Exam 2: Analysis of the External Environment: Opportunities and Threats

A popular food company, Crunchez Corp., is finding it difficult to retain its buyers as another food company, MidnightSnax Inc., has started to provide the same product with the same taste for a lesser price.Which of the following is a threat to Crunchez Corp.?

In what way are switching costs a fundamental part of not just rivalry but also the force of new entrants?

WillowWorks LLC, a retail clothing store, has been sourcing its raw materials from a supplier named ThreadTym Corp.for the last five years.A change of management at ThreadTym resulted in an increase of the prices of the raw materials.As a result, WillowWorks purchases ThreadTym so that it can produce these products on its own.This scenario best illustrates _____.

Define switching costs and the forces that it takes into consideration.

The companies LaceThings Inc.and BellePrints Corp.sell the same product.They constantly try to outdo each other in terms of resources, price, and customer satisfaction.The companies try to outperform each other in order to gain customer loyalty and generate more sales.This scenario is an example of _____.

Pancake Platter Inc.opens a new breakfast deli in the small town of Lakeville.It makes a lot of profit during its first year because it is the only deli in the area.Customers choose to have breakfast at this deli because their only other options for availing this type of service would be to travel several miles to the next town.This scenario best illustrates _____.

Hercules Inc.is an high performing steel manufacturing company.Chang, a stakeholder of the company, believes that it is important to protect the company from threats.Hercules Inc.has often struggled to overcome rivalry and product substitutes.Chang claims that if the company constantly keeps a check on itself by creating power over buyers, paying heed to customers' requests, and strengthening its resources and manpower, the company can maintain competitive advantage.Which of the following statements strengthens Chang's claim?

BlockWood Inc.has been providing raw materials to Couches Corp., a furniture company.The management at Couches recently decided to cut the prices it pays for the raw materials.BlockWood Inc.tried to negotiate a price that would be feasible for both companies, but Couches did not agree to pay more than what they had quoted.As BlockWood Inc.was facing similar difficulties with other buyers too, it eventually stopped supplying raw materials and took to manufacturing furniture instead.This scenario best illustrates _____.

The board of directors of August Inc., a company that provides legal services, has been debating over whether to provide its 99 full-time employees with health insurance.The managers of the firm, however, are considering dropping employee health insurance as a benefit.Which of the following statements strengthens the managers' consideration?

The computers of Main Frame Inc., a computer company, are manufactured with in-built operating software.The users of this software have avoided using computers manufactured by other companies because that would entail converting their data to the other software.Also, they would have to get used to working smoothly with the other software.From this scenario, we can infer that:

MouseTag Inc.has incorporated a new type of technology that has increased the potential of the company by two fold.Its machinery can now work faster and produce more products in a day than any of its previous machines ever could.This has also helped increase the profits of the company.Which of the following trends does this scenario best illustrate?

A hardware company named Ace Works Corp.has been going through financial problems because the entire industry experienced a drastic rise in prices.This has made it hard for the company to plan any future investments as it cannot risk the chance of losing more funds.Rather than development, most of the companies in this industry are experiencing an increase in price competition because all of them are competing with each other to gain more market share.Which of the following general economic conditions is Ace Works Corp.experiencing?

How is buying power related to switching costs?

Zenith Corp., a bag company, produced a lot of high-end leather bags than could be sold in the market for a year.The leather bags eventually wore out and were not fit to be sold, thus causing huge losses for that year.Which of the following did Zenith Corp.most probably experience during that year?

A firm that provides products that are inputs to another firm's production process is known as a(n) _____.

The management of GNH Corp., a chemical plant in the city of Werkshore, has promised to take care of its surroundings.It assured to dispose its factory wastes in a way that does not affect the habitat.In order to do so, the company had to go through renovations that allow the plant to take up green initiatives.Which of the following is the source of change for GNH Corp.?

GetYoung Inc., a cosmetic company, recently launched a beauty bar soap that claims to soften the users' skin, giving it a natural glow, and also make them look up to 5 years younger.A lot of women eagerly tried out this soap and received positive results and thus encouraged their friends to try out the soap.GetYoung Inc.gained profits very fast through this word-of-mouth advertising.This scenario best illustrates _____.

Jupiter Bank was one of the first banks to adopt intelligent imaging that helps in classifying, storing, and retrieval of data.It was also among the first to practice virtual banking and transfer data electronically.As such, Jupiter Bank was an early adopter of these new and faster techniques of banking.This helped the bank to gain a large market share which consequently enabled it to generate huge profits.Jupiter Bank yielded such profits because it paid importance to _____.

Define barriers to entry and briefly mention its characteristics.

Leo Corp., an automobile company, experienced an increase in growth rate this year as the company sold its products at a lesser rate due to the economic conditions that the industry recently went through.This has helped the company to attain more investments than before and consequently to invest in new assets, research and development, and new product development.Which of the following macroeconomic forces does this scenario best illustrate?