
the availability of complements
the threat of substitutes
Which of the following fundamental insights was provided by Porter’s five forces framework from the completion of the Alta Velocidad Española (AVE)?
A strong threat of substitutes decreases the rivalry among existing competitors.
All of the five forces must work together to have a meaningful impact.
Competition must be defined broadly to include buyers, suppliers, potential entrants, and substitutes.
Competition must be defined more narrowly to remain confined to the industry’s closest competitors.
Which of the following factors most contributes to the U.S. automotive industry being characterized by high entry barriers?
New auto companies create electric cars powered by simpler motors and gearboxes.
New entrants in the automotive industry expect that incumbents will not or cannot retaliate.
Car manufacturers require large-scale production in order to be cost-competitive.
Few industrial products are as easy to build as cars powered by internal combustion engines.
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
oligopoly
perfect competition
monopolistic competition
New Diamond Inc. is a company that sells 24-carat gold biscuits to companies that manufacture jewelry. Because the company operates in an industry where many other suppliers sell standardized products, it can most likely
easily achieve a temporary competitive advantage.
easily achieve a sustainable competitive advantage.
only achieve competitive parity.
maintain its absolute advantage for long time.
Hank runs a company that manufactures satellites for commercial and government use. It has few rivals. At the moment, the power of buyers, the power of suppliers, and the threat of substitutes are all low. Based on this information, what can Hank conclude?
The manufacturer is likely to see little profit until the power of buyers improves.
In this scenario, suppliers are likely to create and sell effective substitutes.
This firm is an example of near-perfect competition.
The company is likely to be very profitable as long as the threat to entry is low.
Farm to Table Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Farm to Table has aggressively used branding, pricing, and superior customer service to uniquely position itself in the market. As a result, the supermarket chain has been able to differentiate itself from its competitors and sell its products at higher prices. Which of the following industry competitive structures does this scenario best illustrate?
perfect competition
monopolistic competition
monopoly
oligopoly
ABC Inc., It’s Electric Inc., and Wares 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?
monopolistic competition
oligopoly
monopoly
perfect competition
Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly?
Sellers in an oligopoly provide highly differentiated products; in monopolistic competition, the products sold are undifferentiated or standardized.
In an oligopoly, the number of buyers is large; in monopolistic competition, the number of buyers is limited to three or four.
Firms in an oligopoly have no pricing power; firms in a monopolistically competitive industry have the ability to raise prices.
In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.
Three large firms dominate the telecommunication industry of CallsRUs: TeleFone Inc., Cell Comm Corp., and Talk Now Inc. 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?
monopoly
perfect competition
monopolistic competition
oligopoly
Urst Ammunition Inc., a firm controlled and managed by the government of Urst, 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
monopoly
oligopoly
perfect competition
While Seismic Inc. operates in a monopolistically competitive industry, Energy 4 All Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true?
The threat of new entrants will be higher for Seismic than for Energy 4 All.
Seismic will have more pricing power than Energy 4 All does.
Seismic will have more profit potential than Energy 4 All.
The number of buyers will be limited for both Seismic and Energy 4 All.
Nye Studios 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, Nye Studios is most likely functioning in a(n) ________ industry.
oligopolistic
monopolistic
perfectly competitive
monopolistically competitive
Hot Wok Cuisine is a premium Asian restaurant chain that differentiates itself from a large number of competitors by providing exclusively organic Chinese cuisine. It has some pricing power because it provides differentiated products and therefore, has some entry barriers in place. In this scenario, Hot Wok Cuisine is most likely operating in a(n)
oligopoly.
monopoly.
perfectly competitive industry.
monopolistically competitive industry.
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
profitability increases.
perfect competition.
natural monopolies.
cutthroat competition.
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
new product releases
promotional campaigns
product differentiation
Due to economic regression in Jabu, the profitability of the large corporation Honey Comb Inc. was poor. An analysis of the company’s business showed that the company could become profitable if it divested a few strategic business units under its banner. From which of the following businesses would Honey Comb Inc. find it most easy to exit?
the automobile industry, where the company has contractual obligations with suppliers
the airline business, where the company’s strategic commitments are long-term
the e-commerce retail business, where investments on assets are low
the pharmaceutical business, where the company has a large number of fixed costs
Jalen Corp., a large conglomerate, wants to liquidate its business in certain industries to improve its overall profitability. Which of the following industries would Jalen Corp. find it most difficult to exit?
the management consultancy industry in which the company’s fixed costs are low
the steel industry in which the company has obligations like severance pay toward employees
the corporate training industry in which the company’s commitments are mostly short-term
the e-commerce industry where the company has no long-term contractual agreements with suppliers
Steve manages product design and development at a toy company. The junior managers who report to him tell him that new complementors for the firm’s products are available. What should Steve’s reaction be?
He should consult lawyers about the possibility of suing for copyright infringement.
If the industry barriers to entry are low, he doesn’t need to do anything.
He needs to find out if his company as well as other companies can provide the complements.
If the industry barriers to entry are high, he doesn’t need to do anything.
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.
perfect competition.
monopolization.
conglomeration.
Amanda is a management consultant for a soda manufacturer that wants to expand into health drinks such as green tea and after-workout drinks. Based on what you have read, which of these is sensible advice for Amanda to offer her client?
“Pinpoint the best time to enter this new market, and then make a yes-or-no decision quickly.”
“Carefully consider the entry choices over time before making a decision.”
“Your best bet is to undercut competitors’ prices and lure them into a price war.”
“Focus on what your company does well rather than trying to expand into untried areas.”
Silvio 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, Silvio is most likely to expect
increased competition in the future and therefore he should recommend that the company upgrade its products to slow the entry of rival companies.
increased profitability in the future and therefore he should recommend that the company remain on its current course.
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.
decreased competition in the next few years and therefore he should recommend that the company take advantage of its pricing power.
Pam owns Discount Auto Zone, a company that got its start making auto parts related for hybrid vehicles, but her firm has had difficulty establishing itself as a maker of parts for the more profitable internal combustion engine. What is most likely contributing to Discount Auto Zone’s problem in this area?
Newcomers cannot use existing assets or reconfigure their value chains.
New competitors usually ignore stakeholders who are not stockholders.
It is difficult for outsiders to gauge which stage of the “life cycle” that industry is in.
Entry barriers usually protect the incumbent players in a profitable industry.
Shima is a chef who owns three moderately successful restaurants with innovative menus. Based on what you have read, which of these approaches could help her improve her profits?
Change her menus and décor to appeal to economy-minded consumers.
Carefully time the opening of her business and focus on underserved niches.
Use her existing knowledge, equipment, and staff to launch a catering business.
Expand to new locations in economically struggling areas.
Which of the following is a drawback of Porter’s five forces model?
The model describes competition narrowly as a firm’s closest competitors.
Managers cannot determine the changing speed of an industry or the rate of innovation.
It fails to provide a basis for deriving implications for a firm’s strategic position within an industry.
The model fails to consider that threat of substitutes can come from outside a given industry.
Which of the following statements with regard to industry structures is true?
They are stable over time, not dynamic.
Having a large number of competitors generally equates to higher industry profitability.
A consolidated industry tends to be more profitable than a fragmented one.
Having few but large competitors increases the threat of strong competitive forces such as supplier or buyer power.
Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines?
The overall industry profitability will increase.
The threat of strong competitive forces such as supplier power will increase.
The industry will face excess capacity in the future.
The structure of the industry will change from consolidated to one that is fragmented.
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?
The travel industry changed from a consolidated structure to a fragmented one.
The pricing power of the incumbent firms in the travel industry has increased.
The bargaining power of buyers in the travel industry has decreased.
The structure of the travel industry changed from monopolistic competition to an oligopolistic one.
Todd is a manager in an industry that has a few large players and that has remained relatively stable over the past few years. He finds out that legislators are proposing new laws to deregulate the industry. If the laws pass, which of these scenarios will Todd most likely face?
many new competitors
technological innovation
the end of globalization
across-the-board price increases
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?
industry convergence
backward integration
product differentiation
customer myopia
A strategic group will typically include
firms within the same industry.
customers belonging to a particular socioeconomic class.
firms employing similar number of employees, irrespective of their industries.
employees within a firm earning the same amount in salary.
Companies in the same strategic group are _______ to each other.
strategic allies
direct competitors
merger partners
stakeholders or shareholders
Makita, DuPont, Builder’s Square, and Nut’s & Bolts are all hardware stores that compete against each other through everyday low pricing and discounts on bulk purchases. All four stores cater to the needs of highly price-sensitive customers. Thus, together these stores form a _______ group.
focus
command
strategic
cross-functional
Ride N Style Inc. is a bus line with service to several major cities. It has several competitors that each offer service to one or two cities, and based on its current outlays, it cannot match or beat those competitors on price. Because of long-term contracts and an increase in the cost of gasoline, it is not possible to reduce expenditures at this time. Which of these strategies should Ride N Styles pursue instead?
Create a strategic group through mergers.
Compete based on inter-group rivalry, not intra-group rivalry.
Pursue a differentiated strategy.
Close the business until the cost of gas decreases.
Wheat and Steak is a restaurant located inside a five-star hotel. It caters mainly to customers who are concerned about quality dining rather than the prices. In this scenario, which of the following will be a part of Wheat and Steak’s strategic group?
a nearby fast-food restaurant
a food kiosk in an adjacent subway station
a premium rooftop restaurant in the same city
a mobile food cart parked opposite to the five-star hotel
Which of the following statements is true about strategic groups?
It is not possible to have two different strategic groups within the same industry.
Rivalry within the same strategic group tends to be lower than rivalry between different strategic groups.
Profitability varies between different strategic groups.
Companies within the same strategic group are complementors to each other.
Breeze Car Rental follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor?
Auto Rent Inc., which follows a cost-increase strategy
Samson Truck Rentals, which follows a differentiation strategy
Quicker Rental Cars, which follows a low-cost strategy
Rent and Buy Corp., which follows a standardization strategy
While implementing strategic group mapping for the U.S. domestic airline industry, two strategic groups become apparent: low-cost, point-to-point airlines (Virgin Atlantic, Alaska Airlines, JetBlue, and Southwest Airlines) versus differentiated airlines using a hub-and-spoke system (American, Delta, and United). Which of the following statements is true about these two strategic groups?
Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines.
American, United, and Delta Airlines will be affected differently by Porter’s five competitive forces.
Alaska Airlines and Delta Airlines will be affected by the external environment in very similar ways.
Competitive rivalry between Virgin Atlantic and Delta Airlines is likely to be higher than that between American, Delta, and United.
OpenUrToys Inc. is a consulting firm that opens your toys for you and then films your emotional response. They have many clients and are able to generate above average returns relative to their competitors. In this scenario, we would conclude that OpenUrToys Inc. probably has a
competitive advantage.
sustainable competitive advantage.
a competitive parity.
a competitive disadvantage.
TopHat & Scarfs Inc., an apparel company, recently moved locations to be closer to their main manufacturer in Ohio. The move required that they upgrade their legacy ordering system with their manufactures ordering system which should facilitate their supply chain to gain future efficiencies and reap future savings. However, the new system costs $75,000.00 and will require a significant amount of time to train their employees. This best represents a significant increase in their
switching cost.
strategic positioning.
arbitrage.
power of buyers.
