Deck 2: Managing Industry Competition

Question 1

By finding ways to reduce the per-unit cost of its products, a firm enjoys non-scale-based advantages that provide greater profitability.

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

The three generic strategies include cost leadership, differentiation, and profitability.

Question 5

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 6

It is easier to establish dominance and market share in an industry that provides big-ticket items.

Question 7

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

Question 8

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

Question 9

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

Question 10

Industrial organization economics is a branch of economics that seeks to better understand how firms within an industry may be both centralized and regulated.

Question 11

Intel held numerous patents for semiconductors, allowing them to hold a significant share of the world's market. These patents represented a significant barrier to entry for other firms wanting to enter the lucrative semiconductor business.

Question 12

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

Question 13

In order for firms within an industry to be more likely to enjoy higher profitability, product differentiation should be high.

Question 14

Substantial switching costs reduce the threat of potential entry.

Question 15

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

Question 16

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

Question 17

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 18

The primary contribution of IO economics is the structure-conduct-performance model.

Question 19

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

Question 20

Mass markets tend to be characterized by low profit margins.

Question 21

An off-the-rack wedding dress would not be considered a highly differentiated product.

Question 22

When demand is uncertain, integration increases strategic flexibility.

Question 23

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

Question 24

For a savvy strategist, the five forces framework provides for a strong beginning, middle, and end of strategic analysis.

Question 25

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

Question 26

The traditional view recommends avoidance of integration.

Question 27

Once a firm becomes a cost leader, it no longer has to search as diligently for lower costs.

Question 28

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

Question 29

Strategic alliances are on the decline.

Question 30

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

Question 31

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

Question 32

In an industry-based view, firms should strive for integration and avoid outsourcing.

Question 33

Cost leaders are significantly and negatively affected when strong suppliers decrease their prices.

Question 34

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

Question 35

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

Question 36

Company Allgood is positions its products to target "average" customers for the mass market; Allgood is mostly likely the cost leader among market participants.

Question 37

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

Question 38

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

Question 39

In an industry-based view, not every firm within an industry competes against each other.

Question 40

The five forces model overemphasizes threats and downplays opportunities.

Question 41

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 can be added in small increments.
D) Slow industry growth or decline in demand.

Question 42

Porter's three generic choices address how a firm is to make strategic choices in order to:

A)​Become an incumbent firm with excess capacity.
B)​Allow buyers to enhance their bargaining power.
C) ​Strengthen the focal firm's position relative to the five competitive forces.
D) ​Establish structures that increase the costs of entry and reduce the scale of production.

Question 43

Which of the following firms exhibits a differentiation strategy?

A)​Company A constantly searches for lower costs in providing its products.
B)​Company B takes a high-volume low-margin approach in targeting customers for its products.
C) ​Company C targets customers who are willing to pay a premium price.
D) ​Company D targets the average customer.

Question 44

Which of the following is true of the industrial organization (IO) economics model?

A)Industry structure determines firm performance, which determines strategy and conduct.
B)Original goal - help regulators set policy to minimize the ability of firms to earn excess profits.
C) Strategists avoid the IO model to try to earn above-average returns (excess profits).
D) All of the above are true.

Question 45

Which of the following firms exhibits a cost leadership strategy?

A)​Company A's products meet customers' needs in several niche markets.
B)​Company B takes a low-volume high-margin approach in targeting customers for its products.
C) ​Company C targets customers who are willing to pay a premium price.
D) ​Company D targets the average customer.

Question 46

Economist ________________ defined perfect competition as a situation in which price is set by the "market," all firms are price takers, and entries and exits are relatively easy.

A)​Michael Porter
B)​John Maynard Keynes
C) ​Adam Smith
D) ​Richard Branson

Question 47

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.

Question 48

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?

Question 49

For firms following a cost leadership strategy, their goal is a:

A)​High-volume how-margin approach.
B)​High-volume high-margin approach.
C) ​Low-volume high-margin approach.
D) ​Low-volume low-margin approach.

Question 50

Which is generally NOT true of differentiation?

A)Inability to pass on suppliers' price increases to buyers.
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.

Question 51

Porter's three generic strategies are:

A)​Industry-based view, resource-based view, and institution-based view.
B)​Cost leadership, differentiation, and focus.
C) ​Rivalry among competitors, threat of potential entry, and threat of substitutes.
D) ​Potential profitability, assessment of opportunities, and challenge of threats.

Question 52

Competitors that typically compete most vigorously with each other:

A)​Are of different sizes and with similar market influence.
B)​Have highly differentiated product offerings.
C) ​Offer big-ticket items to their market.
D) ​Are of similar size and offer similar products.

Question 53

Which of the following firms exhibits a focus strategy?

A)​Company A's products meet customers' needs in a particular niche market.
B)​Company B takes a high-volume low-margin approach in targeting customers for its products.
C) ​Company C targets customers who are looking for the lowest price.
D) ​Company D targets the average customer.

Question 54

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.

Question 55

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

A)​The intensity of collaboration among rivals.
B)​The threat of potential entry.
C) ​The bargaining power of buyers.
D) ​The threat of substitutes.

Question 56

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.

Question 57

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?

Question 58

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.

Question 59

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.

Question 60

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.

Question 61

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) Backward or forward integration as a way to defend against the power of suppliers and buyers.

Question 62

Every firm within a broadly defined industry:

A)​Is uniformly influenced by advances in technology.
B)​Succeeds best by following a strategy that combines cost leadership and differentiation.
C) ​Competes against each other.
D) ​Can usually be placed in one of several strategic groups within that industry.

Question 63

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.

Question 64

The ultra-luxury automobile market is characterized by:

A)​A great deal of 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.

Question 65

Which of the following is true about firms that pursue both strategies of cost leadership and differentiation?

A)​They become "stuck in the middle" with resulting poor performance.
B)​They cannot be successful in both strategies.
C) ​Flexible manufacturing enables a firm to produce differentiated products at low costs in many cases.
D) ​Mass customization is the inevitable result of combining strategies.

Question 66

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) All of the above.

Question 67

Which is a reason for choosing outsourcing as opposed to integration?

A)More expensive.
B)Strategic flexibility is enhanced.
C) Those inside the firm are often more competitive.
D) The activity is crucial to the core business.

Question 68

One controversial issue with strategic groups is:

A)Stability of strategic groups.
B)Lack of mobility barriers between strategic groups.
C) How easy it is to obtain large quantities of objective data.
D) All of the above are controversial issues.

Question 69

The main goal of a differentiation strategy is to:

A)​Target the average customers for mass market.
B)​Identify the attributes and deliver products that attract customers willing to pay a premium price.
C) ​Relentlessly cut costs in producing the products customers desire.
D) ​All of the above.

Question 70

Activities that are crucial to a firm's core business:​

A)​Should be outsourced to increase a firm's strategic flexibility.
B)​Should be managed through a keiretsu structure.
C) ​Should not be outsourced.
D) ​Should always be outsourced.

Question 71

Which of the following is characteristic of a savvy strategist?

A)​Focusing on the five forces as a way to understand an industry inside and out.
B)​Understanding that structurally unattractive industries do not allow for firm success.
C) ​Using the five forces framework as the beginning, middle, and end of any good strategic analysis.
D) ​Realizing that industry is destiny.

Question 72

Related and supporting industries are called _________ and they are an additional force that can impact the competitiveness of an industry.

A)Complementors
B)Supporters
C) Customizers
D) Flexible manufacturing

Question 73

Which of the following questions is NOT essential to determining the scope of a firm?

A)​Can opportunities be leveraged by outsourcing?
B)​Have we optimized industry as destiny?
C) ​Are we focused on core activities?
D) ​Will collaboration with competitors be beneficial?

Question 74

Strategists using the industry-based view need to:

A)​See it as a powerful strategic tool.
B)​Arrive at an uncritical acceptance of the traditional view.
C) ​Identify their firm within an industry in a boundary-less way.
D) ​Avoid strategic alliances.

Question 75

One of the drawbacks of the differentiation strategy is that:

A)​Customers are unwilling to pay a premium price for differentiation.
B)​It is difficult to sustain the basis of differentiation in the long run.
C) ​The firm is forced to continuously search for lower costs.
D) ​The bargaining power of suppliers presents a significant problem to differentiators.

Question 76

A complementor that sells products that add value to a focal industry's products:

A)​Does not affect the competitiveness of an industry.
B)​Is almost always high-tech in nature.
C) ​Can act as a sixth force in the five forces framework.
D) ​None of the above.

Question 77

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) Supplier relationships in Japan tend to be ineffective.

Question 78

Which of the following statements about strategic groups is most accurate?

A)​Firms within an industry can easily move from one strategic group to another.
B)​Members of strategic groups are often subject to mobility barriers.
C) ​An abundance of objective data within industries prevents classification of strategic groups.
D) ​Strategic groups greatly complicate the analysis of a given industry.

Question 79

A niche market that is the goal of a focus strategy may have all of the following characteristics EXCEPT:

A)​It is defined by a specific geographical area.
B)​It is defined by a specific geographical area.
C) ​It is define by product line.
D) ​It is defined by imitation of competitors.

Question 80

Which is a reason for choosing integration as opposed to outsourcing?

A)Decreased expense.
B)Strategic flexibility is enhanced.
C) Those within the firm are often more competitive.
D) The activity is not crucial to the core business.