Deck 2: Evaluating a Firms External Environment

Question 1

Which of the following best describes the competition in the U.S.online auction industry?

A)perfect competition
B)monopolistic competition
C)oligopoly
D)monopoly

Answer 1

C

Question 2

The values,beliefs and norms that guide behavior in a society are known as

A)climate.
B)demographics.
C)economics.
D)culture.

Answer 2

D

Question 3

The ________ consists of broad trends in the context in which a firm operates that can have an impact on a firm's strategic choices.

A)micro-environment
B)general environment
C)task environment
D)internal environment

Answer 3

B

Question 4

________ is/are the distribution of individuals in a society in terms of age,sex,marital status,income,ethnicity,and other personal attributes that may determine buying patterns.

A)Demographics
B)Economics
C)Technological trends
D)Culture

Question 5

All of the following are elements of the general environment except

A)technological trends.
B)demographic trends.
C)industrial trends.
D)cultural trends.

Question 6

The S-C-P model assumes that any competitive advantages a firm has in an industry must benefit society.

Question 7

In the S-C-P model,________ refers to the strategies that firms in an industry implement.

A)structure
B)strategy
C)conduct
D)performance

Question 8

Understanding a firm's general environment can help the firm identify some of the threats and opportunities it faces.

Question 9

Civil wars,political coups,terrorism,wars between countries,famines,and country or regional economic recessions are all examples of which element of the general environment?

A)demographics
B)specific international events
C)economics
D)culture

Question 10

Identify the six interrelated elements that comprise a firm's general environment.

Question 11

In a perfectly competitive industry,a large number of firms have products and services that are similar to each other and it is not very costly for firms to enter into or exit these markets.

Question 12

In a perfectly competitive industry,

A)there are relatively few firms operating in the industry.
B)the products and services sold by firms in the industry are very different from each other.
C)it is very costly for firms to enter the industry.
D)it is not very costly for firms to enter or exit the industry.

Question 13

A firm's general environment consists of broad trends in the context within which the firm operates that can have an impact on the firm's strategic choices.

Question 14

In the structure-conduct-performance model,the term "performance" refers solely to the performance of individual firms.

Question 15

According to the S-C-P model,attributes of the industry structure within which a firm operates define the range of options and constraints facing a firm.

Question 16

Culture is largely the same across the world.

Question 17

The aging of the "baby boomer" generation in American society is an example of a demographic trend.

Question 18

In the structure-conduct-performance model,the term "structure" refers to industry structure,which can be measured by such factors as the number of competitors in an industry.

Question 19

In general,technological change creates opportunities,but not threats.

Question 20

When activity in an economy is relatively low for a short period of time,the economy is said to be in a

A)recession.
B)depression.
C)prosperous cycle.
D)boom.

Question 21

Firms in industries characterized by ________ can expect to earn only competitive parity.

A)perfect competition
B)monopolistic competition
C)oligopoly
D)monopoly

Question 22

The products or services provided by a firm's substitutes meet ________ customer needs in ________ ways as the product provided by the firm itself.

A)different; the same
B)approximately the same; the same
C)different; different
D)approximately the same; different

Question 23

Which of the following statements regarding substitutes is accurate?

A)In the extreme,substitutes can ultimately replace an industry's products or services.
B)Substitutes place a floor on the prices firms in an industry can charge and on the profits firms in an industry can earn.
C)Substitutes rarely impact the profitability that firms in an industry can earn.
D)The importance of substitutes in reducing the profit potential in a wide variety of industries is decreasing.

Question 24

Within the five forces framework,the five most common threats facing firms from their competitive environment include each of the following except

A)substitutes.
B)complementors.
C)suppliers.
D)buyers.

Question 25

Which of the following is the best example of forward vertical integration?

A)a car dealership opening up its own automobile manufacturing plant
B)a car company opening its own dealerships to sell its products directly to customers
C)a car company opening its own chain of video rental stores
D)a car company opening a plant to produce motorcycles

Question 26

________ exist when a firm's costs rise as a function of its volume of production.

A)Economies of scale
B)Economies of scope
C)Diseconomies of scale
D)Learning curve effects

Question 27

Buyers tend to have less power when

A)a firm has only one buyer,or a small number of buyers.
B)the products or services being sold to buyers are standard and not differentiated.
C)the supplies they purchase are an insignificant portion of the costs of their final products.
D)they are not earning significant economic profits.

Question 28

Firms that have either recently begun operations in an industry or that threaten to begin operations in an industry soon are considered to be ________ in the five forces framework.

A)barriers to entry
B)new competitors
C)suppliers
D)buyers

Question 29

Identify and define the three elements of the S-C-P model.

Question 30

________ make a wide variety of raw materials,labor and other critical assets available to firms.

A)Buyers
B)Rivals
C)Suppliers
D)Substitutes

Question 31

Which of the following attributes makes suppliers a stronger threat?

A)The supplier's industry is dominated by a small number of firms.
B)The product or service provided by suppliers is not highly differentiated.
C)Suppliers are threatened by substitutes.
D)Suppliers are not able to engage in forward vertical integration.

Question 32

Monopolistically competitive industries consist of only a single firm.

Question 33

Which type of competition is characterized by a small number of firms,homogeneous products and costly entry and exit?

A)perfect competition
B)monopolistic competition
C)oligopoly
D)monopoly

Question 34

A(n)________ is any individual,group,or organization outside a firm that seeks to reduce the level of that firm's performance.

A)environmental threat
B)environmental opportunity
C)environmental equalizer
D)competitive advantage

Question 35

Frequent price cutting by firms in an industry,frequent introduction of new products by firms in an industry and intense advertising campaigns are indications of

A)high power of buyers.
B)high threat of new entrants.
C)high levels of direct competition.
D)high threat of substitutes.

Question 36

Overall,the average level of performance in an industry is likely to be highest when

A)the threat level of all five forces is high.
B)the threat level of rivalry and substitutes is low,but the threat level of suppliers,buyers and new entrants is high.
C)the threat level of rivalry,substitutes and new entrants is high,but the threat level of buyers and supplies is low.
D)the threat level of all five forces is low.

Question 37

All other things being equal,which of the following would lead to lower barriers to entry in an industry?

A)The existence of economies of scale in the industry.
B)Products are highly differentiated in the industry.
C)Industry incumbents have learning-curve cost advantages.
D)Raw materials are widely and readily available at a competitive price.

Question 38

The threat of direct competition tends to be high when

A)there are few firms in an industry and these firms tend to be unequal in size.
B)the industry growth rate is high.
C)firms are unable to differentiate their products.
D)production capacity can be added in small increments.

Question 39

The products or services provided by a firm's direct competitors meet ________ customer needs in ________ ways as the product provided by the firm itself.

A)different; the same
B)approximately the same; the same
C)different; different
D)approximately the same; different

Question 40

Which type of competition is characterized by a large number of firms,heterogeneous products and low cost of entry and exit?

A)perfect competition
B)monopolistic competition
C)oligopoly
D)monopoly

Question 41

Brand identification and customer loyalty serve as entry barriers because new entrants not only have to absorb the standard costs associated with starting production in a new industry,but also have to absorb the costs associated with overcoming an incumbent firm's differentiation advantages.

Question 42

In an industry,the products or services provided by a firm's direct competition meet approximately the same customer needs in the same way as the products or services provided by the firm itself,whereas substitutes meet approximately the same customer needs but do so in different ways.

Question 43

The level of direct competition in the fastfood industry can best be described as

A)low because of the numerous firms in the industry and the slowing growth rate.
B)low because of the slowing growth rate and the competition from composite wood furniture.
C)high because of the numerous firms in the industry and the slowing growth rate.
D)moderate because the slowing growth rate offsets the numerous firms in the industry.

Question 44

The five forces framework is based on the S-C-P model and identifies the five most common threats facing firms from their local competitive environment and the conditions under which these threats are more or less likely to be present.

Question 45

Jay Z recently started Tidal,an "artist friendly" streaming company.This would be an example of

A)complementors.
B)backward vertical integration.
C)consolidation.
D)forward vertical integration.

Question 46

Diseconomies of scale exist in an industry when a firm's costs fall as a function of that firm's volume of production.

Question 47

Incumbent firms may have a whole range of cost advantages compared to new competitors.

Question 48

The threat of existing competition tends to be high in an industry when firms are able to meaningfully differentiate their products.

Question 49

A firm's supplier poses a greater threat if the supplier's industry has a large number of firms,none of which dominate the supplying industry,than if the supplier's industry is dominated by a small number of firms.

Question 50

In the hardwood furniture industry,composite wood furniture would be an example of a(n)

A)substitute.
B)rival.
C)new entrant.
D)complementor.

Question 51

The threat of suppliers in the legal industry can best be described as

A)low because there are a large number of suppliers selling an undifferentiated product.
B)high because there are a large number of suppliers selling an undifferentiated product.
C)moderate because the large number of suppliers is offset by the undifferentiated products they are selling.
D)moderate because of the slowing growth rate in the industry and the commodity nature of the products produced by suppliers.

Question 52

Proprietary technology often is more important as a barrier to entry than is managerial know-how.

Question 53

Within the five forces framework,when all five threats are very high,competition in the industry begins to approach a monopoly.

Question 54

The threat of buyers in the hardwood furniture industry is best described as

A)high because there are many suppliers,none of which represents a significant portion of the hardwood furniture industry's sales.
B)low because of the slow industry growth and the commodity nature of the suppliers.
C)low because there are many suppliers,none of which represents a significant portion of the hardwood furniture industry's sales.
D)high because of the slow industry growth and the commodity nature of the suppliers.

Question 55

The threat of entry in an industry depends on the cost of entry,and the cost of entry,in turn,depends upon the existence and "height" of barriers to entry.

Question 56

In general,it is rarely the case that all five forces in the five forces framework will be equally threatening at the same time.

Question 57

Suppliers are a greater threat to firms in an industry when suppliers are threatened by substitutes.

Question 58

Learning-curve cost advantages are present when the cost of production falls with the cumulative volume of production.

Question 59

The threat of buyers is greater if the products or services that are being sold to buyers are standard and not differentiated than if the products sold to buyers are highly differentiated.

Question 60

If the owner of a jewelry store who normally purchased diamonds from a diamond brokerage firm were to open his own diamond brokerage firm,this would be an example of forward vertical integration.

Question 61

Discuss the difference between a company's existing direct competitors and its substitutes and discuss the role substitutes play in an industry.

Question 62

According to Bradenburger and Nalebluff,a firm's competitors help increase the size of a firm's markets while complementors divide this market among a set of firms.

Question 63

Describe the difference between a competitor and a complementor and identify the role complementors play in an industry.

Question 64

The major opportunity facing firms in fragmented industries is

A)refining their current products and emphasizing an increase in service quality.
B)developing new products and technologies.
C)creating a first-mover advantage through technological leadership.
D)the implementation of strategies that began to consolidate the industry into a smaller number of firms.

Question 65

In general,first-mover advantages can arise from any of these sources except

A)technological leadership.
B)preemption of strategically valuable assets.
C)the creation of customer switching costs.
D)using an imitative strategy to introduce improved versions of competitors' new products.

Question 66

The most promising opportunity for a firm in a declining industry is to

A)establish itself as a first mover in the post-shakeout industry.
B)become a market leader in the pre-shakeout industry.
C)become a fast follower in the pre-shakeout industry.
D)merge with another firm.

Question 67

Sophisticated software can enhance the value that customers receive from a personal computer.Therefore,software can be said to be a complementor of a personal computer.

Question 68

BidBuy has a ________ advantage.

A)visionary
B)global
C)first-mover
D)comparative

Question 69

Identify the five most common threats facing firms from their local competitive environment that are represented in the five forces framework,and discuss under what conditions firms in a specific industry are most likely to earn an above average profit and when they are likely to earn a below average profit.

Question 70

Factors such as BidBuy's feedback rating system that are valuable to the company's customers but which are not useful on other online auction sites are examples of

A)first-mover advantages.
B)complementors.
C)substitutes.
D)customer-switching costs.

Question 71

An industry in which a large number of small or medium-sized firms operate and no small set of firms has dominant market share or creates dominant technologies is known as a(n)________ industry.

A)fragmented
B)consolidated
C)mature
D)emerging

Question 72

________ are advantages that come to firms that make important strategic and technological decisions early in the development of an industry.

A)Visionary advantages
B)First-mover advantages
C)Comparative advantages
D)Missionary advantages

Question 73

Firms in a declining industry that engage in a long,systematic phased withdrawal from the industry,extracting as much value as possible during the withdrawal period,are following a(n)________ strategy.

A)niche
B)expansion
C)divestment
D)harvest

Question 74

Mature industries are characterized by

A)an increase in total industry demand.
B)faster increases in production capacity.
C)a slowdown in the introduction of new products or services.
D)a decrease in the amount of international competition.

Question 75

In the 1980s,the video cassette rental industry had a large number of small firms with no firm with a dominant market share.The video cassette rental industry in the 1980s was a(n)________ industry.

A)fragmented
B)mature
C)emerging
D)declining

Question 76

The advantages that come to firms that make important strategic and technological decisions early in the development of an industry are known as ________ advantages.

A)first-mover
B)competitive
C)comparative
D)emerging

Question 77

If your customers value your products more when they have your product and another firm's product rather than when they have your product alone,the other firm is considered to be a

A)competitor.
B)complementor.
C)rival.
D)substitute.

Question 78

For BidBuy,services such as those offered by DollarDog that make BidBuy's services more valuable for customers who use the services of both companies are best described as

A)complementors.
B)substitutes.
C)rivals.
D)suppliers.

Question 79

It is possible for a single firm to be a complementor of one firm and a competitor of another.

Question 80

Identify the four types of competition,the attributes of each type and the expected performance under each.