Question 1

An industry in which a large number of small or medium-sized firms operate and no small set of firms has dominant market share or creates dominant technologies is known as a(n) ________ industry.

Accepted Answer

A fragmented industry is characterized by a large number of small or medium-sized firms with no dominant market share or technology. This type of industry may have lower barriers to entry, leading to greater competition and a more diverse range of products and services.

Question 2

In general, first-mover advantages can arise from any of these sources except

Accepted Answer

First-mover advantages typically come from being the first to move in a market, which can lead to technological leadership, preemption of strategically valuable assets, and the creation of customer switching costs. Using an imitative strategy to introduce improved versions of competitors' new products is not a first-mover advantage, as the advantage would then lie with the competitor who brings the initial product to market.

Question 3

Buyers tend to have less power when

Accepted Answer

When the supplies purchased are an insignificant portion of the costs of their final products, buyers have less leverage to negotiate prices or terms, reducing their power.

Question 4

Mature industries are characterized by

Accepted Answer

Mature industries are those that have reached their peak and are no longer growing rapidly. As a result, the pace of innovation slows down and there are fewer new products or services being introduced. The other options, such as an increase in demand or production capacity, are indicative of industries that are still in their growth phases, not mature ones. The amount of international competition can vary depending on the industry, so it is not a defining characteristic of mature industries.

Question 5

A consolidation strategy is a good option in what type of industry?

Accepted Answer

A consolidation strategy is often used in fragmented industries to combine smaller companies into larger entities, reducing competition and increasing market share.

Question 6

________ costs exist when customers make investments in order to use a firm's particular products or services.

Accepted Answer

Customer-switching costs are costs that customers incur when they have to make investments in order to use a firm's particular products or services. This can include things like switching to a new software system or retraining employees to use a new product. The other options listed (first-mover-switching, technological leadership-switching, process-switching) are not relevant to this definition.

Question 7

________ are advantages that come to firms that make important strategic and technological decisions early in the development of an industry.

Accepted Answer

First-mover advantages refer to the benefits that a firm gains by being the first to introduce a new product, service, or technology in the market. These advantages can include brand recognition, customer loyalty, and economies of scale, among others. By making important strategic and technological decisions early in the development of the industry, firms can position themselves to be the first movers and reap the benefits of these advantages.

Question 8

The major opportunity facing firms in fragmented industries is

Accepted Answer

Fragmented industries have many small players with small market shares. This often leads to inefficiencies due to duplication of efforts. Implementing strategies that consolidate the industry into a smaller number of firms through mergers and acquisitions can lead to economies of scale, cost savings, and increased competitiveness. Therefore, the major opportunity facing firms in fragmented industries is the implementation of strategies that began to consolidate the industry into a smaller number of firms.

Question 9

Which of the following attributes makes suppliers a stronger threat?

Accepted Answer

If the supplier's industry is dominated by a small number of firms, then those firms have significant bargaining power over the buyer as they control the supply of the product or service. This makes them a stronger threat compared to other attributes listed.

Question 10

If your customers value your products more when they have your product and another firm's product rather than when they have your product alone, the other firm is considered to be a

Accepted Answer

A complementor is a firm whose products or services enhance the value of another firm's products or services. In this case, if customers value a firm's products more when they have the firm's product and another firm's product, then the other firm is likely providing a complementary product. This emphasizes the notion of complementarities, where two firms collaboratively package their offerings to create more value for their customers.

Question 11

Firms in a declining industry that engage in a long, systematic phased withdrawal from the industry, extracting as much value as possible during the withdrawal period, are following a(n) ________ strategy.

Accepted Answer

The strategy mentioned in the question, of a systematic phased withdrawal from a declining industry, while extracting as much value as possible during the period, is an example of a harvest strategy. This strategy involves reducing investment in the declining industry, minimizing costs, and maximizing short-term cash flow and profits. The other options - niche, expansion, and divestment - do not match the described strategy.

Question 12

Which of the following statements regarding substitutes is accurate?

Accepted Answer

Substitutes can replace an industry's products or services if they offer a better price or performance, thus posing a significant threat to the industry.

Question 13

Which of the following is the best example of forward vertical integration?

Accepted Answer

Forward vertical integration occurs when a company expands its operations into the next stage of production or distribution, such as a car company opening its own dealerships to sell its products directly to customers.

Question 14

________ are resources required to successfully compete in an industry.

Accepted Answer

Strategically valuable assets are resources that give a company a competitive advantage. These assets can include brand reputation, patents, and unique capabilities that are difficult for competitors to imitate. Technological and process innovations can contribute to this advantage, but they are means to an end rather than the resources themselves. Product innovations may also be helpful, but they are not a necessary requirement for success in an industry.

Question 15

Hickory Divine is one of the leading manufacturers in the hardwood furniture industry. Hickory Divine has many small competitors, none of which controls a significant portion of the industry. Hickory, like most of the furniture manufacturers, sells its products to a broad variety of small furniture stores throughout the country, none of which represents a large percentage of Hickory's sales. When purchasing the products it uses for manufacturing its furniture, Hickory is able to choose from many suppliers since the wood it uses is an undifferentiated commodity, and Hickory is able to easily switch to any supplier that has the best price and delivery times. While growth in the hardwood furniture industry has historically been in the double digits, the industry growth rate has slowed considerably into the single digits, to approximately 5% in recent years; consumers have been purchasing less expensive furniture made of composite wood that is considerably less expensive than hardwood furniture but that looks and functions very similarly once it is painted.
-Based on the above description, the hardwood furniture industry can best be described as a(n) ________ industry.

Accepted Answer

The passage states that there are many small competitors in the hardwood furniture industry, none of which controls a significant portion of the industry. This indicates that the industry is fragmented. The passage also states that industry growth has slowed considerably in recent years due to consumers purchasing less expensive furniture made of composite wood. This suggests that the industry is declining. However, since the question asks for the best description, the answer is fragmented.

Question 16

Overall, the average level of performance in an industry is likely to be highest when

Accepted Answer

When the threat level of all five forces is low, it indicates a favorable environment for companies to perform well, as there is less competitive pressure and fewer challenges from suppliers, buyers, substitutes, and new entrants.

Question 17

The advantages that come to firms that make important strategic and technological decisions early in the development of an industry are known as ________ advantages.

Accepted Answer

First-mover advantages refer to the benefits that firms can gain by being the first to enter a new market, develop a new technology, or introduce a new product. These advantages can include brand recognition, customer loyalty, economies of scale, and the ability to establish dominant positions in the market. As such, they can be extremely valuable to firms that are able to position themselves as industry leaders early on.

Question 18

________ make a wide variety of raw materials, labor and other critical assets available to firms.

Accepted Answer

Suppliers provide firms with the necessary raw materials, labor, and other critical assets needed for production and operations.

Question 19

The most promising opportunity for a firm in a declining industry is to

Accepted Answer

The answer of The most promising opportunity for a firm...

Question 20

Industries in which a large number of small or medium-sized firms operate and no small set of firms has dominant market share or creates dominant technologies are called ________ industries.

Accepted Answer

The term "fragmented" accurately describes industries with many small or medium-sized firms, none of which hold dominant market share or create dominant technologies.

Quiz 2: Evaluating a Firms External Environment