Question 1

Mighty Green, a residential lawn chemical manufacturer, is committed to gaining market share in its industry. Mighty Green

Accepted Answer

Mighty Green's commitment to gaining market share implies that they will be aggressively competing with other companies in the industry, potentially raising the level of competitive rivalry. This does not necessarily mean they will embark on an acquisition strategy or that top management is affected by emotional barriers to exit. It is unlikely that they have decided that long-run above-average returns are not important as gaining market share is usually a strategy for achieving long-term profitability.

Question 2

All of the following are implications of strategic groups EXCEPT

Accepted Answer

The implication that the strength of the five forces is the same across strategic groups is not accurate. Strategic groups have different levels of competition and different competitive environments, which means that the strength of the five forces can vary across different groups. The other options, A, C, and D, are all valid implications of strategic groups.

Question 3

Rivalry between Dell, Hewlett-Packard, and other computer manufacturers is intense in part because

Accepted Answer

The rivalry is intense because companies are trying to differentiate their products in a market where differentiation is challenging, leading to competition on other factors like price and service.

Question 4

Firms within strategic groups

Accepted Answer

Firms within strategic groups follow similar strategies across certain dimensions, such as target market, product/service offerings, and distribution channels. This similarity allows for greater comparison and competition among firms within the same group. While there may be some intergroup rivalry, it is often outweighed by the competition within the same group. Strategic groups can exist in a variety of industries and sectors, not just manufacturing.

Question 5

Competitor analysis focuses on

Accepted Answer

Competitor analysis focuses on firms with which the company competes directly. This includes identifying their strengths, weaknesses, strategies, and market share in order to better understand the competitive landscape and formulate effective strategies. Analysis of firms that produce substitute products or potential entrants may also be included, but the primary focus is on direct competitors.

Question 6

The existence of high exit barriers such as ownership of specialized assets (e.g., large aircraft) in the airline industry indicates that

Accepted Answer

High exit barriers, such as ownership of specialized assets, mean that it is difficult for companies to leave the industry and recover their investments. This makes competitive rivalry in the industry more severe, as companies are more likely to stay in the market even if it is unprofitable.

Question 7

A competitor analysis includes all of the following about competitors EXCEPT

Accepted Answer

A competitor analysis typically includes information about a company's current strategy, future objectives, and assumptions. However, traditions are not typically considered a key part of competitor analysis.

Question 8

Circuit Corp. is a manufacturer of a broad range of consumer electronics products. These consumer products are all highly profitable. The firm also manufactures a low-cost component which is an essential differentiating feature for most of their consumer products. The costs to manufacture this component have risen sharply in recent months. Internal cost accounting estimates now indicate the company is breaking even on the manufacture of this component. Which of the following is most likely?

Accepted Answer

The fact that the low-cost component is an essential differentiating feature for most of their consumer products indicates that it has high strategic stakes for the company. Therefore, Circuit Corp. is likely to continue to manufacture the component, even at a loss, to maintain this strategic advantage in the market. Low supplier power or stake does not play a significant role in this decision.

Question 9

Clarissa is a sales representative for a large pharmaceutical firm. While calling on one of her major clients, the purchasing director of a hospital, the client told her confidential information that a sales representative from a competing firm had passed on to him. The information completely contradicts Clarissa's firm's understanding of the competitor's business strategy, and would allow Clarissa's employer to gain many of the competitor's clients.

Accepted Answer

Clarissa has received confidential information from her client, who obtained it through unethical means from a competitor. While the client may have voluntarily shared the information, Clarissa has an ethical responsibility to not use it to her advantage. The ethical dilemma here is respecting the right of competitors to keep certain information confidential. Clarissa should inform her employer of the situation without disclosing the confidential information and seek guidance on how to proceed.

Question 10

According to the five forces model, an unattractive industry would include all of the following characteristics EXCEPT

Accepted Answer

The answer of According to the five forces model, an...

Question 11

Competitor intelligence is

Accepted Answer

Competitor intelligence refers to the data and information that a company gathers to understand its competitors' objectives, strategies, assumptions, and capabilities. It is not necessarily illegal and industrial espionage (option B) is not a legitimate or ethical method of collecting competitor intelligence. Option A is also not a legitimate method of collecting competitor intelligence and is illegal. Option D is incorrect as the Sarbanes-Oxley Act is not related to the gathering of competitor intelligence.

Question 12

Once a firm has determined its competitor's future objectives, current strategy, assumptions, and strengths and weaknesses, its next step is to develop

Accepted Answer

Based on the information gathered about competitors, the firm should develop a response profile, which outlines how it will respond to competitors' actions and strategies. This will help the firm anticipate and prepare for competitive moves and adjust its own strategy accordingly. Options A and B are relevant but come before the development of a response profile. Option D may be necessary but is not the immediate next step after gathering information about competitors.

Question 13

A manufacturer of washing machines has expanded its plant and has created excess capacity, just as the general economy has taken a downturn. The company is likely to

Accepted Answer

Offering rebates and incentives can help the company attract customers and increase sales, which can help offset the excess capacity and lost sales due to the economic downturn. This strategy is more feasible than raising prices, which may make the company less competitive and vulnerable to new entrants and international manufacturers.

Question 14

The competition within each strategic group is

Accepted Answer

The competition within each strategic group is more intense than is the competition between strategic groups because firms within the same strategic group share similar resources, capabilities, and target markets, making them direct competitors. In contrast, firms in different strategic groups have unique characteristics that differentiate them from each other, leading to less direct competition.

Question 15

When rival firms compete aggressively by trying to attract competitors' customers, this might be an indication of

Accepted Answer

The answer of When rival firms compete aggressively by trying...

Question 16

An owner of a stable of racehorses has been earning below-average returns for over 15 years. To a colleague, he expressed his determination to stay in horse racing until he died because "racing is in my blood." This individual is probably still racing horses because of

Accepted Answer

The owner's statement about staying in horse racing until he died indicates that he has a strong emotional connection to the industry, which suggests that high barriers to exit may be a factor keeping him in the business. These barriers could be financial (such as the cost of selling off horses and equipment) or psychological (such as a desire to maintain a certain lifestyle or identity).

Question 17

All the following are ethical sources of data for external analysis EXCEPT

Accepted Answer

A competitor's confidential memos are not an ethical source of data for external analysis because they are private and not intended for public consumption. Taking or using confidential information without permission is considered unethical and could lead to legal consequences. All other options - trade shows, competitor's annual reports, and competitor's help wanted advertisements - are ethical and accessible sources of external data analysis.

Question 18

Which of the following pairs of companies would be least likely to be examined together as part of competitive analysis?

Accepted Answer

IBM and Microsoft operate in different segments of the technology industry, with IBM focusing more on enterprise solutions and Microsoft on software and consumer products, making them less direct competitors compared to the other pairs.

Question 19

According to the five forces model, an attractive industry would have all of the following characteristics EXCEPT

Accepted Answer

According to the five forces model, an attractive industry should have high barriers to entry to limit new competitors from entering the market easily. Therefore, low barriers to entry would not be a characteristic of an attractive industry.  The other options are all characteristics of an attractive industry, including limited bargaining power for suppliers and buyers, moderate rivalry among competitors, and few good product substitutes.

Question 20

Exit barriers to a firm include all of the following EXCEPT

Accepted Answer

Generic assets are assets that can be easily transferred or sold, such as cash or marketable securities, and do not pose a barrier to exiting a market. The other options listed, loyalty to employees, governmental concern about job loss, and restrictive labor agreements, can all create significant barriers to exiting a market.

Quiz 2: The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis