Deck 2: Managing Industry Competition

Question 1

Core features of the five forces model remain remarkably insightful when analyzing old industries but not new phenomena, such as e-commerce.

Answer 1

False

Question 2

The three generic strategies can strengthen a focal firm's position relative to the five forces.

Answer 2

True

Question 3

Strategic alliances are on the decline.

Answer 3

False

Question 4

The five forces model overemphasizes threats and downplays opportunities.

Question 5

Substantial switching costs reduce the threat of potential entry.

Question 6

Japanese firms do not tend to maintain close relationships with their suppliers.

Question 7

A key indicator of intense rivalry among firms is low cost competitive actions and reactions.

Question 8

High exit costs from an industry tend to reduce the intensity of rivalry.

Question 9

A focused firm avoids being either a specialized differentiator or a specialized cost leader.

Question 10

One of the benefits of having a cost advantage is that it serves as barrier to entry.

Question 11

The threat of substitutes products from different industries that satisfy customer needs being met by focal firms) is greater if there are low switching costs.

Question 12

If there are many sellers but only a few buyers, the sellers tend to have the most bargaining power.

Question 13

An industry is defined as a group of firms producing goods and/or services that are similar to each other.

Question 14

If a low-cost firm has already achieved the maximum efficient scale, it must turn to differentiation to distinguish itself from competitors.

Question 15

Choosing whether to perform activities differently than rivals or to perform different activities than competitors is the essence of the Three Generic Strategies.

Question 16

A key proposition of the five forces framework is that industry structure is unrelated to firm performance and the strength of the five forces.

Question 17

Product proliferation is a potential strategy used to reduce the threat of potential entry.

Question 18

If there are many buyers but only a few sellers, the buyers tend to have the most bargaining power.

Question 19

Telecommunications is an example of one industry in which one can determine exact boundaries.

Question 20

Mass markets tend to be characterized by low profit margins.

Question 21

The industry-based view recommends:
a. Backward integration as a way to defend against the power of suppliers.
b. Backward integration as a way to defend against the power of buyers.
c. Forward integration as a way to defend against the power of suppliers.
d. Forward integration as a way to defend against the power of buyers.
e. Backward or forward integration as a way to defend against the power of suppliers and buyers.

Question 22

One noncontroversial issue with strategic groups is:
a. Stability of strategic groups.
b. Mobility barriers between strategic groups.
c. The requirement for large quantities of objective data.
d. All of the above are controversial issues.
e. None of the above is controversial.

Question 23

Strategies of firms within a strategic group tend to be differentand so does their performance.

Question 24

Which of the follow would tend to reduce the bargaining power of buyers?
a. Large number of buyers.
b. Products of the industry do not produce clear cost advantages or enhance the quality of life for buyers.
c. Purchase standard, undifferentiated commodity products from suppliers.
d. Willingness and ability of buyers to integrate backward.
e. All of the above.

Question 25

Which of the following is NOT true of the industrial organization IO) economics model?
a. Industry structure determines firm conduct strategy), which determines firm performance.
b. Original goal - help regulators set policy to minimize the ability of firms to earn excess profits.
c. Strategists use the IO model to try to earn above-average returns excess profits).
d. All of the above are NOT true.
e. All of the above ARE true.

Question 26

Which of the following would tend to reduce the bargaining power of suppliers?
a. Dominance of the supplier industry by a few firms.
b. Suppliers provide unique, differentiated products with few or no substitutes.
c. Focal firm is not an important customer.
d. Unwillingness and inability of suppliers to integrate forward.
e. None of the above.

Question 27

Related and supporting industries are called _________ and they are an additional force that can impact the competitiveness of an industry.
a. Complementors
b. All-rounders
c. Customizers
d. Flexible manufacturing
e. Supporters

Question 28

Which of the following are scale-based low cost advantages?
a. Experience curves.
b. Proprietary technology.
c. Favorable access to raw materials and distribution channels.
d. Favorable locations.
e. None of the above.

Question 29

Which of the following tends to reduce the intensity of rivalry?
a. Similarity of firms in terms of size, market influence and product offerings.
b. Products are big-ticket items and purchased infrequently.
c. New capacity must be added in large increments.
d. Slow industry growth or decline in demand.
e. None of the above.

Question 30

Recent work favors outsourcing and willingness to collaborate with suppliers/buyers, as well as competitors.

Question 31

Which is a reason for integration as opposed to outsourcing?
a. Greater expense.
b. Strategic flexibility is enhanced.
c. Those within the firm are often more competitive.
d. The activity is crucial to the core business.
e. All of the above.

Question 32

Which is a reason for outsourcing as opposed to integration?
a. Less expense.
b. Strategic flexibility is enhanced.
c. Those outside the firm are often more competitive.
d. The activity is not crucial to the core business.
e. All of the above.

Question 33

The luxury market is characterized by:
a. Fewer competitors than in a mass market.
b. Less use of incentives and price cuts to induce purchases.
c. Healthier profit margins than in a mass-market segment.
d. All of the above.
e. None of the above.

Question 34

The ultra luxury automobile market is characterized by:
a. Little competition in the past - but that is changing.
b. A small number of cars produced each year - but they are very expensive.
c. Being the same as the luxury market.
d. A and B above.
e. None of the above.

Question 35

The industry-based view ignores the impact of industry history and institutions on firm performance.

Question 36

Which of the following is NOT true regarding supplier relationships?
a. Supplier relationships that are too close may introduce rigidities, including loss of flexibility.
b. In Japan suppliers may become trusted members of the keiretsu.
c. In Japan, instead of treating suppliers as adversaries, they are treated as collaboration partners.
d. In view of A through C above, supplier relationships in Japan tend to be ineffective.
e. In view of A through C above, close supplier relationships are not necessarily good or bad.

Question 37

Recent success of firms in unattractive industries suggests that firm-specific resources and capabilities are not needed to determine firm performance.

Question 38

The traditional view recommends avoidance of integration.

Question 39

Which is generally NOT true of differentiation?
a. Difficult to sustain basis of differentiation in the long run.
b. Relentless efforts of competitors to duplicate differentiation.
c. Key areas of application include research and development, marketing/sales and after-sale services.
d. It is a challenge to identify attributes that are valued by customers in each market segment.
e. Inability to pass on suppliers' price increases to buyers.

Question 40

Which of the following are true concerning cost leadership?
a. Targets average customers for mass market - little differentiation.
b. Key functional areas are manufacturing and materials management.
c. Relentless drive to cut costs might compromise value that customers desire.
d. All of the above.
e. None of the above.

Question 41

An industry-based view provides some answers to which of the following questions?
a. Why do firms differ?
b. How do firms behave?
c. What determines the scope of the firm?
d. What determines the international success and failure of firms?
e. All of the above.

Question 42

What are the "Three Generic Strategies," and what lessons can we learn from their use?

Question 43

Maximizing opportunities and minimizing threats presented by the five forces provides some answers to which of the following questions?
a. Why do firms differ?
b. How do firms behave?
c. What determines the scope of the firm?
d. What determines the international success and failure of firms?
e. All of the above.

Question 44

Many high-technology industries are characterized by network externalities. What are those externalities and how can they pay off?

Question 45

The relative bargaining power of the focal firm and according to the traditional view) the degree of integration helps answer which of the following questions?
a. Why do firms differ?
b. How do firms behave?
c. What determines the scope of the firm?
d. What determines the international success and failure of firms?
e. All of the above.

Question 46

How can high exit costs increase the chance that firms may continue to operate for at least a while when operating at a loss? Explain by giving examples.

Question 47

Porter's five forces framework:
a. Identifies relevant variables but fails to ask the needed questions.
b. Identifies only questions to ask.
c. Identifies both relevant variables and questions to ask.
d. Eliminates the need for other frameworks to add insight about firm performance.
e. None of the above.

Question 48

How can backward integration be used by buyers and what are some examples?

Question 49

A systematic foundation for industry and competitor analysis is best provided by:
a. The industry-based view.
b. Resource-based view.
c. Historical view.
d. Macro analysis.
e. None of the above.

Question 50

An intense focus on above-average firm performance is shared by IO economists and those involved in the strategy of firms and yet their perspective is opposite of each other. Explain.