Question 1

Many firms benefit from an increasing ability to outsource manufacturing or service functions to lower-cost foreign countries. This trend is referred to in the textbook as a(n) ________ trend.

Accepted Answer

A

Question 2

The Partnering for Success feature in Chapter 5 focuses on three things that are important for startups to become active in to learn the ins and outs of their industries. The three items focused on in the feature are ________.

Accepted Answer

The Partnering for Success feature in Chapter 5 focuses on the importance of participating in trade associations, trade shows, and trade journals to learn about the industry and make connections.

Question 3

What is industry analysis? Why is it important for a new venture to complete a thorough analysis of the industry it is entering?

Accepted Answer

Industry analysis is business research that focuses on the potential of an industry. An industry is a group of firms producing a similar product, such as tires, fitness drinks, or electronic games. Once it is determined that a new venture is feasible in regard to the industry and market in which it will compete, a more in-depth analysis is needed to learn the ins and outs of the industry the firm plans to enter. This analysis helps a firm determine if the target market(s) it identified during its feasibility analysis are accessible and which ones represent the best point of entry for a new firm.

Question 4

A comparison analysis is a detailed evaluation of a firm's competitors.

Accepted Answer

The answer of A comparison analysis is a detailed evaluation...

Question 5

An industry is a group of firms producing a similar product or service, such as tires, life insurance, or smartphone apps.

Accepted Answer

This statement is true, as an industry is defined as a group of firms producing similar products or services.

Question 6

In general, industries are more attractive when the ________.

Accepted Answer

Industries are more attractive when the threat of each of the five forces is low, because this indicates that there is a lower overall level of competition, lower barriers to entry, lower bargaining power of suppliers and buyers, and lower threat of substitutes or new entrants. A high level of threats in any of these areas can make an industry less attractive, as it creates more challenges and risks for companies operating within that industry.

Question 7

Once a firm decides to enter an industry and chooses a market in which to compete, it must gain an understanding of its competitive environment. This challenge can be undertaken by completing a(n) ________ analysis.

Accepted Answer

A competitor analysis is specifically focused on understanding the competitive environment by evaluating the strengths and weaknesses of current and potential competitors.

Question 8

Industry analysis is business research that focuses on the potential of an industry.

Accepted Answer

Industry analysis is a form of business research that evaluates the potential and performance of an industry, including its competitors, customers, and market trends. It helps businesses make informed decisions, identify opportunities and potential risks, and develop effective strategies for growth and success in the industry.

Question 9

According to the textbook, the five competitive forces included in the Five Forces model determine the average ________.

Accepted Answer

The Five Forces model is used to analyze the competitive environment of an industry, and it includes five competitive forces: the threat of new entrants, the bargaining power of customers, the bargaining power of suppliers, the threat of substitute products or services, and the intensity of rivalry among competitors in the industry. These forces ultimately determine the rate of return for the firms in an industry, making option C the correct choice.

Question 10

The two trends that are most important to focus on in an industry analysis are business and environmental trends.

Accepted Answer

Business trends help identify market conditions, customer demands, competition, and technology advancements, while environmental trends focus on sustainability, regulatory changes, and societal impacts on the industry. Both trends provide valuable insights that can influence business strategies and decision-making processes.

Question 11

Terry Washington recently started a new firm in the financial services industry. Prior to starting his firm, he spent considerable time doing research on the potential of the industry. The research that Terry was doing is called ________ analysis.

Accepted Answer

Industry analysis involves researching and analyzing the potential of a specific industry, including factors such as market size, competition, and trends. This type of analysis helps entrepreneurs like Terry understand the market they are entering and identify opportunities for growth and success.

Question 12

In various studies, researchers have found that from ________ percent of the variation in firm profitability is directly attributable to the industry in which a firm competes.

Accepted Answer

In various studies, researchers have found that from 8 to 30 percent of the variation in firm profitability is directly attributable to the industry in which a firm competes.

Question 13

Generally, industries are more attractive when the threat of substitutes is ________.

Accepted Answer

When the threat of substitutes is low, industries are generally more attractive. This is because there are fewer alternatives for consumers, leading to a higher demand for the industry's products or services. This can result in higher profits and a more stable market. In contrast, when the threat of substitutes is high, consumers have more options to choose from, which can lead to decreased demand and lower profits for the industry.

Question 14

Industries that sell products to seniors, such as the eyeglass industry and the hearing aid industry, are benefiting from the aging of the population, which is an important ________ trend.

Accepted Answer

The aging population affects industries by changing the demand for certain products, such as eyeglasses and hearing aids, which is considered an environmental trend because it relates to demographic changes in the environment in which businesses operate.

Question 15

WriteLab, the company profiled in the opening feature of Chapter 5, believes it has created a barrier to entry to enable it to maintain a leadership position in the education industry. Its barrier to entry is ________.

Accepted Answer

WriteLab's barrier to entry is significantly enhanced by the reputation and established presence of co-founder Donald McQuade in the writing community, which can provide a unique advantage and credibility that new entrants may find difficult to replicate.

Question 16

The price of prescription medicine is high, partly because when someone is sick there is no real alternative to buying medicine if they want to get better. Which of Porter's five forces explains how this aspect of the prescription medicine industry helps keep profitability high?

Accepted Answer

The threat of substitutes explains how the lack of alternatives for prescription medicine keeps profitability high. With no substitutes available, buyers have no choice but to purchase the medicine at the high prices set by the industry, giving the companies in the industry strong bargaining power and the ability to maintain high profits.

Question 17

Each quarter, Craig Anderson, who owns a chain of auto repair shops, does a detailed analysis of his firm's competitors. This analysis is called ________ analysis.

Accepted Answer

Competitor analysis is the correct term for the detailed analysis of a firm's competitors, as it specifically focuses on understanding the strengths, weaknesses, strategies, and actions of competing businesses.

Question 18

Business trends include economic trends, social trends, technological advances, and political and regulatory changes.

Accepted Answer

The answer of Business trends include economic trends, social trends,...

Question 19

According to the textbook, how do well-managed firms respond to the five forces that determine industry profitability?

Accepted Answer

Well-managed firms try to position their firms in a way that avoids or diminishes the forces that determine industry profitability. They may use strategies such as differentiation, cost leadership, or niche targeting to minimize the impact of the competitive forces. They may also seek to reduce supplier and buyer power by diversifying their supply base or developing strong customer relationships. Overall, they aim to create a sustainable competitive advantage that allows them to prosper despite the challenges posed by the five forces.

Question 20

A(n) ________ is a group of firms producing a similar product or service, such as soft drinks, airlines, or smartphone apps.

Accepted Answer

The term "industry" is commonly used to describe a group of firms producing a similar product or service. Clusters and networks may refer to a similar concentration of firms in a geographic area, but do not necessarily have to produce similar products or services. Divisions are subdivisions of a larger company, and sectors typically refer to broader categorizations of the economy (such as the manufacturing sector or service sector).

Quiz 5: Industry and Competitor Analysis