Question 1

A useful way of gaining insight into competitors is through industry analysis.

Accepted Answer

Industry analysis involves examining the general industry landscape, including competitors, to identify trends and opportunities. By analyzing the competition, one can gain insights into their strengths, weaknesses, and strategies, which can inform business decision-making.

Question 2

Francisco Martínez is CFO of Comercial Mexicana SA, a retail chain in Mexico. Commenting on Walmart's entry into Mexico, Mr. Martínez notes, "I buy 20,000 plastic toys, and Walmart buys 20 million. Who do you think gets them cheaper?" Which strategic principles are evident in this comment?
A)Walmart's buyer power and cost leadership
B)Walmart's barriers to entry and differentiation
C)Walmart's loose bricks and switching costs
D)Walmart's focused differentiation and supplier power
E)Walmart's discount policies for customers

Accepted Answer

The comment made by Mr. Martinez highlights Walmart's buyer power, which is a strategic principle of cost leadership. Due to its large scale of operations and buying power, Walmart is able to negotiate prices much lower than its competitors including Comercial Mexicana SA.

Question 3

Suppose you are a sales representative for Advanced Micro Devices (AMD)in Japan. You are trying to convince Toshiba to buy your company's superfast Opteron microprocessor for its new laptop computer. Toshiba's representative seems interested, but eventually does not actually place an order. Confidentially, the representative tells you that he is afraid that Intel will withhold shipments of its Pentium 4 if he does business with AMD. Thinking about Intel's role in this scenario, which of the following elements of the five forces model is evident here?
A)barriers to entry
B)bargaining power of suppliers
C)bargaining power of buyers
D)threat of substitute products
E)threat of new entrants

Accepted Answer

A

Question 4

In the tech world, about 90% of the world's nearly one billion PCs use Microsoft's operating systems and 80% use Intel's microprocessors. This represents which aspect of the Porter's five forces model?
A)bargaining power of suppliers
B)bargaining power of buyers
C)threat of substitute products
D)rivalry among competitors
E)threat of new entrants

Accepted Answer

This question is about Porter's five forces model, which includes the bargaining power of suppliers as one of the forces. The fact that nearly all PCs use Microsoft's operating systems and Intel's microprocessors means that these two companies hold significant power over the computer industry, as they are the main suppliers of key components. Therefore, the correct answer is A - bargaining power of suppliers.

Question 5

Which of the following is not identified by Porter as one of the possible types of barriers to entry in an industry?
A)loose bricks
B)switching costs
C)economies of scale
D)product differentiation
E)access to distribution channels

Accepted Answer

Loose bricks are not a type of barrier to entry identified by Porter in his analysis of industry competitiveness. The other choices are all valid types of barriers to entry, such as switching costs, economies of scale, product differentiation, and access to distribution channels.

Question 6

New entrants to an industry bring all of the following except:
A)new capacity.
B)desire to gain market share.
C)desire to gain market position.
D)new approaches to customer needs.
E)decline in per-unit product costs.

Accepted Answer

New entrants to an industry may bring new capacity, desire to gain market share or position, and new approaches to customer needs, but they do not necessarily result in a decline in per-unit product costs. In fact, new entrants may initially face higher costs due to lack of scale and experience.

Question 7

Which of the following is not identified by Porter as one of the five forces that explains competition in an industry?
A)threat of new entrants
B)threat of substitute products or services
C)bargaining power of suppliers
D)bargaining power of competitors
E)the competitive rivalry among current members

Accepted Answer

Porter identifies the five forces as the threat of new entrants, the threat of substitute products or services, the bargaining power of suppliers, the bargaining power of customers, and the competitive rivalry among current members.

Question 8

Apple's success with the iPhone prompted Samsung and others to enter the market. This is an example of the "perfect competition."

Accepted Answer

The answer of Apple's success with the iPhone prompted Samsung...

Question 9

Walmart refuses to stock CDs bearing parental advisory stickers for explicit lyrics or violent imagery. Recording artists who want their recordings available at Walmart have the option of altering lyrics and song titles or deleting offending tracks. Likewise, artists are sometimes asked to change album cover art if Walmart deems it offensive. Considering the elements of the five forces model this is an example of:
A)buyer power.
B)supplier power.
C)threat of new entrants.
D)threat of substitute products.
E)access to distribution channels.

Accepted Answer

The answer of Walmart refuses to stock CDs bearing parental...

Question 10

Several factors can create intense rivalry among firms. These factors include all of the following factors except:
A)firms focus on market share at the expense of others.
B)firms feel pressure due to fixed costs and produce at full capacity.
C)lack of differentiation in products and services.
D)upward pressure on prices and profitability.
E)absence of switching costs for customers.

Accepted Answer

Upward pressure on prices and profitability actually reduces rivalry among firms as it allows them to earn higher profits and reduces the need to compete aggressively on price. The other factors listed, such as focusing on market share, lack of differentiation, and absence of switching costs, can all increase rivalry among firms. Pressure from fixed costs may also increase rivalry as firms may need to compete more aggressively to cover their fixed costs.

Question 11

Factors which determine suppliers' ability to gain leverage over industry firms include all of the following except:
A)large numbers and relatively few in number.
B)suppliers' products or services are important to user firms.
C)suppliers' products or services are highly differentiated.
D)alternative products do not threaten suppliers' business.
E)buyers preferences are highly differentiated.

Accepted Answer

The answer of Factors which determine suppliers' ability to gain...

Question 12

Jaguar produced so few cars that it couldn't get volume discounts from components suppliers. Jaguar managers sometimes could not even determine the "fair" price for a particular part. In terms of Porter's competitive forces framework, Jaguar's strategic disadvantage stemmed from low:
A)buyer power.
B)supplier power.
C)threat of new entrants.
D)threat of substitute products.
E)access to distribution channels.

Accepted Answer

The answer of Jaguar produced so few cars that it...

Question 13

Microsoft's extensive base of Windows operating systems and applications presented a formidable entry barrier for many years.

Accepted Answer

Microsoft's dominance in the operating system and application market made it difficult for competitors to enter the market and gain a foothold.

Question 14

Intel achieved success by using the "Intel Inside" advertising campaign and logo that appears on many brands of PCs. This is an example of a barrier to entry classified as:
A)new capacity.
B)product differentiation.
C)competitor response.
D)new approaches to customer needs.
E)distribution channels.

Accepted Answer

The "Intel Inside" campaign and logo created a strong product differentiation for Intel's microprocessors, making it difficult for competitors to enter the market with a similar brand recognition or reputation. Therefore, it is an example of a barrier to entry classified as product differentiation.

Question 15

Competition in an industry tends to drive rates of return on invested capital up towards the level of "perfect competition."

Accepted Answer

Competition in an industry tends to drive rates of return on invested capital down towards the level of "perfect competition." This is because competition forces companies to lower prices and improve efficiency in order to remain competitive, which reduces profit margins. Only in a perfectly competitive market where all companies have equal access to resources and technology would rates of return be at the lowest possible level.

Question 16

Volkswagen Auto Group of America markets both the VW and Audi nameplates in the United States; in 2014, unit sales for the group totaled nearly 550,000 vehicles. However, the VW brand has been hampered by perceptions of hit-and-miss quality.

Accepted Answer

This statement is true according to the information provided.

Question 17

Porter's four generic strategies for achieving competitive advantage are:
A)price determination, cost leadership, product differentiation, distribution savings.
B)cost leadership, product differentiation, cost challenger, product challenger.
C)price leadership, product differentiation, price challenger, cost differentiation.
D)cost leadership, product differentiation, cost focus, focused differentiation.
E)cost leadership, product differentiation, consumer differentiation, focused differentiation.

Accepted Answer

Porter's four generic strategies for achieving competitive advantage are cost leadership, product differentiation, cost focus, and focused differentiation. Choice D includes all four of these strategies while the other choices only include 2-3 of them. Therefore, D is the best choice.

Question 18

Dell's factories can assemble a complete PC in three minutes. With a build-to-order strategy at the heart of its business model, Dell's sales staff maintains close ties with customers. This approach represents which aspect of the Porter's five forces model?
A)rivalry among competitors
B)bargaining power of buyers
C)threat of substitute products
D)threat of new entrants
E)bargaining power of suppliers

Accepted Answer

The answer of Dell's factories can assemble a complete PC...

Question 19

"Switching costs" are one of the barriers to entry in Porter's five forces model.

Accepted Answer

Switching costs refer to the costs incurred by a customer when switching from one supplier to another. These costs can be monetary, time-related, or based on customer loyalty. High switching costs can make it difficult for new entrants to attract customers away from established competitors, thereby serving as a barrier to entry.

Question 20

According to Porter, the nature of the interaction between potential industry entrants, buyers, substitute products, suppliers, and rival firms determines:
A)whether or not the government will launch an antitrust investigation.
B)the industry's profit potential in terms of long-run return on invested capital.
C)whether a country can generate a balance of payments surplus.
D)whether a country can create a comparative advantage in the production of differentiated products.
E)whether a country can generate income by innovation.

Accepted Answer

According to Porter's Five Forces model, the nature of the interaction between potential industry entrants, buyers, substitute products, suppliers, and rival firms determines the industry's profit potential in terms of long-run return on invested capital. The level of competition among these forces influences the industry's overall profitability. Therefore, option B is the best choice.

Quiz 16: Strategic Elements of Competitive Advantag

A useful way of gaining insight into competitors is through industry analysis.

Francisco Martínez is CFO of Comercial Mexicana SA, a retail chain in Mexico. Commenting on Walmart's entry into Mexico, Mr. Martínez notes, "I buy 20,000 plastic toys, and Walmart buys 20 million. Who do you think gets them cheaper?" Which strategic principles are evident in this comment?

In the tech world, about 90% of the world's nearly one billion PCs use Microsoft's operating systems and 80% use Intel's microprocessors. This represents which aspect of the Porter's five forces model?

Which of the following is not identified by Porter as one of the possible types of barriers to entry in an industry?

New entrants to an industry bring all of the following except:

Which of the following is not identified by Porter as one of the five forces that explains competition in an industry?

Apple's success with the iPhone prompted Samsung and others to enter the market. This is an example of the "perfect competition."

Several factors can create intense rivalry among firms. These factors include all of the following factors except:

Factors which determine suppliers' ability to gain leverage over industry firms include all of the following except:

Jaguar produced so few cars that it couldn't get volume discounts from components suppliers. Jaguar managers sometimes could not even determine the "fair" price for a particular part. In terms of Porter's competitive forces framework, Jaguar's strategic disadvantage stemmed from low:

Microsoft's extensive base of Windows operating systems and applications presented a formidable entry barrier for many years.

Intel achieved success by using the "Intel Inside" advertising campaign and logo that appears on many brands of PCs. This is an example of a barrier to entry classified as:

Competition in an industry tends to drive rates of return on invested capital up towards the level of "perfect competition."

Volkswagen Auto Group of America markets both the VW and Audi nameplates in the United States; in 2014, unit sales for the group totaled nearly 550,000 vehicles. However, the VW brand has been hampered by perceptions of hit-and-miss quality.

Porter's four generic strategies for achieving competitive advantage are:

Dell's factories can assemble a complete PC in three minutes. With a build-to-order strategy at the heart of its business model, Dell's sales staff maintains close ties with customers. This approach represents which aspect of the Porter's five forces model?

"Switching costs" are one of the barriers to entry in Porter's five forces model.

According to Porter, the nature of the interaction between potential industry entrants, buyers, substitute products, suppliers, and rival firms determines: