Chapter.3 Exam Questions External Analysis Strategy

Student name:__________

The stronger the five forces, the lower the industry’s ability to earn above-average profits and gain and sustain a competitive advantage.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Industry Structure and Firm Strategy: The Five Forces Model
Source : Chapter 03 Test Bank > TF Qu. 01 The stronger the five forces, the lower...

A key feature of an oligopoly is that competing firms are interdependent.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Industry Structure and Firm Strategy: The Five Forces Model
Source : Chapter 03 Test Bank > TF Qu. 02 A key feature of an oligopoly is that compet...

For-profit businesses operating in long-standing fields such as energy and transportation usually operate in an environment of price stability.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : PESTEL Framework
Source : Chapter 03 Test Bank > TF Qu. 03 For-profit businesses operating in long-stan...

Office Homie Inc. wants to become the largest and most profitable office chair supplier in a three-state area. To do this, Office Homie should try to create the largest possible difference between the value that its office chairs create and the expense that the company must spend to produce the chairs.
1. ______

true
false

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 2 Medium
Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir
Topic : PESTEL Framework
Source : Chapter 03 Test Bank > TF Qu. 04 Office Homie Inc. wants to become the...

A small used tire shop faces significant potential competition because of the low capital requirements compared with business environments such as universities and laboratories.
1. ______

true
false

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : PESTEL Framework
Source : Chapter 03 Test Bank > TF Qu. 05 A small used tire shop faces significant pot...

Federal and regional laws prevent incumbent firms from dramatically lowering prices or otherwise retaliating when a new entrant joins an industry.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > TF Qu. 06 Federal and regional laws prevent incumbent ...

Because competitors in oligopolistic industries are so independent, it is not very important for strategic leaders in those firms to monitor and respond to changes their competitors make.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > TF Qu. 07 Because competitors in oligopolistic industr...

A video-streaming service provider such as Amazon Prime is a complement to a manufacturer of streaming video devices such as Roku and the Amazon Firestick.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-05 Describe the strategic role of complements in creating positive-sum co-ope
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > TF Qu. 08 A video-streaming service provider such as A...

A company that owns failing movie theaters could leverage existing assets by turning the buildings into private schools.
1. ______

true
false

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 2 Medium
Learning Objective : 03-06 Explain the five choices required for market entry.
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > TF Qu. 09 A company that owns failing movie theaters c...

When smartphone manufacturers began including cameras and voice recorders in their products, that was an example of switching costs.
1. ______

true
false

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > TF Qu. 10 When smartphone manufacturers began includin...

A local manufacturer that wants to be a global manufacturer faces few mobility barriers because it has not yet invested in supply chains, which can become outdated and expensive.
1. ______

true
false

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between
Topic : The Advantages and Disadvantages of a Global Strategy
Source : Chapter 03 Test Bank > TF Qu. 11 A local manufacturer that wants to be a glob...

Firms within the same industry automatically belong to the same strategic group.
1. ______

true
false

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between
Topic : Strategic Group Models for Understanding Industry Rivals
Source : Chapter 03 Test Bank > TF Qu. 12 Firms within the same industry automatically...

In recent years a growing number of U.S. consumers have become more health conscious about what they eat. According to the PESTEL Framework this trend could best be classified as a________ trend.
1. ______

sociocultural

healthy eating

political

legal

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : The PESTEL Framework
Source : Chapter 03 Test Bank > MC Qu. 13 In recent years a growing number of U.S. con...

Danish manufacturer Vestas is addressing environmental concerns regarding the burning of fossil fuels to generate energy by building wind turbines. This best represents which of the following PESTEL categories?
1. ______

ecological

economic

political

technological

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : The PESTEL Framework
Source : Chapter 03 Test Bank > MC Qu. 14 Danish manufacturer Vestas is addressing...

A firm’s________ is based on creating value for customers (V) while containing the cost (C).
1. ______

strategic position

growth strategy

industry analysis

co-operative strategy

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir
Topic : Industry Structure and Firm Strategy: The Five Forces Model
Source : Chapter 03 Test Bank > MC Qu. 15 A firm’s ________ is based on creating...

According to Michael Porter’s five forces model,________ must be viewed broadly to encompass other forces in an industry.
1. ______

competition

revenue streams

future volatility

market share

According to the five forces model, the stronger the five forces, the lower the industry’s
1. ______

bargaining power.

profit potential.

economic risk.

monopolistic potential.

In nearly every case, which of the five forces is the most important in determining the relative power structure in an industry?
1. ______

No single force is dominant in most every case.

current competitors

potential entrants

past participants

Which of the five forces is Starbucks answering when it repeatedly upgrades and refreshes its stores and offerings?
1. ______

threat of entry

power of supplier

competitive rivalry

threat of substitute products

WeBreak4Bikes Inc. has a new U.S.-based client in the bicycle industry. The client’s company produces only bicycles for riding on the road. The bicycles are used for reliable general-purpose transportation. When asked to identify a potential substitute for the bicycle industry from the five forces perspective, you would select
1. ______

motorcycles.

hot air balloons.

tractors.

None of these are substitutes.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 3 Hard
Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir
Topic : Industry Structure and Firm Strategy: The Five Forces Model
Source : Chapter 03 Test Bank > MC Qu. 20 WeBreak4Bikes Inc. has a new U.S.-based clie...

Which of the following is not captured when examining a competitive industry structure?
1. ______

the ability to engage in forward vertical integration

the number and size of an industry’s competitors

the firm’s degree of pricing power

the type of product or service (commodity or differentiated product)

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Competitive Industry Structure
Source : Chapter 03 Test Bank > MC Qu. 21 Which of the following is not captured when ...

A(n)________ industry is one that is characterized by many small firms, a commodity product, and little or no ability for each firm to raise its prices.
1. ______

monopolistically competitive

oligopolistic

naturally monopolistic

perfectly competitive

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Competitive Industry Structure
Source : Chapter 03 Test Bank > MC Qu. 22 A(n) ________ industry is one that is...

Firms that are classified as operating in an oligopoly tend to have some pricing power if they are able to differentiate their product or service offerings from those of their competitors, so the recommended mode of competition is
1. ______

non-price competition.

price-based competition.

hypercompetition.

service-based competition.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Competitive Industry Structure
Source : Chapter 03 Test Bank > MC Qu. 23 Firms that are classified as operating in an...

Which of the following would serve as a feasible option when deciding who are the players in an established industry?
1. ______

Focus on customers who can extract value.

Avoid industries with direct competitors.

Align the incentives of only internal stakeholders.

Find ways to take down a monopoly.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 03-06 Explain the five choices required for market entry.
Topic : Changes over Time: Entry Choices and Industry Dynamics
Source : Chapter 03 Test Bank > MC Qu. 24 Which of the following would serve as a...

Firms that compete within the same strategic group generally experience
1. ______

more competitive rivalry than firms outside their strategic group.

less competitive rivalry than firms outside their strategic group.

the same competitive rivalry than firms outside their strategic group.

no competitive rivalry because they are substitutes.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between
Topic : Performance Differences within the Same Industry: Strategic Groups
Source : Chapter 03 Test Bank > MC Qu. 25 Firms that compete within the same strategic...

The PESTEL framework allows the scanning, monitoring, and evaluating of________ in a firm’s macro environment.
1. ______

manufacturing and distribution

price setting and marketing

internal and external forces

changes and trends

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : PESTEL Framework
Source : Chapter 03 Test Bank > MC Qu. 26 The PESTEL framework allows the scanning...

Which of the following external forces is a part of a firm’s task environment?
1. ______

the composition of the strategic group to which the firm belongs

the interest rates prevalent in the economy in which the firm operates

the inflation level in the economy in which the firm operates

the recent innovations in process technology, including lean manufacturing

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : PESTEL Framework
Source : Chapter 03 Test Bank > MC Qu. 27 Which of the following external forces is a ...

The government of Monterro has mandated that all companies with 25 or more employees must provide group health insurance. Which of the following factors in a firm’s general environment does this mandate best indicate?
1. ______

ecological factors

sociocultural factors

technological factors

legal factors

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 2 Medium
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > MC Qu. 28 The government of Monterro has mandated...

Khaled, a manager, is writing an analysis of his employer’s current and possible future revenues. Which of the following could he identify as an economic factor in his firm’s external general environment?
1. ______

the government regulations and laws in the country in which the firm exists

the stage of the business cycle that the country is in

the values and norms prevalent in the society in which the firm operates

the bargaining power of the firm’s suppliers and buyers

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : PESTEL Framework
Source : Chapter 03 Test Bank > MC Qu. 29 Khaled, a manager, is writing an analysis of ...

Managers at SunTrustUs Properties are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates?
1. ______

Cost of capital for firms will be high.

Firms will invest less in future growth.

Economic growth rate will fall.

Consumer demand will increase.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : PESTEL Framework
Source : Chapter 03 Test Bank > MC Qu. 30 Managers at SunTrustUs Properties are surpri...

Roxana manages a chain of workout facilities in a tri-county area that has recently experienced an economic boom because of the development of a new high-speed train line. What is most likely to happen when there is too much money in the tri-county economy?
1. ______

too many goods and services

a drop in interest rates

high economic growth

an increase in prices

Lin manages the supply chain for a company that sells designer bags. She learns that economists are predicting a moderate to severe recession in the next six to eight months. Based on that information, what action should Lin recommend to the company’s owner?
1. ______

Increase supply. During recessions, businesses that focus on low-cost solutions make significant profits.

Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters.

Maintain the supply at its current rate. Economic forecasts are rarely accurate.

Wait six months and see what happens. Recessions rarely affect consumer spending.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 3 Hard
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : PESTEL Framework
Source : Chapter 03 Test Bank > MC Qu. 32 Lin manages the supply chain for...

In a firm’s external environment,________ factors to consider are growth rates, interest rates, the employment level, price stability, and currency exchange rates.
1. ______

political

demographic

ecological

economic

Bill is researching sociocultural factors related to his employer, a sporting goods manufacturer. Which of the following would be part of the sociocultural forces in a firm’s external environment?
1. ______

the interest rates prevalent in an economy

the laws protecting small enterprises in a nation

the family size of the firm’s target market

the rate of employee attrition within the firm

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : PESTEL Framework
Source : Chapter 03 Test Bank > MC Qu. 34 Bill is researching sociocultural factors re...

In 2008, BlackBerry’s market cap peaked at $75 billion. By 2017 this valuation had fallen more than 90 percent, to $3.9 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry’s decline?
1. ______

BlackBerry failed to offer strong security features for its device.

BlackBerry failed to change its device into one that could perform multiple tasks effectively.

BlackBerry failed to adapt to a groundswell that involved workers bringing mobile devices to work.

BlackBerry failed to produce an efficient emailing system using a keyboard.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : PESTEL Framework
Source : Chapter 03 Test Bank > MC Qu. 35 In 2008, BlackBerry’s market cap peake...

How is a firm’s task environment different from its general environment?
1. ______

Strategic leaders have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.

Strategic leaders have no direct effect over external factors in the task environment; they have some influence over external forces in the general environment.

Strategic leaders have no direct effect over external factors in the task environment; they have influence over all external forces in the general environment.

Strategic leaders have influence over all external factors in the task environment; they have no direct effect over external forces in the general environment.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : PESTEL Framework
Source : Chapter 03 Test Bank > MC Qu. 36 How is a firm’s task environment diffe...

Which of the following is a macroeconomic factor that can affect a firm’s strategy?
1. ______

power of buyers

power of suppliers

levels of employment

threat of substitutes

How do high interest rates affect a business?
1. ______

Firms tend to invest while the rates remain up.

Firms can easily borrow money to finance growth.

Consumer demand slows down.

Business credit is easier to obtain.

________ factors capture a society’s cultures, norms, and values.
1. ______

Political

Sociocultural

Economic

Demographic

Food Shipp Inc. is a food supply company that wants to sell its products directly to consumers through mail order instead of going through supermarkets and other stores. However, supermarket chains want to make this transaction either illegal or more difficult for Food Shipp. To accomplish this, they are using________ to influence the political process.
1. ______

ecological factors

lobbying forces

interest rates

demographic research

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : PESTEL Framework
Source : Chapter 03 Test Bank > MC Qu. 40 Food Shipp Inc. is a food supply company tha...

A firm’s________ is based on creating value for customers (V) while containing the cost (C).
1. ______

strategic position

industry effects

advantage of the marketplace

industry analysis

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir
Topic : Organizational Design and Competitive Advantage
Source : Chapter 03 Test Bank > MC Qu. 41 A firm’s ________ is based on creating...

The primary objective of the________ model is to understand the profit potential of different industries.
1. ______

PESTEL

five forces

strategic group

structure-conduct-performance

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 42 The primary objective of the ________ model...

In the five forces model developed by Michael Porter,________ is not defined narrowly as a firm’s closest competitors but rather more broadly to include other factors in an industry, such as buyers, suppliers, the potential new entry of other firms, and the threat of substitutes.
1. ______

a stakeholder

regulation

competition

a barrier to entry

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 43 In the five forces model developed by Michae...

Which of the following is a primary feature of the five forces model?
1. ______

It is concerned exclusively about the intensity of rivalry among direct competitors.

It takes into account a firm’s internal resources, capabilities, and core competencies.

It helps managers determine the changing speed of an industry or the rate of innovation.

It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 44 Which of the following is a primary feature ...

A firm’s strategic position is likely to be strong when
1. ______

the entry barriers within the industry it operates in are low and the exit barriers are high.

its suppliers and vendors can easily forward-integrate and buyers can backward-integrate.

all the five forces in Porter’s model are strong.

the gap between the value the firm’s product generates and the cost to produce it is large.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 45 A firm’s strategic position is likely ...

During an interview for a chief executive officer position, Fatma’s potential employers ask her, “If you get this job, will you focus more on industry effects or firm effects?” What should her answer be?
1. ______

“Neither. I would focus on unexplained variances. They are the most mysterious effects and the most powerful.”

“Firm effects. I will be able to have the most impact on those.”

“Industry effects. They have the most substantial effect on superior firm performance.”

“Neither. I would focus on business cycle effects. These are the most predictable, so they are worth the most effort.”

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 3 Hard
Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 46 During an interview for a chief executive officer position...

Keeping in mind the five forces in the airline industry, which of the following best explains the difficulty airlines have in generating a profit?
1. ______

Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry.

Suppliers have weak bargaining power because they offer products that are not differentiated.

Entry barriers in the industry are high, resulting in hardly any new airlines popping up.

Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 47 Keeping in mind the five forces in the airli...

Matteo is a management consultant. The leaders of Office Outfitters asks him to evaluate their company, and he finds that the difference between the cost of producing the firm’s products and the value of those products is extremely narrow. What should Matteo suggest that Office Outfitters management do?
1. ______

Find a way to widen the gap between cost and value.

Find a way to pass on as much profit as possible to suppliers and customers.

Shore up the company’s strong position by erecting entry barriers.

Encourage customers to buy complements to their products.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 2 Medium
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 48 Matteo is a management consultant. The...

The internet service provider industry in the country of Wakanda is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the internet service provider industry, the
1. ______

threat of substitutes is most likely high.

threat of new entrants is most likely low.

bargaining power of buyers is most likely low.

entry barriers are most likely nonexistent.

A new company named ZipZip Inc. entered the motorized scooter retail business, which is a fairly consolidated industry. In response, two large incumbent motorized scooter retailers, Vespa and Apollo, lowered the price of their scooters. Also, they spent more money to improve the features on their scooter and on additional marketing. By doing this Vespa and Apollo
1. ______

decreased industry exit barriers.

increased industry exit barriers.

decreased industry profit potential.

increased industry profit potential.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Analyze
Difficulty : 3 Hard
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 50 A new company named ZipZip Inc. entered...

TicToc Corp. is a manufacturer of smart watches that track the wearer’s heart rate and sleep patterns. Which of the following is most likely an implication of new firms entering this industry?
1. ______

The bargaining power of buyers will reduce.

The industry’s overall profit potential and sales will increase.

The rivalry among existing competitors will reduce.

The incumbent firms will spend more to satisfy their existing customers.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 51 TicToc Corp. is a manufacturer of smart watc...

Economies of scale are cost advantages that accrue for firms with
1. ______

high fixed costs.

low employee turnover.

larger output.

high capital risks.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Economies and Diseconomies of Scale
Source : Chapter 03 Test Bank > MC Qu. 52 Economies of scale are cost advantages that ...

Given the structure of the automobile industry, entering the auto manufacturing industry seemed risky. Yet Tesla Motors joined the fray. Rather than attempting to compete head-on with internal combustion engines, Tesla Motors entered the all-electric car segment, a much less crowded niche in the overall car industry. Which of the following is Tesla most hoping to benefit from in this market niche?
1. ______

network effects

economies of scale

customer switching costs

capital requirements

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Analyze
Difficulty : 3 Hard
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Economies and Diseconomies of Scale
Source : Chapter 03 Test Bank > MC Qu. 53 Given the structure of the automobile indust...

In which of the following situations is the power of suppliers high in an industry?
1. ______

Suppliers offer products that are undifferentiated.

Suppliers can credibly threaten to backward integrate into the industry.

Suppliers depend heavily on the industry for their revenues.

The suppliers’ industry is more concentrated than the industry it sells to.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 54 In which of the following situations is the ...

All Signal Inc., a telephone service provider, has a large user base mainly because phone calls and messages between All Signal users are free. When people switch to an All Signals network, their entire network of family and friends is likely to switch to the same network to receive the benefit of free calls and messages. In addition, an existing user who gets a new user to register with All Signal Inc. is given a free wireless connection. This has helped to keep competition away from All Signal. In this scenario, which of the following factors is acting as an entry barrier for All Signal Inc.?
1. ______

economies of scale

high capital requirement

network effects

high fixed costs

Marketo Inc., a marketing firm, replaced its existing data analysis software with new software from another supplier. Since the new software has different features and abilities, Marketo has had to spend $15,000 on training its employees to use it. In this scenario, $15,000 represents Marketo’s
1. ______

opportunity cost.

switching cost.

octroi charge.

excise duty.

In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because
1. ______

entering the aircraft manufacturing industry requires huge capital investments.

there is expected to be a huge return on investment within this industry.

there is no credible threat of retaliation from the incumbents.

entering the aircraft manufacturing industry means violating government policies.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 57 In the aircraft manufacturing industry, at l...

In an industry, the threat of entry is high when
1. ______

capital requirements are low.

expected returns are low.

technological know-how is industry-specific.

switching costs are high.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 58 In an industry, the threat of entry is high ...

How are cumulative learning and experience effects of a company most likely to affect Michael Porter’s five forces?
1. ______

Threat of new entrants will be low.

Bargaining power of suppliers will be high.

Availability of complements will be low.

Threat of substitute products and services will be high.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 59 How are cumulative learning and experience e...

In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry?
1. ______

if the company is able to put up a credible threat of retaliation

if the capital requirements in the industry are high

if the customer switching costs in the industry are high

if the industry has recently become deregulated

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 60 In which of the following situations is a co...

GoGadget Inc., a manufacturer of multiuse tools, supplies its products to Hardware Harry’s, a home improvement retail chain. GoGadget demands that Hardware Harry’s create more shelf space in its stores for its products. However, Hardware Harry’s refuses to do this. Instead, it decides to produce its own range of multiuse tools with its own label “Harry’s Helpful Tools.” In this scenario, Harry’s Hardware has exercised its bargaining power as a buyer through
1. ______

price stability.

retroactive market share.

enhanced technology.

backward integration.

Which of the following features about a buyer indicates that the buyer has high bargaining power?
1. ______

when the buyer cannot credibly threaten to backwardly integrate into the industry

when the buyer cannot purchase specific products from other sellers

when the buyer faces high switching costs

when the buyer purchases inputs that are standardized or undifferentiated commodities

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 62 Which of the following features about a buye...

When automobile magazines face competition from automobile blogs on the web, which of the following forces in Michael Porter’s five forces model primarily gets stronger?
1. ______

the emergence of entry barriers

the bargaining power of suppliers

the availability of complements

the threat of substitutes

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 63 When automobile magazines face competition f...

Which of the following fundamental insights was provided by Porter’s five forces framework from the completion of the Alta Velocidad Española (AVE)?
1. ______

A strong threat of substitutes decreases the rivalry among existing competitors.

All of the five forces must work together to have a meaningful impact.

Any of the five forces on its own, if sufficiently strong, can extract industry profitability.

Competition must be defined more narrowly to remain confined to the industry’s closest competitors.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 64 Which of the following fundamental insights ...

Which of the following factors most contributes to the U.S. automotive industry being characterized by high entry barriers?
1. ______

New auto companies create electric cars powered by simpler motors and gearboxes.

New entrants in the automotive industry expect that incumbents will not or cannot retaliate.

Car manufacturers require large-scale production in order to be cost-competitive.

Few industrial products are as easy to build as cars powered by internal combustion engines.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 65 Which of the following factors most contribu...

When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate?
1. ______

monopoly

oligopoly

perfect competition

monopolistic competition

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > MC Qu. 66 When companies that manufacture shipping con...

Fruit of the Sea is a company that sells lobster, shrimp, and scallops to seafood restaurants. Because the company operates in an industry where many other suppliers sell standardized products, it can most likely
1. ______

easily achieve a temporary competitive advantage.

easily achieve a sustainable competitive advantage.

only achieve competitive parity.

maintain its absolute advantage for long time.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > MC Qu. 67 Fruit of the Sea is a company that sells...

Lucas runs a company that manufactures satellites for commercial and government use. It has few rivals. At the moment, the power of buyers, the power of suppliers, and the threat of substitutes are all low. Based on this information, what can Lucas conclude?
1. ______

The manufacturer is likely to see little profit until the power of buyers improves.

In this scenario, suppliers are likely to create and sell effective substitutes.

This firm is an example of near-perfect competition.

The company is likely to be very profitable as long as the threat to entry is low.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 3 Hard
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > MC Qu. 68 Lucas runs a company that manufactures satell...

Farm to Table Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Farm to Table has aggressively used branding, pricing, and superior customer service to uniquely position itself in the market. As a result, the supermarket chain has been able to differentiate itself from its competitors and sell its products at higher prices. Which of the following industry competitive structures does this scenario best illustrate?
1. ______

perfect competition

monopolistic competition

monopoly

oligopoly

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > MC Qu. 69 Farm to Table Inc. is a supermarket chain. D...

ABC Inc., It’s Electric Inc., and Wares Inc., the three largest firms in the consumer electronics industry, hold close to 85 percent of the industry’s market share. These companies mainly compete against each other by providing unique features in their products rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate?
1. ______

monopolistic competition

oligopoly

monopoly

perfect competition

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Analyze
Difficulty : 3 Hard
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > MC Qu. 70 ABC Inc., It’s Electric Inc., and Ware...

Which of the following statements accurately illustrates the difference between monopolistic competition and an oligopoly?
1. ______

Sellers in an oligopoly provide highly differentiated products; in monopolistic competition, the products sold are undifferentiated or standardized.

In an oligopoly, the number of buyers is large; in monopolistic competition, the number of buyers is limited to three or four.

Firms in an oligopoly have no pricing power; firms in a monopolistically competitive industry have the ability to raise prices.

In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > MC Qu. 71 Which of the following statements accurately...

Three large firms dominate the telecommunication industry of CallsRUs: TeleFone Inc., Cell Comm Corp., and Talk Now Inc. Instead of cutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in?
1. ______

monopoly

perfect competition

monopolistic competition

oligopoly

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > MC Qu. 72 Three large firms dominate the telecommunica...

Jatteland Jets Inc., a firm controlled and managed by the government of Jatteland, is the only company that has the license to manufacture private jets in the country. Which of the following industry competitive structures does this best illustrate?
1. ______

monopolistic competition

monopoly

oligopoly

perfect competition

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > MC Qu. 73 Jatteland Jets Inc., a firm controlled and...

While Sesmic Inc. operates in a monopolistically competitive industry, Energy 4 All Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true?
1. ______

The threat of new entrants will be higher for Sesmic than for Energy 4 All.

Sesmic will have more pricing power than Energy 4 All does.

Sesmic will have more profit potential than Energy 4 All.

The number of buyers will be limited for both Sesmic and Energy 4 All.

Nye Studios is a large production company that controls a major portion of the television industry’s market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Nye Studios is most likely functioning in a(n)________ industry.
1. ______

oligopolistic

monopolistic

perfectly competitive

monopolistically competitive

Mindful Baking is a gourmet bakery chain that differentiates itself from a large number of competitors by providing baked goods for people who have various food allergies. It has some pricing power because it provides differentiated products and, therefore, has some entry barriers in place. In this scenario, Mindful Baking is most likely operating in a(n)
1. ______

oligopoly.

monopoly.

perfectly competitive industry.

monopolistically competitive industry.

Demand for traditional fast-food providers such as McDonald’s, Burger King, and Wendy’s has been on a decline in recent years. Consumers have become more health-conscious, and demand has shifted to alternative restaurants such as Subway, Chick-fil-A, and Chipotle. Attempts by McDonald’s and Wendy’s to steal customers from one another include frequent discounting tactics such as dollar menus. Such competitive actions are indicative of
1. ______

profitability increases.

perfect competition.

natural monopolies.

cutthroat competition.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > MC Qu. 77 Demand for traditional fast-food providers s...

Competitive rivalry based solely on________ is destructive to firms, as it transfers most of the value created in the industry to the customers.
1. ______

price cutting

new product releases

promotional campaigns

product differentiation

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > MC Qu. 78 Competitive rivalry based solely on ________ is...

Due to economic regression in Jabu, the profitability of the large corporation Honey Comb Inc. was poor. An analysis of the company’s business showed that the company could become profitable if it divested a few strategic business units under its banner. From which of the following businesses would Honey Comb Inc. find it most easy to exit?
1. ______

the automobile industry, where the company has contractual obligations with suppliers

the airline business, where the company’s strategic commitments are long term

the e-commerce retail business, where investments on assets are low

the pharmaceutical business, where the company has a large number of fixed costs

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Analyze
Difficulty : 3 Hard
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Organizational Design and Competitive Advantage
Source : Chapter 03 Test Bank > MC Qu. 79 Due to economic regression in Jabu, the prof...

Jalen Corp., a large conglomerate, wants to liquidate its business in certain industries to improve its overall profitability. Which of the following industries would Jalen Corp. find it most difficult to exit?
1. ______

the management consultancy industry, in which the company’s fixed costs are low

the steel industry, in which the company has obligations such as severance pay toward employees

the corporate training industry, in which the company’s commitments are mostly short-term

the e-commerce industry, in which the company has no long-term contractual agreements with suppliers

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Organizational Design and Competitive Advantage
Source : Chapter 03 Test Bank > MC Qu. 80 Jalen Corp., a large conglomerate, wants to ...

Amelja manages product design and development at a toy company. The junior managers who report to her tell her that new complementors for the firm’s products are available. What should Amelja’s reaction be?
1. ______

She should consult lawyers about the possibility of suing for copyright infringement.

If the industry barriers to entry are low, she doesn’t need to do anything.

She needs to find out if her company and other companies can provide the complements.

If the industry barriers to entry are high, she doesn’t need to do anything.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 3 Hard
Learning Objective : 03-05 Describe the strategic role of complements in creating positive-sum co-ope
Topic : Organizational Design and Competitive Advantage
Source : Chapter 03 Test Bank > MC Qu. 81 Amelja manages product design and...

Samsung and Google cooperate as complementors to compete against Apple’s strong position in the mobile device industry, while at the same time Samsung and Google are becoming increasingly competitive with one another. This scenario best illustrates the process of
1. ______

co-opetition.

perfect competition.

monopolization.

conglomeration.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-05 Describe the strategic role of complements in creating positive-sum co-ope
Topic : Organizational Design and Competitive Advantage
Source : Chapter 03 Test Bank > MC Qu. 82 Samsung and Google cooperate as complementor...

Lucia is a management consultant for a snack manufacturer that wants to expand into healthy snacks such as whole-grain cookies and quinoa-based crackers. Which of the following is sensible advice for Lucia to offer her client?
1. ______

“Pinpoint the best time to enter this new market, and then make a yes-or-no decision quickly.”

“Carefully consider the entry choices over time before making a decision.”

“Your best bet is to undercut competitors’ prices and lure them into a price war.”

“Focus on what your company does well rather than trying to expand into untried areas.”

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 3 Hard
Learning Objective : 03-06 Explain the five choices required for market entry.
Topic : Strategy and the Strategic Management Process
Source : Chapter 03 Test Bank > MC Qu. 83 Lucia is a management consultant for...

Silvio is a manager at a software firm. The chief executive officer tells him that the industry as a whole has become increasingly profitable over the past five years. Based on this information, Silvio is most likely to expect
1. ______

increased competition in the future, and therefore he should recommend that the company upgrade its products to slow the entry of rival companies.

increased profitability in the future, and therefore he should recommend that the company remain on its current course.

a leveling off of profitability in the next few years, and therefore he should recommend that the company cooperate with its rivals to stimulate the industry.

decreased competition in the next few years, and therefore he should recommend that the company take advantage of its pricing power.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 03-06 Explain the five choices required for market entry.
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 84 Silvio is a manager at a software firm. The ...

Syed owns Discount Auto Zone, a company that got its start making auto parts for hybrid vehicles, but her firm has had difficulty establishing itself as a maker of parts for the more profitable internal combustion engine. What is most likely contributing to Discount Auto Zone’s problem in this area?
1. ______

Newcomers cannot use existing assets or reconfigure their value chains.

New competitors usually ignore stakeholders who are not stockholders.

It is difficult for outsiders to gauge which stage of the “life cycle” that industry is in.

Entry barriers usually protect the incumbent players in a profitable industry.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 03-06 Explain the five choices required for market entry.
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > MC Qu. 85 Syed owns Discount Auto Zone, a company that ...

Siham is a chef who owns three moderately successful restaurants with innovative menus. Based on what you have read, which of these approaches could help her improve her profits?
1. ______

Change her menus and décor to appeal to economy-minded consumers.

Carefully time the opening of her business and focus on underserved niches.

Use her existing knowledge, equipment, and staff to launch a catering business.

Expand to new locations in economically struggling areas.

Which of the following is a drawback of Porter’s five forces model?
1. ______

The model describes competition narrowly as a firm’s closest competitors.

Strategic leaders cannot determine the changing speed of an industry or the rate of innovation.

It fails to provide a basis for deriving implications for a firm’s strategic position within an industry.

The model fails to consider that threat of substitutes can come from outside a given industry.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > MC Qu. 87 Which of the following is a drawback of Port...

Which of the following statements with regard to industry structures is true?
1. ______

Industry structures are not static but can change over time.

Having a large number of competitors generally equates to higher industry profitability.

A consolidated industry tends to be less profitable than a fragmented one.

Having few but large competitors increases the threat of strong competitive forces such as supplier or buyer power.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping
Topic : Fragmented Industries
Source : Chapter 03 Test Bank > MC Qu. 88 Which of the following statements with regar...

Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines?
1. ______

The overall industry profitability will increase.

The threat of strong competitive forces such as supplier power will increase.

The industry will face excess capacity in the future.

The structure of the industry will change from consolidated to one that is fragmented.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping
Topic : Acquisitions and Mergers
Source : Chapter 03 Test Bank > MC Qu. 89 Which of the following is likely to happen d...

Years ago, the travel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets, and hotels for their customers. However, with the emergence of the internet, smaller travel agencies started mushrooming in the industry and customers started making their own reservations. Which of the following can be inferred from this information?
1. ______

The travel industry changed from a consolidated structure to a fragmented one.

The pricing power of the incumbent firms in the travel industry has increased.

The bargaining power of buyers in the travel industry has decreased.

The structure of the travel industry changed from monopolistic competition to an oligopolistic one.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Analyze
Difficulty : 3 Hard
Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping
Topic : Fragmented Industries
Source : Chapter 03 Test Bank > MC Qu. 90 Years ago, the travel industry was controlle...

Todd is a manager in an industry that has a few large players and that has remained relatively stable over the past few years. He finds out that legislators are proposing new laws to deregulate the industry. If the laws pass, which of these scenarios will Todd most likely face?
1. ______

many new competitors

technological innovation

the end of globalization

across-the-board price increases

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping
Topic : Fragmented Industries
Source : Chapter 03 Test Bank > MC Qu. 91 Todd is a manager in an industry that has a ...

With the emergence of smartphones, users no longer have to carry a separate music player, a video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone is loaded with a variety of applications to satisfy all the customer needs that different industries or products individually satisfied earlier. As a result, the smartphone industry has been posing a threat to a lot of other unrelated industries. What is this phenomenon best known as?
1. ______

industry convergence

backward integration

product differentiation

customer myopia

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping
Topic : Effect of Technology on Industry Structure and Competition
Source : Chapter 03 Test Bank > MC Qu. 92 With the emergence of smartphones, users no ...

A strategic group will typically include
1. ______

firms within the same industry.

customers belonging to a particular socioeconomic class.

firms employing similar number of employees, irrespective of their industries.

employees within a firm earning the same amount in salary.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between
Topic : Strategic Group Models for Understanding Industry Rivals
Source : Chapter 03 Test Bank > MC Qu. 93 A strategic group will typically include

Companies in the same strategic group are________ to each other.
1. ______

strategic allies

direct competitors

merger partners

stakeholders or shareholders

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between
Topic : Strategic Group Models for Understanding Industry Rivals
Source : Chapter 03 Test Bank > MC Qu. 94 Companies in the same strategic group are ________...

Makita, DuPont, Builder’s Square, and Nut’s & Bolts are all hardware stores that compete against each other through everyday low pricing and discounts on bulk purchases. All four stores cater to the needs of highly price-sensitive customers. Thus, together these stores form a________ group.
1. ______

focus

command

strategic

cross-functional

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between
Topic : Strategic Group Models for Understanding Industry Rivals
Source : Chapter 03 Test Bank > MC Qu. 95 Makita, DuPont, Builder’s Square, and ...

Limozine Inc. is a car service firm that provides high-end transportation in a major metropolitan area. It has several competitors that each offer similar services, and based on its current structure, it cannot match or beat those competitors on price. Because of long-term contracts and an increase in the cost of gasoline, it is not possible to reduce expenditures at this time. Which of these strategies should Limozine pursue instead?
1. ______

Create a strategic group through mergers.

Compete based on inter-group rivalry, not intra-group rivalry.

Pursue a differentiated strategy.

Close the business until the cost of gas decreases.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 3 Hard
Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between
Topic : Gaining Competitive Advantage Through Differentiation
Source : Chapter 03 Test Bank > MC Qu. 96 Limozine Inc. is a car service firm that...

Wheat and Steak is a restaurant located inside a five-star hotel. It caters mainly to customers who are concerned about quality dining rather than the prices. In this scenario, which of the following will be a part of Wheat and Steak’s strategic group?
1. ______

a nearby fast-food restaurant

a food kiosk in an adjacent subway station

a premium rooftop restaurant in the same city

a mobile food cart parked opposite to the five-star hotel

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 2 Medium
Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between
Topic : Strategic Group Models for Understanding Industry Rivals
Source : Chapter 03 Test Bank > MC Qu. 97 Wheat and Steak is a restaurant located insi...

Which of the following statements is true about strategic groups?
1. ______

It is not possible to have two different strategic groups within the same industry.

Rivalry within the same strategic group tends to be lower than rivalry between different strategic groups.

Profitability varies between different strategic groups.

Companies within the same strategic group are complementors to each other.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between
Topic : Strategic Group Models for Understanding Industry Rivals
Source : Chapter 03 Test Bank > MC Qu. 98 Which of the following statements is true ab...

Breeze Car Rental follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor?
1. ______

Auto Rent Inc., which follows a cost-increase strategy

Samson Truck Rentals, which follows a differentiation strategy

Quicker Rental Cars, which follows a low-cost strategy

Rent and Buy Corp., which follows a standardization strategy

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > MC Qu. 99 Breeze Car Rental follows a cost-leadership ...

While implementing strategic group mapping for the U.S. domestic airline industry, two strategic groups become apparent: low-cost, point-to-point airlines (Virgin Atlantic, Alaska Airlines, JetBlue, and Southwest Airlines) versus differentiated airlines using a hub-and-spoke system (American, Delta, and United). Which of the following statements is true about these two strategic groups?
1. ______

Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines.

American, United, and Delta Airlines will be affected differently by Porter’s five competitive forces.

Alaska Airlines and Delta Airlines will be affected by the external environment in very similar ways.

Competitive rivalry between Virgin Atlantic and Delta Airlines is likely to be higher than that between American, Delta, and United.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > MC Qu. 100 While implementing strategic group mapping f...

OpenUrToys Inc. is a consulting firm that opens your toys for you and then films your emotional response. They have many clients and are able to generate above average returns relative to their competitors. In this scenario, we would conclude that OpenUrToys Inc. probably has a
1. ______

competitive advantage.

sustainable competitive advantage.

a competitive parity.

a competitive disadvantage.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 2 Medium
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > MC Qu. 101 OpenUrToys Inc. is a consulting firm that op...

LuxWear Inc., an apparel company, recently moved locations to be closer to their main manufacturer in South Carolina. The move required the firm to upgrade its legacy ordering system with its manufactures ordering system, which should facilitate its supply chain to gain future efficiencies and reap future savings. However, the new system costs $75,000 and will require a significant amount of time to train employees. This best represents a significant increase in the company’s
1. ______

switching cost.

strategic positioning.

arbitrage.

power of buyers.

Describe the relationship between growth rates and the employment level.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : PESTEL Framework
Source : Chapter 03 Test Bank > SA Qu. 103 Describe the relationship between growth...

How is a firm’s task environment different from its general environment? Provide examples of both types of environments.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : PESTEL Framework
Source : Chapter 03 Test Bank > SA Qu. 104 How is a firm’s task environment diffe...

How do real interest rates affect a business?

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Analyze
Difficulty : 2 Medium
Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t
Topic : PESTEL Framework
Source : Chapter 03 Test Bank > SA Qu. 105 How do real interest rates affect a business?

What are the two key insights that form the basis of Michael Porter’s seminal five forces model?

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > SA Qu. 106 What are the two key insights that form the ...

Explain how the availability of substitutes affects business strategy. Include an example of a company or an industry in which many substitutes are available and one in which few or none are available.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > SA Qu. 107 Explain how the availability of substitutes ...

In regard to any of the five forces that shape competition, it is important to note that their relative strengths are context-dependent. Elaborate on this statement with the help of a real-world example.

What is a natural monopoly? Provide a real-world example.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > SA Qu. 109 What is a natural monopoly? Provide a real-w...

Why are entry barriers in the U.S. airline industry relatively low?

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Analyze
Difficulty : 2 Medium
Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > SA Qu. 110 Why are entry barriers in the U.S. airline i...

Discuss the sixth force in Porter’s five forces model. Give a real-life example of this sixth force.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 03-05 Describe the strategic role of complements in creating positive-sum co-ope
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > SA Qu. 111 Discuss the sixth force in Porter’s fi...

What are the five stages of the industry life cycle? Name them and provide a real-life example of a company or an industry that has gone through all five stages.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 03-06 Explain the five choices required for market entry.
Topic : Competitive Implications and the Industry Life Cycle
Source : Chapter 03 Test Bank > SA Qu. 112 What are the five stages of the industry lif...

What does it mean when a company leverages existing assets? Include a real-life example in your answer. Your example can be from the reading or from your own experience.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 03-06 Explain the five choices required for market entry.
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > SA Qu. 113 What does it mean when a company leverages e...

What is the drawback of the five forces model? Provide an example that shows this drawback. The example can be from your reading or from your own experience.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > SA Qu. 114 What is the drawback of the five forces mode...

What is meant by switching costs? Explain with the help of a real-world example.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 3 Hard
Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping
Topic : Effect of Technology on Industry Structure and Competition
Source : Chapter 03 Test Bank > SA Qu. 115 What is meant by switching costs? Explain...

How do scholars explain differences in firm performance within the same industry?

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > SA Qu. 116 How do scholars explain differences in firm ...

Defend or refute the statement: “Strategic groups do not impact competitive rivalry within an industry.”

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between
Topic : Analyzing Industry Competition
Source : Chapter 03 Test Bank > SA Qu. 117 Defend or refute the statement: “Strat...

Explain brand loyalty and how it helps incumbent firms maintain their position in the industry. Provide a real-world example.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Evaluate
Difficulty : 3 Hard
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > SA Qu. 118 Explain brand loyalty and how it helps...

Describe the PESTEL framework as a strategic tool and categorize it as either external or internal to the firm.

Describe in detail Porters five forces model and categorize this tool as external or internal to the firm.

Question Details
AACSB : Knowledge Application
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Medium
Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of
Topic : Porter's Five Competitive Forces
Source : Chapter 03 Test Bank > SA Qu. 120 Describe in detail Porters five forces model...

Compare and contrast the roles of industry effects versus firm effects when determining firm performance.

Question Details
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Bloom's : Evaluate
Difficulty : 3 Hard
Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir
Topic : The Roles of Firm Effects and Industry Effects on Firm Performance and Competitive Advantage
Source : Chapter 03 Test Bank > SA Qu. 121 Compare and contrast the roles of industry...

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Chapter 3 External Analysis Strategy

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