Question 1

Generally, the stronger the competitive forces, the higher the profit potential of an industry.

Accepted Answer

The stronger the competitive forces, the lower the profit potential of an industry as companies will have to compete fiercely and may have to lower their prices to attract customers. This can lead to lower profit margins for businesses in the industry.

Question 2

Switching costs, access to distribution channels, economies of scale, large numbers of competing firms, and slow industry growth are some of the entry barriers that may affect the threat of new entrants to an industry.

Accepted Answer

The answer of Switching costs, access to distribution channels, economies...

Question 3

Typically, fast industry growth increases the vigor of retaliation by existing firms against a new industry rival.

Accepted Answer

The answer of Typically, fast industry growth increases the vigor...

Question 4

Globalfocusing is often used by firms with high levels of international operations who further increase their internationalization by focusing on global niche markets.

Accepted Answer

The answer of Globalfocusing is often used by firms with...

Question 5

Compared with the general environment, the industry environment has a more indirect effect on the firm's strategic competitiveness and ability to earn above-average returns.

Accepted Answer

The industry environment has a direct effect on the firm's strategic competitiveness and ability to earn above-average returns as it includes factors such as competitors, suppliers, customers, and other stakeholders that directly impact a firm's operations and performance.

Question 6

An attractive industry is one that is characterized by high entry barriers, suppliers and buyers with strong bargaining power, low threats from substitute products, and low rivalry among firms.

Accepted Answer

An attractive industry is characterized by low entry barriers, suppliers and buyers with weak bargaining power, low threats from substitute products, and low rivalry among firms. High entry barriers, strong bargaining power of suppliers and buyers, and high threats from substitute products and rivalry among firms make an industry less attractive.

Question 7

The belief that effective health care reform in the United States requires securing coverage for all citizens and lowering the cost of services would be considered part of the sociocultural segment of the external environment.

Accepted Answer

The sociocultural segment of the external environment includes factors such as beliefs, values, and attitudes of society that can impact business operations. The belief that access to healthcare coverage and cost reduction are important for effective healthcare reform is a sociocultural factor as it reflects the values and attitudes of society towards healthcare.

Question 8

The main competitive factor facing newspaper companies is the existence of substitute products and services.

Accepted Answer

With the rise of digital media, people have a wide range of options to consume news and information such as social media, blogs, podcasts, and online news websites. This makes it difficult for traditional newspaper companies to compete for the attention of their audience.

Question 9

The $1.5 billion fine imposed on Intel in 2009 by the European Commission for "breaking European antitrust rules" is an example of a government policy barrier to entry.

Accepted Answer

The imposition of a fine by the European Commission is a government policy barrier to entry, specifically related to the enforcement of antitrust rules. This can make it more difficult for firms to enter the market and compete with established companies that have already faced penalties for anticompetitive behavior.

Question 10

High exit barriers are factors that cause a company to remain in an industry even though the profitability of doing may be questionable.

Accepted Answer

High exit barriers refer to factors such as high fixed costs, specialized assets, government regulations, or investments in R&D that make it difficult or costly for a company to leave an industry. As a result, even if profitability is low or negative, a company may choose to stay in the industry rather than exit.

Question 11

Global warming and energy consumption are aspects of the technological environment segment that firms should monitor.

Accepted Answer

The answer of Global warming and energy consumption are aspects...

Question 12

A high threat of new entrants keeps pricing pressures on existing firms, keeping consumers happy and making the industry attractive and profitable.

Accepted Answer

A high threat of new entrants creates competition and may lead to lower prices, reducing profitability for existing firms. This does not necessarily guarantee consumer happiness or make the industry attractive and profitable.

Question 13

Green restaurant design, sustainable packaging, waste management, and energy efficiency are aspects of the technological segment of the general environment which McDonald's has sought to address.

Accepted Answer

These aspects are part of the ecological or environmental segment, not the technological segment.

Question 14

The Strategic Focus case on efforts by firms to address the physical environment indicated that producing and selling "green" (environmentally friendly) products was not a successful strategy.

Accepted Answer

The Strategic Focus case did not indicate that producing and selling "green" (environmentally friendly) products was not a successful strategy. In fact, it discussed several firms that have successfully implemented such strategies.

Question 15

Target Corporation's statement that it "strives to be a responsible steward of the environment" is an example of addressing concerns in the physical segment of the general environment.

Accepted Answer

Target Corporation's statement about being a responsible steward of the environment pertains to the physical segment of the general environment, which includes concerns related to the natural environment and its resources.

Question 16

Early adopters of new technology often achieve higher market shares and higher returns than later adopters of the technology.

Accepted Answer

Early adopters have a head start in establishing a presence in the market and are able to capitalize on the novelty of the technology to attract customers. As more and more companies adopt the technology, the market becomes saturated and competition increases, making it harder for later adopters to achieve high returns.

Question 17

It is uncommon for a large firm to receive a majority of revenues from outside its home country.

Accepted Answer

It is becoming more common for large firms to receive a majority of their revenues from outside their home country, especially as globalization and international trade continue to grow.

Question 18

Suppliers are powerful when the industry is dominated by a few large companies, no satisfactory substitutes are available, the selling industry is relatively more concentrated than the purchasing industry, and switching costs are high.

Accepted Answer

These are the four factors that give suppliers bargaining power in a given industry. When these conditions are met, suppliers can charge higher prices or set stricter terms, giving them more power over the industry's buyers.

Question 19

The technological segment includes the institutions and activities involved with creating new knowledge and translating that knowledge into new outputs, products, processes, and materials.

Accepted Answer

This statement correctly describes the technological segment.

Question 20

The five forces model expands the arena of competitive analysis beyond direct competitors (i.e., rivals) to include buyers and suppliers who may also be a source of competition.

Accepted Answer

The five forces model considers the impact of five competitive forces, including direct competitors, buyers, suppliers, new entrants, and substitutes. It recognizes that competition may come from various sources beyond just rival firms.

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