Question 1

A market growth factor that explains customers' perceptions of a new product as better at satisfying their needs than the product it replaces is called:
A) complexity
B) relative advantage
C) compatibility
D) trialability
E) observability

Accepted Answer

Relative advantage refers to customers' perception of a new product being better at satisfying their needs than the product it replaces. Complexity refers to the ease of use, while compatibility refers to the extent to which the product fits with the customers' values and experiences. Trialability and observability refer to the ease of trying the product and the visibility of its benefits, respectively.

Question 2

A company uses _____ when it focuses on pockets of demand that are declining more slowly than the industry as a whole to maintain profitability.
A) acquisition strategy
B) chaining
C) divestment strategy
D) niche strategy
E) franchising

Accepted Answer

A niche strategy involves focusing on a specific segment or niche in the market where demand is still present, even if the industry as a whole is declining. This can help a company maintain profitability by not competing directly with larger companies and instead focusing on their unique offerings.

Question 3

An embryonic industry is one that:
A) includes a number of small and medium sized companies.
B) is just beginning to develop and customer demand is initially limited.
C) has sufficiently developed so that early industry leaders have already been identified.
D) has initial government backing because of its importance to the general populace.
E) is characterized by intense rivalry among established companies.

Accepted Answer

An embryonic industry is one that is just beginning to develop and customer demand is initially limited. It is in the early stages of development and has not yet matured to the point where there are established leaders or intense rivalry among companies.

Question 4

Who among the following is most likely to fall under the category of laggards in the context of customer groups?
A) Lauren is tech-savvy and tends to actively seek out for new and innovative products in the market.
B) Suresh appreciates technology but tends to refrain from trying products that are extremely new.
C) Phillip is ignorant about the newest uses of technology and buys new products only when they become an absolute necessity.
D) Charlotte is aware of the value that technology offers; she tends to weigh costs and benefits of a product before making a buying decision.
E) Maria tends to be a little apprehensive about buying new technology but buys nevertheless when he observes that a lot of people are using the new technology.

Accepted Answer

Laggards are customers who are slow to adopt new products and usually only make purchases when the product has become a necessity. Phillip fits this description as he is ignorant about the newest uses of technology and only buys new products when they become necessary. The other options all describe customers who are more likely to be early adopters or at least adopt products sooner than laggards.

Question 5

Customers who have a practical interest in using a new technology in the future and who are willing to experiment and envision new uses for the technology are called:
A) early adopters.
B) the early majority.
C) innovators.
D) laggards.
E) the late majority.

Accepted Answer

Early adopters are customers who have a practical interest in using a new technology in the future and who are willing to experiment and envision new uses for the technology.

Question 6

The first group of customers to enter the market for a new product are called:
A) laggards.
B) late majority.
C) innovators.
D) early majority.
E) passive shoppers.

Accepted Answer

The first group of customers to enter the market for a new product are called innovators. They are willing to take risks, are highly knowledgeable about the product or technology, and often serve as opinion leaders for the rest of the market. Laggards are the last group to adopt a new product, while the early majority and late majority fall in between these two groups. Passive shoppers are not a recognized group within the diffusion of innovations theory.

Question 7

Which of the following factors that affect market growth rates refers to the degree to which a new product is perceived as difficult to understand and use?
A) Complexity
B) Relative advantage
C) Compatibility
D) Trialability
E) Observability

Accepted Answer

Complexity refers to how easy it is for customers to understand and use the new product. If a product is too complex, customers may be hesitant to adopt it, which can slow down market growth rates.

Question 8

Which of the following statements is true of embryonic industries?
A) They are characterized by very a high initial customer demand.
B) They are characterized by well-developed distribution channels.
C) They involve low production costs because of large volumes of production.
D) They face the challenge of educating customers who are not familiar with their product benefits.
E) They enjoy the abundance of complementary products that help increase sales.

Accepted Answer

Embryonic industries are characterized by new and innovative products or services that are not yet widely known or understood by potential customers. As a result, these industries often face the challenge of educating customers about the benefits of their products or services.

Question 9

In a declining industry, a company may utilize a harvest strategy and:
A) significantly increase its investment in a business.
B) extract maximum profits from its investments.
C) venture into new market segments with new products.
D) expand the number of stores or outlets for its products.
E) significantly increase its advertising expenditure.

Accepted Answer

In a declining industry, a company utilizing a harvest strategy would focus on maximizing profits from existing investments rather than investing further in the business, venturing into new markets, expanding outlets, or significantly increasing advertising expenditure. The objective of the harvest strategy is to generate as much cash as possible from the declining product or market segment.

Question 10

The growth stage of an industry's life cycle is the:
A) time when companies attempt to secure their grip over customers in existing market segments.
B) time when customers start exiting the markets.
C) time to plan an exit strategy.
D) time to reduce investment in a product.
E) time when the demand for products is low because customers are not familiar with the product.

Accepted Answer

The growth stage is characterized by the increasing demand for products and the entry of new players into the market. Companies focus on expanding their customer base within existing market segments and securing their position in the industry. This is the time to invest in marketing, distribution, and production to meet the growing demand.

Question 11

Most embryonic industries arise from:
A) a technological breakthrough.
B) product proliferation.
C) lack of high entry barriers.
D) chaining.
E) franchising.

Accepted Answer

Embryonic industries typically arise from a technological breakthrough, which introduces a new way of doing things, creates demand for new products or services, and presents opportunities for entrepreneurs to develop and commercialize innovative ideas. Product proliferation, lack of high entry barriers, chaining, and franchising are not necessarily unique to embryonic industries and can apply to a wide range of business sectors.

Question 12

An industry moves from embryonic to growth stage when:
A) the sales of complementary products decline.
B) the production costs increase.
C) companies manufacture products in very small quantities.
D) ongoing technological progress makes its product easier to use.
E) mass markets for its products decline.

Accepted Answer

As ongoing technological progress makes its product easier to use, it becomes more accessible to the general public, leading to an increase in demand and a move from the embryonic stage to the growth stage.

Note: Choices A, B, C, and E are incorrect as they do not accurately represent the transition from the embryonic to the growth stage.

Question 13

One strategy used to consolidate fragmented industries is:
A) vertical mergers.
B) chaining.
C) product proliferation.
D) price signaling.
E) nonprice competition.

Accepted Answer

Chaining is a strategy used to consolidate fragmented industries by creating a network of interconnected operations, often through standardization and central control, to achieve economies of scale and improve efficiency.

Question 14

In a bid to expand its business and gain cost advantages, Omega Inc. has established several merchandising outlets in different locations. All the outlets share a good network and are interconnected by information technology. The entire network of outlets operates in the industry as one large company. Which of the following strategies has Omega Inc. most likely used ?
A) Chaining
B) Franchising
C) Horizontal merger
D) Niche strategy
E) Divestment strategy

Accepted Answer

Chaining is a strategy where a company establishes multiple outlets that are interconnected and operate as a single entity, often leveraging information technology to create a cohesive network.

Question 15

Factors leading to the slow growth of demand in embryonic industries include all of the following except the:
A) poor quality of the first products.
B) lack of complementary products.
C) customer passion for the products.
D) high production costs of the products.
E) lack of distribution channels for the products.

Accepted Answer

Customer passion for the products would actually contribute to the growth of demand, rather than hindering it. Therefore, all of the other options (poor quality of first products, lack of complementary products, high production costs, and lack of distribution channels) could potentially lead to slow growth of demand in embryonic industries.

Question 16

___________ is a market growth factor that refers to the degree to which the results of using and enjoying a new product can be seen and appreciated by other people.
A) Complexity
B) Relative advantage
C) Compatibility
D) Trialability
E) Observability

Accepted Answer

Observability refers to the degree to which the benefits or results of using a new product can be seen and appreciated by other people. This factor is particularly important for products that are visible or tangible to others, such as fashion items or electronic gadgets. The more observable a product is, the more likely it is to generate positive word-of-mouth recommendations and social influence, which can drive market growth.

Question 17

Which of the following customer groups represents the leading wave or edge of the mass market?
A) Early adopters
B) Early majority
C) Innovators
D) Late majority
E) Laggards

Accepted Answer

The early majority represents the leading wave or edge of the mass market, as they adopt new products just before the average person.

Question 18

Which of the following factors of a particular product tends to accelerate customer demand for it?
A) High observability
B) Minimum relative advantage
C) High complexity
D) Minimal value
E) Low trialability

Accepted Answer

High observability refers to the product being noticeable and easily recognizable to potential customers. If a product is easily observable, it tends to create more demand as people can see its benefits and features.

Question 19

To compete in the fragmented restaurant industry, Starbucks built, and now operates hundreds of restaurants across the United States and Canada. Which of the following strategies is Starbucks using ?
A) Acquisitions
B) Horizontal mergers
C) Franchising
D) Licensing
E) Chaining

Accepted Answer

Starbucks is using the strategy of chaining by building and operating multiple locations across the US and Canada under their own brand. This allows them to have greater control over the consistency and quality of their product, as well as increasing their brand recognition and customer loyalty.

Question 20

Hydralicious, a juice bar, has been looking to expand its business. The company has given a few entrepreneurs in different locations the license to operate under its name.The entrepreneurs have permission to use the company's reputation and the business model to run operations. The entrepreneurs will be charged a fee, but they will also get a percentage of the profits. Which of the following strategies is Hydralicious most likely to be using ?
A) Chaining
B) Horizontal merger
C) Vertical merger
D) Franchising
E) Centralization

Accepted Answer

Hydralicious is most likely using the strategy of franchising where the company gives entrepreneurs the license to use their name, reputation and business model to run operations while charging a fee and sharing profits.

Quiz 6: Business-Level Strategy and the Industry Environment

A market growth factor that explains customers' perceptions of a new product as better at satisfying their needs than the product it replaces is called:

A company uses _____ when it focuses on pockets of demand that are declining more slowly than the industry as a whole to maintain profitability.

An embryonic industry is one that:

Who among the following is most likely to fall under the category of laggards in the context of customer groups?

Customers who have a practical interest in using a new technology in the future and who are willing to experiment and envision new uses for the technology are called:

The first group of customers to enter the market for a new product are called:

Which of the following factors that affect market growth rates refers to the degree to which a new product is perceived as difficult to understand and use?

Which of the following statements is true of embryonic industries?

In a declining industry, a company may utilize a harvest strategy and:

The growth stage of an industry's life cycle is the:

Most embryonic industries arise from:

An industry moves from embryonic to growth stage when:

One strategy used to consolidate fragmented industries is:

Factors leading to the slow growth of demand in embryonic industries include all of the following except the:

___________ is a market growth factor that refers to the degree to which the results of using and enjoying a new product can be seen and appreciated by other people.

Which of the following customer groups represents the leading wave or edge of the mass market?

Which of the following factors of a particular product tends to accelerate customer demand for it?

To compete in the fragmented restaurant industry, Starbucks built, and now operates hundreds of restaurants across the United States and Canada. Which of the following strategies is Starbucks using ?