Question 1

As an industry enters the shakeout stage, rivalry between companies becomes intense.

Accepted Answer

During the shakeout stage, weak firms exit the market, leading to a reduction in the number of competitors. As a result, the remaining firms have to compete more fiercely for market share, leading to increased rivalry.

Question 2

Growth in an embryonic industry is slow because of buyers' unfamiliarity with the industry's product, high prices due to the inability of companies to reap any significant scale of economies, and poorly developed distribution channels.

Accepted Answer

Embryonic industries are in the early stages of development and are still trying to establish themselves in the market. This often means that buyers are not yet familiar with the product being offered, which results in slow growth. Additionally, companies in embryonic industries have not had the opportunity to benefit from significant scale of economies, which can help to reduce costs and lower prices. Finally, distribution channels may not be well established, making it more difficult to get products to market efficiently. All of these factors contribute to slower growth in embryonic industries.

Question 3

An important determinant of the strength of the competitive forces in an industry is the changes that take place in it over time.

Accepted Answer

The changes that occur in an industry over time can have a significant impact on the competitive forces within it. For example, the emergence of new technologies or the entry of new competitors can increase competition and weaken the position of existing firms. Similarly, changes in consumer preferences or demographic trends can disrupt established market segments and create new opportunities or threats for industry players. Therefore, it is important for companies to monitor and adapt to these changes in order to maintain their competitive advantage.

Question 4

Rivalry in embryonic industries is based not so much on price as on educating customers, opening up distribution channels, and perfecting the design of the product.

Accepted Answer

In embryonic industries, companies are often focused on establishing a market and gaining customers rather than price competition. This involves educating potential customers about the new product, finding ways to distribute it efficiently, and refining the design to meet customer needs. Price may still be a factor, but it is not the primary form of rivalry in these early stages.

Question 5

Substitute products are the products of different businesses or industries that can satisfy similar customer needs.

Accepted Answer

Substitute products are indeed products from different businesses or industries that can fulfill similar customer needs. For example, instead of buying a branded product, customers can buy a cheaper unbranded product that serves the same purpose.

Question 6

As an industry enters maturity, barriers to entry decrease, and the threat of entry from potential competitors increases.

Accepted Answer

As an industry enters maturity, it typically experiences increased barriers to entry due to factors like high levels of competition, saturated markets, and the need for significant capital investment, which collectively decrease the threat of entry from potential competitors.

Question 7

As an industry enters the shakeout stage of the industry life cycle, the rivalry between companies decreases.

Accepted Answer

As an industry enters the shakeout stage, the weaker companies are eliminated, leaving only the strongest ones. The remaining companies, therefore, become more focused and aggressive in their pursuit of market share, resulting in increased rivalry between them.

Question 8

Strategic groups are groups of companies in which each company follows a strategy that is similar to that pursued by other companies in the group, and is the same strategy followed by companies in other groups.

Accepted Answer

Strategic groups are groups of companies within an industry that follow similar strategies, but the strategies differ from those of companies in other groups within the same industry.

Question 9

In a declining industry, competition usually decreases.

Accepted Answer

In a declining industry, companies may become desperate for any available market share and may begin to compete even more fiercely. This can lead to increased competition and price cutting, as well as consolidation as weaker firms go out of business.

Question 10

The stability of a mature industry is threatened by price wars.

Accepted Answer

Price wars can lead to a decrease in profits and possibly drive some competitors out of business, resulting in a less stable industry.

Question 11

Explosive growth cannot be maintained indefinitely. Sooner or later, the rate of growth slows, and the industry enters the mature stage.

Accepted Answer

The answer of Explosive growth cannot be maintained indefinitely. Sooner...

Question 12

The systematic analysis of forces in the industry environment using the Porter framework is a powerful tool that helps managers to think strategically.

Accepted Answer

The statement is true as the Porter framework helps managers to analyze the competitive forces in their industry environment and make informed strategic decisions.

Question 13

Normally, the importance of control over technological knowledge as a barrier to entry has diminished by the time an industry enters its growth stage.

Accepted Answer

During the growth stage, the industry experiences an increase in competition, which often leads to firms trying to gain an advantage over their competitors. As a result, control over technological knowledge can still be an important barrier to entry during this stage, as it allows firms to establish themselves as leaders in the industry and differentiate themselves from their competitors.

Question 14

The industry life cycle model identifies four sequential stages in the evolution of an industry that lead to four distinct kinds of industry environment.

Accepted Answer

The industry life cycle model typically identifies five stages in the evolution of an industry: introduction, growth, shakeout, maturity, and decline.

Question 15

Within an industry, each strategic group may face a different set of opportunities and threats.

Accepted Answer

This statement is true. Different strategic groups within the same industry may have different strengths, weaknesses, opportunities, and threats based on factors such as target market, product offerings, distribution channels, and competitive landscape. Therefore, each group may have unique opportunities and threats to consider in their strategic decision-making.

Question 16

Mobility barriers are factors that help the movement of companies between strategic groups.

Accepted Answer

Mobility barriers are factors that prevent or hinder the movement of companies between strategic groups within an industry.

Question 17

One of the defining characteristics of the mature stage of the industry life cycle is that growth is low or zero.

Accepted Answer

During the mature stage of the industry life cycle, growth slows down and may even become stagnant, making it a defining characteristic.

Question 18

Managers must anticipate how the strength of industry competitive forces will change as the industry evolves and then formulate appropriate strategies to take advantage of opportunities.

Accepted Answer

This statement is true. Managers need to analyze how competitive forces in the industry will change over time and adjust their strategies accordingly to stay ahead of competition and take advantage of emerging opportunities.

Question 19

The growth industry is where demand is expanding as second-time consumers enter the market.

Accepted Answer

The growth industry is characterized by an increase in demand due to various factors, not just second-time consumers entering the market. It refers to sectors experiencing rapid expansion in innovation, production, and sales, often driven by new technologies, consumer preferences, or societal changes.

Question 20

In mature industries, companies tend to recognize their interdependence and try to avoid price wars.

Accepted Answer

In mature industries, companies are aware of their interdependence on each other and therefore try to avoid price wars that could harm the entire industry and lead to lower profits for all companies involved. Instead, they may compete through product differentiation or cost-cutting measures to maintain their market share.

Quiz 3: External Analysis: the Identification of Opportunities and Threats