Question 1

Analysis of competitive advantage in mature industries shows that:

Accepted Answer

In mature industries, there is usually little differentiation between competitors in terms of product or service offerings. Therefore, the opportunities for competitive advantage have shifted from differentiation-related factors to cost-related factors, such as operational efficiency and economies of scale. While competition may increase, cases of unfair behavior are not necessarily a characteristic of all mature industries. Therefore, choices A, C, and D are incorrect.

Question 2

Maturity implies that an industry:

Accepted Answer

Maturity means that the industry has reached a stage where it has already experienced significant growth and expansion. It still has opportunities for growth and profit, but they may be more limited than in the earlier stages of the industry's development. Therefore, option B "Still has some opportunities" is the best choice. Option A is incorrect because maturity does not necessarily mean that the industry is at its end. Option C is incorrect because maturity does not imply low returns, just that they may be more stable or predictable. Option D is incorrect because incumbents may continue to operate and compete in a mature industry.

Question 3

For mature industries three cost drivers are especially critical:

Accepted Answer

For mature industries, cost efficiency is paramount. Low-cost inputs and good efficiency in using all inputs are key drivers of cost competitiveness. Additionally, economies of scale allow for spreading fixed costs over a larger base of output, leading to lower per-unit costs. Low overheads further increase cost efficiency. R&D expenditures and economies of scope are not as critical for cost competitiveness in mature industries.

Question 4

Differentiation exists in the early stages of the industry life cycle, but is not an option in a mature industry

Accepted Answer

Differentiation is possible in both early and mature stages of the industry life cycle. In fact, differentiation can help firms in mature industries stand out from their competitors and maintain market share.

Question 5

Filing patents on new products or processes is surprisingly found quite often in mature industries

Accepted Answer

Filing patents on new products or processes is common in mature industries because companies are looking for ways to differentiate themselves and stay ahead of their competitors. They may also be looking to protect their intellectual property and prevent others from copying their innovations. Additionally, new technologies and advancements may be discovered or developed in mature industries, leading to the need for patent protection.

Question 6

Once product and process innovation have slowed, a third type of innovation - game innovation - can change the game and open up competitive advantage possibilities

Accepted Answer

The answer of Once product and process innovation have slowed,...

Question 7

Industries in decline exhibit attributes such as decline in demand, aggressive price competition, and lack of technical change

Accepted Answer

Industries that are declining typically experience a decrease in demand for their products, fierce pricing competition due to oversupply, and a lack of innovation and technical advances that could help revitalize the industry.

Question 8

Warren Buffet distinguished mature businesses from young franchises by defining a "business" as:

Accepted Answer

Warren Buffet defined a "business" as an entity where poor management will soon lead to a firm's demise. This applies to both mature businesses and young franchises. Additionally, he emphasized the importance of good management in sustaining a business, regardless of its age or status.

Question 9

Why do firms in mature industries tend to have higher gearing ratios?

Accepted Answer

Mature firms have significant assets and a long financial track record, which make them less risky to lend to. Therefore, they can obtain more debt to lower their overall cost of capital than firms in growth industries. Option A and C are not correct as they do not address the reasons for higher gearing ratios in mature industries.

Question 10

In mature industries, the diffusion of process technology leads to:

Accepted Answer

As process technology becomes more widely diffused, it becomes more difficult for any one firm to maintain a cost advantage based on technology alone, leading to increasing competition and potentially lower profit margins. While there may still be some differentiation among firms based on other factors, such as branding or customer service, the technological playing field becomes more level, making it harder for firms to stand out solely on the basis of their technology. The emergence of new standards may be a possibility as a result of this diffusion, but it is not a guaranteed outcome. Attacks by rivals targeting specific niches may also occur, but it is not a direct result of process technology diffusion. Perfect competition is a theoretical model that is unlikely to be fully realized in any market.

Question 11

The experience economy refers to a model where firms try to involve their customers emotionally, intellectually, and even spiritually

Accepted Answer

This statement correctly defines the experience economy as a model that focuses on engaging customers on multiple levels, including emotional, intellectual, and spiritual, in order to create memorable and valuable experiences.

Question 12

Mature industries can require drastic intervention to reduce costs because:

Accepted Answer

Mature industries tend to have longstanding practices and traditions that can lead to inefficiencies and resistance to change. Therefore, drastic intervention may be necessary to overcome these ingrained habits and reduce costs. Option A is not necessarily true for all mature industries, and option B is not relevant to the question. Option C is the opposite of the correct answer - cost efficiencies, not inefficiencies, tend to be institutionalized in mature industries.

Question 13

One way to make a profit in a declining industry is to show industry leadership by buying competitors, encouraging others to quit, and announcing that you are replacing old capital equipment with lower-cost plant

Accepted Answer

By acquiring competitors, a business can increase its market share and potentially benefit from economies of scale. Encouraging others to quit can also help reduce competition in the industry. Finally, by upgrading equipment to lower-cost options, the business can improve efficiency and reduce costs, increasing profitability. All of these actions demonstrate industry leadership and can help a business succeed even in a declining industry.

Question 14

Fashion clothing, airlines, coffee shops, and steel illustrate:

Accepted Answer

Mature industries where innovation is still possible.

Question 15

It will be difficult to execute a profitable strategy in an industry with declining but cyclical demand, warring competitors, and a strong sense of pride in their product

Accepted Answer

The statement acknowledges the challenges of executing a profitable strategy in an industry with declining but cyclical demand, warring competitors, and a strong sense of pride in their product. Therefore, it is true that it will be difficult to do so.

Question 16

Standardization of a product's attributes reduces opportunities for meaningful and profitable differentiation, but, once obtained, competitive advantage is easy to sustain

Accepted Answer

Standardization of a product's attributes can create opportunities for cost savings and efficiencies, but it also limits the ability to differentiate from competitors. Once a standard is established, it can be difficult to change and may not provide a sustainable competitive advantage. Successful companies often find ways to differentiate themselves through other means, such as branding, customer service, or innovation.

Question 17

In a mature industry, differentiation often has to take the form of:

Accepted Answer

In a mature industry, where products are often similar and competition is high, differentiation through complementary services can add value and distinguish a company from its competitors.

Question 18

How does an industry's maturity impact potential economies of scale?

Accepted Answer

Greater standardization in a mature industry helps to create economies of scale, which reduces per-unit costs and increases profitability. As an industry matures, firms get more adept at creating efficient processes and optimizing production methods. When similar products can be made quickly and consistently, economies of scale can be enjoyed in the form of cost savings.

Question 19

Why does the profitability of a mature industry tend to be lower than at other stages?

Accepted Answer

In a mature industry, demand growth is typically low because most potential customers already use the product or service. This makes it harder for companies to differentiate themselves from their competitors, which can make it difficult to maintain high profit margins. Additionally, as international competition increases, companies may need to lower their prices in order to remain competitive, which can drive profits even lower. Therefore, all of the above factors contribute to lower profitability in mature industries.

Question 20

Are mature industries identical?

Accepted Answer

Mature industries may have similarities such as slower growth rates, established competition, and stable market structures, but they can differ in terms of specific products or services offered, market size, and overall industry dynamics. Therefore, it is best to classify them as having similar characteristics but not being identical. Option A and D are incorrect as industries differ in their unique characteristics and do not follow an identical pattern of extinction.

Quiz 13: Competitive Advantage in Mature Industries