Question 1

All of the following are forces that create high rivalry within an industry EXCEPT:

Accepted Answer

Fast industry growth typically reduces rivalry because companies can grow without taking market share from each other.

Question 2

In a particular industry, products need a certain level of maintenance.Customers can take the product to service companies to provide that maintenance.However, a number of manufacturers offer reasonably priced maintenance packages as well.This level of service after the sale indicates what about the industry?

Accepted Answer

The answer of In a particular industry, products need a...

Question 3

Customer loyalty programs such as airline frequent flyer miles are an attempt to:

Accepted Answer

Customer loyalty programs like frequent flyer miles are designed to increase customers' switching costs by providing incentives for them to remain loyal to a particular brand or service.

Question 4

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

Accepted Answer

Aggressive competition to attract competitors' customers often occurs in industries with slow growth, as firms seek to increase their market share in a stagnant market.

Question 5

Golden Lotus, an exercise club targeting healthy individuals over 50, is located in a fast-growing city in the Southwest.Which of the following factors that may have an effect on the success of Golden Lotus is the MOST directly controllable by the company?

Accepted Answer

The power of the customers/buyers is the most directly controllable factor by the company, as Golden Lotus can influence this through pricing strategies, customer service, and marketing efforts to attract and retain customers.

Question 6

The highest amount a firm can charge for its products is MOST directly affected by:

Accepted Answer

The cost of substitute products directly affects the maximum price a firm can charge, as customers may switch to substitutes if the price is too high.

Question 7

Consolidation among fuel providers serving airport facilities is viewed in the five forces model of competition as a(n):

Accepted Answer

Consolidation among fuel providers increases the bargaining power of suppliers because fewer suppliers mean less competition among them, allowing them to exert more influence over prices and terms.

Question 8

The aircraft industry has long been dominated by two large aircraft manufacturers, Boeing and Airbus.The demand for major aircraft is low, and Boeing and Airbus aggressively compete for orders from airlines.Which of the following effects will these conditions have on the domestic airline industry?

Accepted Answer

The competition between Boeing and Airbus decreases their supplier power, making the airline industry more attractive as airlines can negotiate better terms.

Question 9

Media content has moved from paper, tape, and film to a digital world based on Internet technology.From the perspective of the five forces model, which of the following forces is MOST relevant here?

Accepted Answer

The shift from traditional media to digital media represents a substitution of products, making substitutes the most relevant force in this context.

Question 10

A certain marble quarry provides a unique type of marble that is richly colored and strikingly veined.It has been used for churches and public buildings throughout the world.The architect of a new headquarters for a prestigious Fortune 500 firm has specified the use of this marble, and this marble only, for the project.Which of the following statements is MOST likely to be true?

Accepted Answer

The cost of the marble will likely be expensive due to the supplier's bargaining power, as the marble is unique and specified exclusively for the project, limiting alternatives.

Question 11

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

Accepted Answer

By committing to gaining market share, Mighty Green is likely to increase competitive rivalry as it seeks to outperform its competitors and capture a larger portion of the market.

Question 12

DWK Foods has developed a line of cookies and candies sweetened exclusively with organic honey.Although DWK is selling some of the products over the Internet, in order to gain economies of scale, the products must be sold in retail outlets as well.The main barrier to entry that DWK is likely to encounter here is:

Accepted Answer

Access to distribution channels is a common barrier to entry for new products trying to enter retail markets, as existing competitors may have established relationships with retailers.

Question 13

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

Accepted Answer

During an economic downturn, with excess capacity, the company is likely to offer rebates and incentives to stimulate demand and increase sales, rather than raising prices or being vulnerable to new entrants.

Question 14

The threat from substitutes is high when:

Accepted Answer

The threat from substitutes is high when the substitute product's price is lower than the industry's product price, making it more attractive to consumers.

Question 15

Suppliers are powerful when:

Accepted Answer

Suppliers are powerful when they offer a credible threat of forward integration, as this gives them the ability to enter the market and compete with their customers.

Question 16

As customers come to believe that a firm's product is unique, this allows the firm to:

Accepted Answer

When customers perceive a product as unique, they are more likely to become loyal, as they see the product as offering something they cannot find elsewhere.

Question 17

Blood banks are highly dependent on donors.In the terminology of industry analysis, which of the following statements about donors is accurate?

Accepted Answer

Blood donors are considered suppliers because they provide the critical input (blood) to blood banks. They are powerful due to the essential nature of their contribution, as blood is a vital and irreplaceable resource for blood banks.

Question 18

For a restaurant business dependent on drive-thru customers, the major cost disadvantage independent of scale would be if:

Accepted Answer

Favorable locations are crucial for drive-thru restaurants to attract customers. If such locations are not available, it poses a significant disadvantage regardless of the restaurant's scale.

Question 19

Buyers are powerful when:

Accepted Answer

Buyers are powerful when switching costs are low because they can easily change suppliers, increasing their bargaining power.

Question 20

A family just changed to a different mobile phone and data service provider.They now need take some time to transfer their content to new phones and learn the features of the new service.This is an example of a:

Accepted Answer

Switching costs are the costs that customers incur when changing from one supplier to another, including time and effort to transfer content and learn new features.

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