Deck 2: External Analysis: The Identification of Opportunities and Threats

Question 1

Over the last few decades,the United States steel industry has become less concentrated.

Answer 1

False

Question 2

When buyers are in a weak bargaining position,companies in the supplying industry must lower their prices to increase profits.

Answer 2

False

Question 3

In general,the more that an industry's product is like a commodity,the lower the intensity of any price war that may develop.

Answer 3

False

Question 4

The personal computer industry is uniquely dependent upon a powerful supplier,Intel.

Question 5

Rapid growth in industry demand enables companies to expand their revenues and profits without taking market share away from competitors.

Question 6

Starbucks and an independent local café both sell coffee and therefore belong to the same strategic group.

Question 7

Government deregulation of telephone service lowered the barriers to entry and lowered industry profit margins.

Question 8

Opportunities arise when a company takes advantage of conditions in its environment to formulate and implement strategies that allow it to be more profitable.

Question 9

High tech industries are often dependent on complementor industries for their mutual success.

Question 10

Access to cheaper capital is an example of an economy of scale.

Question 11

Strategic groups within an industry compete amongst themselves even though their business models may vary greatly.

Question 12

In Porter's framework,the stronger the five forces,the more limited the ability of established companies to raise prices and earn greater profits.

Question 13

The bottled water industry created new competitors for Coca-Cola,but did not change the basic industry boundaries.

Question 14

Even when entry barriers are very high,new firms may still enter an industry if they perceive that the benefits outweigh the costs of entry.

Question 15

In determining its opportunities and threats,a firm should focus on internal processes and capabilities.

Question 16

The Cott Corporation,in the soft drink industry,is an example of how a company failed to overcome barriers to entry in an industry.

Question 17

High exit barriers are most serious as a competitive threat when industry demand is declining.

Question 18

Strong brand loyalty and high customer switching costs are low barriers to entering an industry.

Question 19

Fortunately,substitute products are not a threat if a company is the market leader.

Question 20

Intense rivalry lowers prices and raises costs.

Question 21

The punctuated equilibrium view can also be described as a freezing but not unfreezing process in an industry's life cycle.

Question 22

When the value of the dollar is low compared with the value of other currencies,products made in the United States are relatively inexpensive and products made overseas are relatively expensive.

Question 23

United Airlines,Amtrak,and Greyhound are all companies in the transportation

A) industry.
B) sector.
C) game.
D) segment.
E) strategic group.

Question 24

Unfortunately,successful innovation cannot transform the nature of industry competition.

Question 25

Which of the following components was an extension of Porter's original five forces model?

A) Risk of entry by potential competitors
B) The intensity of rivalry among established companies within an industry
C) The bargaining power of buyers
D) The bargaining power of suppliers
E) The lack of substitutes for an industry's products

Question 26

Deregulation of the mortgage industry is an example of how political and legal forces can impact an industry.

Question 27

Which of the following is not one of Porter's five forces,as proposed in his original model?

A) Threat of complementors
B) Bargaining power of suppliers
C) Rivalry among established companies
D) Threat of new entrants
E) Threat of market changes

Question 28

What is the impact of shifting industry boundaries on firms within the industry?

A) Higher exit barriers
B) More competitors
C) Reduced threat of substitutes
D) Greater bargaining power of suppliers
E) Lesser bargaining power of buyers

Question 29

A group of firms all make writing implements-pens,pencils,and markers.This group should be referred to as a(n)

A) substitute.
B) market segment.
C) sector.
D) supplier.
E) industry.

Question 30

A technological change such as the rise of the Internet can represent either an opportunity or a threat.

Question 31

A group of firms all make tools for baking -- pots,pans,measuring cups,and utensils.This group should be referred to as a market segment.

Question 32

One of the defining characteristics of the mature stage of the industry life cycle is that growth is low or zero.

Question 33

Changes in the characteristics of a population,such as age or race,are irrelevant to the analysis of an industry's macroenvironment.

Question 34

Interest rates have an impact on the sale of autos,appliances,and capital equipment and thus represent a macoeconomic force.

Question 35

Cosmetics makers focus on the unique needs of customers of different ages.The cosmetics makers recognize the importance of

A) shifting industry boundaries.
B) the threat of new entrants.
C) sectors.
D) market segments.
E) substitutes.

Question 36

Which of the following is not a barrier to entry?

A) Economies of scale
B) Brand loyalty
C) Absolute cost advantages
D) High customer bargaining power
E) High customer switching costs

Question 37

Anheuser Busch,because it dominates the mass-market beer segment,does not complete with micro-brewers.

Question 38

If economies of scale are an industry's primary entry barrier,a new entrant's major risk is

A) its inability to access labor and materials.
B) the inferior quality of its products.
C) its inability to match the innovation of the established firm.
D) its inability to produce in sufficient volume to match the cost advantages of established producers.
E) its inability to get buyers to switch to its product.

Question 39

As a barrier to new entry,absolute cost advantages can be based on

A) continuous advertising of brand and company names.
B) high product quality, service-oriented innovations, and good after-sales service.
C) cost reductions that arise from the mass production of standardized output.
D) the unique ability of established companies to spread fixed costs over a large volume.
E) control over low-cost inputs required for production, be they labor, materials, equipment, or management skills.

Question 40

An industry can be defined as a group of

A) companies offering products or services that are close substitutes for each other.
B) twenty or more companies offering products or services that are close substitutes for each other.
C) companies.
D) companies that offer dissimilar products or services.
E) companies that offer products or services to dissimilar customers.

Question 41

Historically,government reputation has

A) encouraged new entrants into an industry.
B) constituted a major entry barrier into major industries.
C) neither hampered nor encouraged new entrants into an industry.
D) encouraged the growth of new companies.
E) none of these choices.

Question 42

Common exit barriers include

A) investments in specific assets.
B) emotional attachments to an industry.
C) high fixed costs associated with leaving the industry.
D) bankruptcy regulations.
E) all of these.

Question 43

Which of the following industry structures is dominated by a small number of large companies?

A) Fragmented industry
B) Consolidated industry
C) Oligopoly
D) Monopoly
E) Sector

Question 44

Economies of scale may arise from

A) cost reductions gained through mass production.
B) discounts on bulk purchases of raw material inputs and component parts.
C) advantages gained by spreading production costs over a large production volume.
D) cost savings associated with spreading marketing and advertising costs over a large volume of output.
E) all of these.

Question 45

Switching costs may arise when

A) changing from one computer system to another.
B) substitute products are available at a lower unit cost.
C) when there are a large number of interchangeable products.
D) products are commodity-like in nature.
E) all of these.

Question 46

Rivalry refers to

A) competition.
B) the intensity of competition among established companies within an industry.
C) a struggle among firms using price, product design, and advertising.
D) all of these.
E) none of these.

Question 47

Growth industries

A) typically suffer from high mobility barriers.
B) tend to be characterized by weak rivalry.
C) have high rivalry among established companies.
D) increase prices because customers are more aware of the industry's product.
E) provide economies of scale to existing companies.

Question 48

The bargaining power of an industry's suppliers is greater when

A) the supply industry is fragmented.
B) switching costs are high.
C) the industry buys in large quantities.
D) many substitutes are available.
E) firms in the industry can threaten backward vertical integration.

Question 49

Brand loyalty may be created by

A) continuous advertising.
B) patent protection of products.
C) product innovation achieved through company research and development.
D) emphasis on high product quality.
E) all of these.

Question 50

Which of the following industry structures consists of a large number of small and medium-sized companies,none of which is in a position to determine industry price?

A) Fragmented industry
B) Consolidated industry
C) Oligopoly
D) Monopoly
E) Sector

Question 51

Which of the following is currently an embryonic industry?

A) Personal computers
B) Biotechnology
C) Internet retailing
D) Nanotechnology
E) Wireless communications

Question 52

The extent of rivalry among established companies is lowest when

A) the industry's product is a commodity.
B) demand is growing rapidly.
C) exit barriers are substantial.
D) the industry is entering a decline stage.
E) the industry is dominated by a small number of large companies.

Question 53

In growth industries,

A) replacement demand is increasing rapidly.
B) technological expertise is the most important entry barrier.
C) rivalry is high.
D) distribution channels are poorly developed.
E) buyers are familiar with the industry's product.

Question 54

Entry barriers in the embryonic stage are frequently based on

A) brand loyalty.
B) economies of scale.
C) absolute cost advantages.
D) economies of scope.
E) technological know-how.

Question 55

The competitive structure of an industry refers to the

A) number of segments in the industry.
B) number and size distribution of companies in the industry.
C) the number of consumers in the industry.
D) number of competing products in the industry.
E) form that competition in the industry takes.

Question 56

Members of a strategic group

A) compete directly with members of other strategic groups.
B) are affected by Porter's five competitive forces to the same degree that members of other strategic groups are affected.
C) follow a business model that is similar to that pursued by other companies in the group.
D) earn the same rate of return.
E) move easily to other groups as desired.

Question 57

A market segment is a group of

A) customers within a market that can be different from each other on the basis of their distinct attributes and specific demands.
B) companies that produce similar goods or services.
C) customers within a market that purchase goods or services in similar quantities.
D) customers within a market that have similar levels of profitability.
E) none of these.

Question 58

Sales of complementors' products tend to

A) increase sales of the industry's product.
B) decrease sales of the industry's product.
C) have no effect on sales of the industry's product.
D) increase sales of substitute products.
E) decrease sales of substitute products.

Question 59

Which of the following is not a determinant of the extent of rivalry among established companies?

A) Industry competitive structure
B) Demand conditions
C) The cost structure of firms in an industry
D) Exit barriers
E) The power of buyers

Question 60

Mobility barriers

A) prevent movement within a strategic group.
B) inhibit the movement of companies between strategic groups in an industry.
C) inhibit the movement of a company from one industry to another.
D) include exit barriers of the strategic group that a company wants to enter.
E) are low when exit barriers in the strategic group that a company is a member of are high.

Question 61

Julian is asked to examine the demographic environment facing his employer,a clothing manufacturer.Which of the following should Julian examine?

A) Government regulations
B) Inflation
C) Manufacturing technology
D) Aging of the population
E) Society's growing interest in exercise

Question 62

Due to a recent relaxation in pollution standards,Ford Motors is withdrawing its electric-powered cars from sales in the U.S.market.Ford is responding to a change in which of the following macroenvironmental forces?

A) Economic
B) Demographic
C) Political and legal
D) Social
E) Strategic

Question 63

Suppliers in an industry are most powerful when

A) there are few substitutes for the product suppliers sell.
B) switching costs are low.
C) companies in the industry can threaten to enter the suppliers' industry.
D) substitute products are readily available.
E) all of these choices

Question 64

Using the industry life cycle model,explain how the threats and opportunities for existing firms in an industry change over time.

Question 65

The Internet is an example of a

A) technological force.
B) social force.
C) political and legal force.
D) demographic force.
E) global force.

Question 66

Philip Morris capitalized on the growing health consciousness trend when it acquired Miller Brewing Company,and then redefined competition in the beer industry with its introduction of low-calorie beer (Miller Lite).This health trend represents a _____force.

A) social
B) political
C) legal
D) technological
E) demographic

Question 67

Demand reaches total saturation in the ____ stage of the industry life cycle.

A) embryonic
B) growth
C) shakeout
D) maturity
E) decline

Question 68

Beverage makers are finding that water sales are increasing due to consumers' preferences for healthy drinks.Which part of the macroenvironment does this represent?

A) Economic forces
B) Demographic forces
C) Embryonic forces
D) Political forces
E) Social forces

Question 69

When shopping for clothing such as shirts and jeans,Tyrone will only buy products sold by the Eastern Clothing Company,even if other brands are cheaper.Eastern Clothing Company has _____ with Tyrone.

A) switching costs
B) bargaining power
C) risk of entry
D) brand loyalty
E) economies of scale

Question 70

Leslie is the owner of Crafts and Things,a local craft store that sells homemade gifts such as jewelry and quilts.Recently,there has been an increase in the price of the items that Leslie uses to make her crafts,such as beads and yarn.The rising cost of these items represent a(n)_____ to Leslie's business.

A) opportunity
B) threat
C) cost advantage
D) rivalry
E) strength

Question 71

Why is it important to understand the external environment in order to think strategically?

Question 72

In part due to advances in medicine,Americans are currently living longer now than in the past.As a result,the sale of products that meet the needs of older individuals,such as devices that assist in walking and movement,have increased.Age can be referred to as a

A) technological force.
B) demographic force.
C) social force.
D) political force.
E) legal force.

Question 73

Define and then relate the concepts of sectors,industries,market segments,and strategic groups.

Question 74

The threat from new entrants is greatest in the ____ stage of the industry life cycle.

A) embryonic
B) growth
C) shakeout
D) maturity
E) decline

Question 75

In the early 1900s,when the automobile was first manufactured,the automobile industry would have been considered a(n)

A) mature industry.
B) industry stakeout.
C) embryonic industry.
D) growth industry.
E) declining industry.

Question 76

As an industry enters the shakeout stage,

A) rivalry among companies declines.
B) demand is still growing at a high rate.
C) prices rise.
D) excess capacity emerges.
E) new entrants come into the market.

Question 77

The level of industry demand

A) has little effect on competition in the industry.
B) is one of the determinants of the intensity of rivalry in the industry.
C) increases as the number of customers grows.
D) is influenced by bankruptcy regulations.
E) all of these.

Question 78

Eventually most industries enter a decline stage where

A) growth becomes negative.
B) rivalry among established companies usually decreases.
C) competitive pressures abate.
D) excess capacity declines.
E) demand continues to hold steady.

Question 79

Which of the following is not one of the factors in the economic forces of the macroenvironment?

A) Interest rates
B) Inflation
C) Regulation
D) Currency exchange rates
E) Economic growth rate

Question 80

An industry's buyers have high bargaining power when

A) buyers purchase in large quantities.
B) switching costs are low.
C) it is economically feasible for buyers to purchase inputs from several companies at once.
D) buyers can threaten to enter an industry and produce the product themselves.
E) all of these.