Deck 3: External Analysis: Industry Structure, Competitive Forces, and Strategic Groups

Question 1

It is unwise to initiate strategic moves such as R&D spending during an economic downturn.

Answer 1

False
Explanation: Shrewd managers initiate strategic successes during downturns, including boosting R&D.

Question 2

In both monopolistically competitive industries and oligopolistic industries,the ability to differentiate a product provides a firm with pricing power.

Answer 2

True
Explanation: Both monopolistically competitive and oligopolistic industries have differentiated products. Differentiated products provide a degree of pricing power.

Question 3

The __________ environment affects a firm's industry environment.

A) macro
B) stakeholder
C) internal
D) supplier

Answer 3

A
Explanation: The PESTEL forces in the macro environment exert influence on the industry environment.

Question 4

Intel was viewed by the European Union as not complying with antitrust regulations and was subjected to regulatory review.The threat of regulatory review can be considered a barrier to entry.

Question 5

The structure-conduct-performance (SCP)model states that industry structure influences the price a firm can charge for its product or service.

Question 6

Industry convergence happens when previously unrelated industries begin to serve the same customer.

Question 7

According to the opening case about the Chinese startup Build Your Dreams (BYD),the ability to successfully enter and compete in the car industry demonstrates that a firm using new technology can circumvent many of the traditionally high entry barriers.

Question 8

Globalization has led to increased entry barriers.

Question 9

_______________ assesses whether a good business opportunity exists or not.

A) A structure-conduct-performance (SCP) analysis
B) A five forces industry environmental analysis
C) A PESTEL model analysis
D) All of these

Question 10

The underlying industry structure has little effect on individual firms' competitive conduct.

Question 11

Scientific improvements and innovations are examples of technological forces.

Question 12

The bargaining power of suppliers is low when the suppliers' products are differentiated or have built-in switching costs.

Question 13

Which of the following is NOT a benefit about the background of BYD that may help it be successful in overcoming barriers to enter the electric vehicle market?

A) BYD has a large and successful home market.
B) BYD is the only car company focused on electric cars.
C) BYD is accustomed to selling competitive products to multinational firms.
D) BYD started as a battery firm and has key insights to this technology.

Question 14

BYD is an example of a new firm entering the global auto industry.With more firms vying for a U.S.market that is not growing very fast,what will happen?

A) The rivalry will be about the same.
B) The intensity of the incumbent firms will decrease.
C) Competitive intensity is sure to rise.
D) The incumbents will keep dominant market shares.

Question 15

Regulatory changes can foster innovation.

Question 16

Fragmented industry structures typically offer high profitability potential.

Question 17

The five forces analysis is focused on factors that influence an industry's profitability potential.

Question 18

The worldwide car industry has had few new entrants in the past couple of decades due to very large entry barriers.How is BYD getting around these barriers?

A) In electric vehicles, the design is simpler than gas engines.
B) BYD started as a battery company and has strengths there.
C) BYD started by selling in emerging markets before developed ones.
D) All of these.

Question 19

Firms that compete within a strategic group rarely use similar competitive strategies.

Question 20

Under the PESTEL framework,external economic factors that are important to a firm's strategy include deflation and levels of employment.

Question 21

Which of the following would NOT explain why managers track interest rates?

A) High interest rates make the cost of capital cheaper for a firm.
B) High interest rates could delay a firm's expansion.
C) Low interest rates make it easier for a firm to borrow money.
D) Low interest rates increase market demand and economic growth.

Question 22

A firm's six PESTEL environmental forces include ______________.

A) political, trade secrets, legal, and technological
B) product, environmental, political, and technological
C) political, economic, legal, and technological
D) environmental, product, ecological, and technological

Question 23

Which of the main industry groups in the SCP model is described as having many firms,some pricing power,and differentiated products?

A) Monopolistic competition
B) Oligopoly
C) Monopoly
D) Perfect competition

Question 24

Non-price competition such as today's rivalry between Coca-Cola and Pepsi refers to:

A) When one firm cuts prices to gain market share, the competition will do the same.
B) When a firm is driving costs down in order to gain competitive advantages through lower prices.
C) When a firm has no pricing power that leads to a competitive disadvantage.
D) When a firm is offering unique products and services as opposed to competing on price.

Question 25

According to the SCP model,what is the relationship between firms and their industries?

A) The firm's structure determines the industry conduct and is not related to firm performance.
B) The firm's conduct shapes the industry structure and leads to firm performance.
C) The industry structure determines firm conduct and these combine to determine firm performance.
D) None of these.

Question 26

All of the following are aspects of sociocultural factors influencing industry attractiveness EXCEPT:

A) The growth rate of the population
B) The age distribution of the population
C) Environmental protection laws
D) Lifestyle changes

Question 27

Which of the following is NOT a main industry group in the SCP model?

A) Monopolistic competition
B) An oligopoly
C) Perfect competition
D) A strategic group

Question 28

As noted in Strategy Highlight 3.1,UBS is a Swiss banking institution that provided tax savings to U.S.clients until the U.S.government took action against UBS.Which of the following is true?

A) Political factors can remove a firm's competitive advantage(s).
B) Barriers to entry can be created through political factors.
C) Political factors can influence a firm's ability to differentiate its product.
D) All of these.

Question 29

Macro-environmental PESTEL analysis considers the effects of forces on ________.

A) a single firm
B) industry leaders
C) an entire industry
D) a strategic group

Question 30

The innovations in process efficiencies such as Six Sigma,the Internet,and biotechnology are all elements of which macro environmental force?

A) Political factors
B) Sociocultural factors
C) Technological factors
D) Economic factors

Question 31

Court decisions and regulations such as CARB zero-emissions are elements of which macro environmental force?

A) Political factors
B) Economic factors
C) Sociocultural factors
D) Legal factors

Question 32

Agriculture is generally considered a perfect competition industry with largely commodity products.However,there is an aspect of the industry that can be classified as monopolistic competition with differentiated products and price premiums.Which part of the industry is it?

A) Genetically modified wheat
B) Corn for biodiesel
C) Organic milk
D) Fresh water salmon

Question 33

The type of industry most likely to engage in non-price competition is ___________.

A) a perfectly competitive industry
B) an oligopolistic industry
C) all industries engage in non-price competition
D) only strategic groups engage in non-price competition

Question 34

Many Internet entrepreneurs have learned that it is difficult to beat the forces of perfect competition.In perfect competition,there are many small stores with largely commodity products and low entry barriers.Which industry has got caught up in the Internet bubble and has tried to join with online models,most of whom closed after a couple of years?

A) Pet supply stores
B) Book sellers
C) Wine stores
D) Express mail industry

Question 35

A firm's pricing power:

A) Is stronger in perfect competition than in monopolistic competition.
B) Is stronger in monopolistic competition than in perfect competition.
C) Is weaker in a monopoly than in an oligopoly.
D) Is stronger in perfect competition than in a monopoly.

Question 36

In Strategy Highlight 3.1,why was the U.S.government putting pressure on UBS,the venerable Swiss bank?

A) The U.S. government was investigating UBS for restraint of trade.
B) The U.S. government wanted information on potential tax evaders.
C) The U.S. government thought UBS had vital information about the 2009 financial meltdown.
D) The U.S. government wanted information about UBS corporate tax payments globally.

Question 37

Which of the main industry groups in the SCP model is described as having a few large firms,differentiated products,and high entry barriers?

A) Monopolistic competition
B) Oligopoly
C) Monopoly
D) Perfect competition

Question 38

Recessions are often viewed as a period of defensive position for firms.However,shrewd managers initiate strategic successes during downturns.What is an example of this provided in the text?

A) GM's foray into electric vehicles in California
B) Apple's increased R&D spending that lead to the launch of iPod
C) Intel's movement into European markets
D) UBS

Question 39

Generally,perfectly competitive industries such as paper and steel (commodities)are deemed to be ________ in profits to more differentiated industries like pharmaceuticals and cosmetics.

A) superior
B) inferior
C) similar
D) indeterminate

Question 40

In 1996,GM,Toyota,and Honda introduced electric vehicles into the California market.This was in response to a regulation passed by the state in 1990 requiring some percentage of zero-emissions vehicles from auto companies be sold in the state.When the regulation was rescinded in the late 1990s,all three firms pulled their electric vehicles out of the market.GM terminated its electric vehicle program,whereas Toyota and Honda used it to introduce hybrid cars only a few years later.Which of the following is NOT a valid conclusion to draw from this series of events?

A) Government regulations are always bad for U.S. businesses.
B) Government regulations can influence business strategies.
C) GM made a strategic error by closing its electric-vehicle program.
D) Toyota and Honda used the regulation as a catalyst for new lines of cars.

Question 41

Georgia Power and Philadelphia Gas Works are two examples of firms in what type of industry structure?

A) monopolistic competition
B) regulated monopoly
C) natural monopoly
D) oligopoly

Question 42

The level of entry barriers is only relevant to potential competitors because:

A) Firms that are established in an industry have already overcome the barriers to entry.
B) The existence of high entry barriers has little impact on overall industry profitability.
C) Competitive markets are dynamic, so established firms expect that there will always be new entrants.
D) The level of entry barriers is relevant to both existing and potential firms due to the competitive consequences for both.

Question 43

When there is pressure to innovate,advertising is key and improved service is important for competition,competitors are engaging in ______________ and prices will ________.

A) price competition; be higher
B) perfect competition; be higher
C) non-price competition; be higher
D) perfect competition: be lower

Question 44

An industry with three firms and a differentiated product is most likely a(n)________,while an industry with three thousand firms and a differentiated product is most likely a(n)________ industry.

A) perfect competition; oligopolistic
B) monopoly; perfectly competitive
C) oligopoly; monopolistic competitive
D) oligopoly; perfectly competitive

Question 45

Competition by offering unique product or service features rather than competing on price is called what?

A) Monopolistic competition
B) Differentiated competition
C) Non-price competition
D) High-intensity competition

Question 46

The objective of Porter's five forces model is to:

A) Assess firm profitability.
B) Assess the potential for profits within an industry.
C) Emphasize the intensity of rivalry within an industry.
D) Analyze the economic conditions of the industry.

Question 47

A ____________ is created when the government believes the product or service would not be supplied by the market under free market conditions.

A) monopolistic competition
B) regulated monopoly
C) near monopoly
D) natural monopoly

Question 48

A key feature of an oligopoly is that the firms are interdependent,which allows them to be good examples in game theory.What does it mean when firms are interdependent?

A) The actions of one competitor influences the behavior of the others.
B) The competitors take actions according to their own situation.
C) The competitive landscape is brutal and will likely have low profits.
D) There will be a dominant solution available in the market.

Question 49

When firms that provide key raw materials to an industry can frequently negotiate for higher prices,the:

A) Bargaining power of buyers is high.
B) Bargaining power of suppliers is high.
C) Barriers to entry are low.
D) Bargaining power of suppliers is low.

Question 50

When a supplier has a credible threat of forward integration,what happens to their power in the industry?

A) It decreases.
B) It has no impact.
C) It converges.
D) It increases.

Question 51

If a rival makes a strategic move in a(n)_________ industry,the dominant firm is most likely to respond with its own initiative to counter (or coordinate)the effects of the first firm.

A) monopolistic competitive
B) oligopolistic
C) monopolistic
D) perfectly competitive

Question 52

What is BYD using to avoid entry barriers upon entering the automotive industry?

A) They purchased a major automotive company.
B) They reduced the switching costs of moving to electric vehicles.
C) They used proprietary battery technology for use in electric vehicles.
D) They have an established brand in China.

Question 53

Suppliers are powerful when which of the following happens?

A) Satisfactory substitutes are available.
B) They sell a commodity.
C) They offer a credible threat of forward integration.
D) They are part of a highly fragmented industry.

Question 54

As natural monopolies are shrinking due to global governmental privatizations,another competitive landscape is emerging.Firms like Intel that have 80 percent market share in some markets would be called what?

A) Competitive monopoly
B) Regulated monopoly
C) Near monopoly
D) Natural monopoly

Question 55

When a buyer has a credible threat of backward integration,what happens to their power in the industry?

A) It decreases.
B) It increases.
C) It converges.
D) It has no impact.

Question 56

The United Auto Workers (UAW)union is which of the five forces in the automotive industry?

A) A supplier
B) A buyer
C) A complement
D) A substitute

Question 57

A firm can use its knowledge of the five forces to strengthen its competitive position through ___________.

A) product differentiation
B) leveraging complements
C) backward integrating to reduce supplier power
D) All of these

Question 58

One of the consequences of the five forces analysis is that a firm must ask itself what?

A) Is the company in a strategic group?
B) Does the company strategy match the competitive landscape?
C) Is the company in an oligopoly or monopolistic competition?
D) Is the company engaged in co-opetition?

Question 59

Which of the following is NOT one of Porter's five forces?

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

Question 60

An ideal competitive environment from a profit-making standpoint is when:

A) Rivalry is moderate, and high entry barriers and good substitutes do not exist.
B) Rivalry is high, entry barriers are low, and there are many substitutes.
C) Rivalry is high, buyers and sellers have strong bargaining power, and entry barriers are low.
D) Rivalry is moderate, entry and exit barriers are low, and there are many substitutes.

Question 61

Industry structures are not stable over time.The U.S.banking industry has seen major consolidation in recent years.We would expect the result of this dynamic change to be what?

A) Generally lower industry profits.
B) It will have no effect on profitability.
C) Further erosion in business.
D) Generally higher industry profits.

Question 62

Mr.Smith was looking to buy a car but decided to buy a motorcycle instead.The motorcycle is a _______ and comes from outside the original industry.

A) complement
B) substitute
C) convergence
D) complementor

Question 63

The five-forces-plus-complements model is useful in understanding industry profit potential,but it is only a snapshot in time.Managers must also consider ___________.

A) the cost structure
B) the industry dynamics
C) the competitive landscape
D) the strategic group

Question 64

The soft drink industry has been one of the most profitable industries for years.There are two key competitors,Coke and Pepsi,who compete on product innovation and lifestyle advertising.Additionally,barriers to entry are high and supplier power is weak.Michael Porter calls this industry:

A) A positive-sum industry
B) A "five star" industry
C) A shining star industry
D) A complementary industry

Question 65

John Connelly went to the grocery store to buy some butter.As he was looking at the butter offerings,he noticed that Pam cooking spray was advertised as $1.00 less for the same amount of product.John purchased the spray.The spray is considered to be a what?

A) A complement
B) A mobility product
C) A replacement
D) A substitute

Question 66

When the collective strength of the five forces works against an industry:

A) Individual firms should compete on price.
B) Individual firms should move from one strategic group to another.
C) The profit potential is weak.
D) There is a high degree of profit potential.

Question 67

Competitive intensity will increase when all of the following happen EXCEPT:

A) Proprietary technology is a core capability.
B) Rivals are similar in size and capability.
C) Buyers switching costs are low.
D) Exit barriers are high.

Question 68

Given its size and industry influence,Walmart would be a powerful buyer.Which of the following is NOT an indication of Walmart's strength as a buyer?

A) Three suppliers merge together to gain economy of scale.
B) Suppliers locate very near Walmart's corporate headquarters.
C) Walmart switches from Rubbermaid to another vendor for containers.
D) Walmart decides to start manufacturing its own clothes to sell.

Question 69

What is the sixth force of industry attractiveness?

A) Substitutes
B) Economic growth rates
C) Complements
D) Technological innovation

Question 70

A large textile manufacturer located in South Carolina had to exit the industry because it could no longer compete with firms from overseas.The company laid off hundreds of employees,its suppliers started to struggle,and several local establishments closed their doors.It can be said that the local economy in South Carolina was experiencing what?

A) The retaliation effects of abandonment
B) The ripple effects through the supply chain
C) The destructive role of complements
D) Dynamic industry consequences

Question 71

Microsoft and Intel are complements to each other.Their alternating advances over time have created a ________.

A) virtuous cycle
B) virtual circle
C) circle of complements
D) mobility barrier

Question 72

Which of the following would NOT indicate that buyers are a strong competitive force?

A) They can integrate backward.
B) They can purchase from several sellers.
C) They are reliant on the industry's product.
D) They buy in large quantities.

Question 73

The competitive threat of potential entry is NOT strong when _____________.

A) there will be expected competitive retaliation
B) there are sizable economies of scale
C) there are strong brand preferences and customers are loyal
D) All of these

Question 74

Exit barriers are obstacles that determine how easily a firm can leave the industry.When exit barriers are high,what happens to industry attractiveness?

A) It decreases.
B) It increases.
C) It becomes a complement.
D) It has no impact.

Question 75

Applying the five forces model to the airline and soft drink industries demonstrates all EXCEPT which of the following?

A) The soft drink industry has fairly low forces.
B) The airline industry has a high level of forces.
C) The profit level should be higher in the soft drink industry than the airline industry.
D) The macro environmental forces are similar between the airline and soft drink industries.

Question 76

Competitive rivalry will get weaker when all of the following happen EXCEPT:

A) Demand is growing.
B) Exit barriers are low.
C) Products are differentiated.
D) One firm's actions will have little direct impact on a rival.

Question 77

Which of the following would NOT indicate that sellers are a strong competitive force?

A) Substitutes exist for their components.
B) They can supply the component for a cheaper cost than industry makers can produce it.
C) The buyers of their component are not important customers.
D) The component that they supply affects buyer product quality.

Question 78

A ____________ is a product or service that can help raise demand in an industry by indirectly enhancing performance or decreasing prices.

A) core competency
B) substitute
C) complement
D) component

Question 79

Which of the following is NOT a major consideration of barriers to entry?

A) Capital requirements
B) Brand identity
C) Positive growth rate
D) Economies of scale

Question 80

The U.S.airline industry has intense rivalry,primarily undifferentiated products,low entry barriers,and low switching costs.Furthermore,suppliers of aircraft engines to the industry have strong bargaining power.It is no surprise that this industry has been one of the least profitable for years.Michael Porter calls this industry what?

A) A zero-sum industry
B) A "zero star" industry
C) A declining star industry
D) A competitively dynamic industry