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

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

One of the key factors in the success of Walmart is the buying power gained by dealing directly with manufacturers.

Question 9

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

Question 10

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

Question 11

The demand for steel worldwide has surged in recent years,as have U.S.producers' profits.

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

Intense rivalry lowers prices and raises costs.

Question 17

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

Question 18

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

Question 19

Substitute products are not a threat if a company is the market leader.

Question 20

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

Question 21

The punctuated equilibrium view can also be described as a freezing and unfreezing process in an industry's life cycle.

Question 22

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

Question 23

Which of the following is not a component of Porter's five forces model?

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

Question 24

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

Question 25

Successful innovation can transform the nature of industry competition.

Question 26

Which of the following is not a barrier to entry?

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

Question 27

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

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

Question 28

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

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

Question 29

An industry can be defined as a group of

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

Question 30

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

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

Question 31

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

Question 32

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

Question 33

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

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

Question 34

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

Question 35

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

Question 36

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

Question 37

A group of firms all make writing implements¾pens,pencils,and markers.This group should be referred to as a(n)

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

Question 38

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

Question 39

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

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

Question 40

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

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

Question 41

The competitive force of substitute products tends to be stronger when

A)buyers view the prices of substitutes as too high.
B)the costs that buyers face in switching over to substitutes are low.
C)the quality and performance of substitutes are relatively low.
D)substitutes do not embody many characteristics that are similar to those of products already serving the market.
E)none of these choices.

Question 42

The risk of a price war is greatest in which of the following circumstances?

A)A high-growth industry
B)An industry characterized by falling demand,high exit barriers,and excess productive capacity
C)An industry characterized by a commodity-type product,strong demand,and low exit barriers
D)A mature industry during an economic upturn
E)An industry characterized by tacit price agreements

Question 43

Mobility barriers

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

Question 44

Which of the following is currently an embryonic industry?

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

Question 45

Historically,government reputation has

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

Question 46

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

A)The number and size distribution of companies in the industry
B)Demand conditions
C)The cost structure of firms in an industry
D)Exit barriers
E)The power of buyers

Question 47

Economies of scale may arise from

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

Question 48

Rivalry refers to

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

Question 49

Sales of complementors' products tend to

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

Question 50

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

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

Question 51

A market segment is a group of

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

Question 52

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

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

Question 53

In which of the following arenas would Walmart's Sam's Club stores compete against their closest,most intense rivals?

A)The retailing sector
B)The discount retailing industry
C)The club-store discount retailing strategic group
D)Sam's Club stores face no close,intense rivals.
E)Sam's Club stores face close,intense rivals in every arena in which they compete.

Question 54

The extent of rivalry among established companies is lowest when

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

Question 55

Members of a strategic group

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

Question 56

Switching costs may arise when

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

Question 57

Common exit barriers include

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

Question 58

The competitive structure of an industry refers to the

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

Question 59

Brand loyalty may be created by

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

Question 60

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

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

Question 61

Suppliers in an industry are most powerful when

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

Question 62

In growth industries,

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

Question 63

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

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

Question 64

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

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

Question 65

Growth industries

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

Question 66

The industry life cycle model includes which of the following stages?

A)Growth
B)Shakeout
C)Maturity
D)Decline
E)All of these choices

Question 67

As an industry enters the shakeout stage,

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

Question 68

Which of the following is not a force within the macroenvironment?

A)Level of interest rates
B)Currency exchange rates
C)Inflation
D)Deflation
E)Rates of social change

Question 69

An industry's buyers have high bargaining power when

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

Question 70

The level of industry demand

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

Question 71

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

Question 72

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

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

Question 73

When an industry enters the mature stage,

A)the market is totally saturated.
B)demand is limited to replacement demand.
C)growth is low or zero.
D)what growth there is in the industry comes from population expansion.
E)all of these choices

Question 74

The Internet is an example of a

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

Question 75

Entry barriers in the embryonic stage are frequently based on

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

Question 76

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

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

Question 77

All of the companies in a strategic group are

A)pursuing different business models.
B)of similar size.
C)pursuing a similar business model.
D)all of these choices.
E)none of these choices

Question 78

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

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

Question 79

Eventually most industries enter a decline stage where

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

Question 80

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

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