Question 1

Generally, an industry is more attractive when competitors are not similar in size or capability.

Accepted Answer

When competitors are not similar in size or capability, there is a higher chance for one company to dominate the market, leading to potentially higher profits and reduced competition. This can make the industry more attractive to investors and those looking to enter the market. In contrast, if competitors are very similar in size and capability, there may be intense price competition and smaller profit margins.

Question 2

Generally, an industry is less attractive when the number of buyers in the industry is large.

Accepted Answer

An industry with a large number of buyers is generally more attractive as it represents a larger potential market for businesses to serve. However, a large number of buyers can also lead to increased competition and price sensitivity, making it more challenging for businesses to differentiate themselves and maintain profitability.

Question 3

Which of the following is a danger of using a niche strategy?

Accepted Answer

All three options listed are potential dangers of using a niche strategy. Niches can change or cease to exist, which can leave a company without a market or potential customers. Entering a niche can also require flexibility and adaptability in order to succeed. Therefore, it is important to carefully consider the potential risks and rewards before choosing a niche strategy.

Question 4

New entrants to an industry can erode existing companies' market share and profits.

Accepted Answer

This statement is true as new entrants can introduce innovative products or services, better pricing or marketing strategies, and disrupt existing players' positions in the market. This can lead to a loss in market share and profits for the existing companies.

Question 5

Which of the following is not a barrier to entry?

Accepted Answer

A large number of buyers is not a barrier to entry. In fact, it may indicate a larger market opportunity and potentially lower barriers to market entry. Capital requirements, specialized knowledge, and access to distribution channels can all be barriers to entry that may limit the ability of new competitors to enter the market.

Question 6

Generally, an industry is more attractive to new entrants when the advantages of economies of scale are present.

Accepted Answer

Economies of scale create cost advantages for existing firms, making it harder for new entrants to compete, thus making the industry less attractive to new entrants.

Question 7

The weakest of the five forces in most industries is the rivalry that exists among the businesses competing in a particular market.

Accepted Answer

The statement is false. The strongest of the five forces is the competition or rivalry among businesses in the industry, as it directly affects prices, profits, and market share. The five forces framework includes: the bargaining power of suppliers, the bargaining power of customers, the threat of new entrants, the threat of substitute products or services, and rivalry among existing competitors.

Question 8

Generally, an industry is more attractive when substitute products are available for the items suppliers provide.

Accepted Answer

The answer of Generally, an industry is more attractive when...

Question 9

Economies of scale relate to which of Porter's 5-forces?

Accepted Answer

Economies of scale make it difficult for new entrants to compete because existing companies can produce at lower costs, making it harder for new players to enter the market and achieve profitability.

Question 10

The strongest of the five forces in most industries is the rivalry that exists among the businesses competing in a particular market.

Accepted Answer

The rivalry among competitors is typically considered the strongest force in Porter's Five Forces framework, as it can lead to price competition, increased advertising and marketing expenses, and innovation to gain a competitive advantage.

Question 11

According to Porter's 5-forces model, a substitute for Coca-Cola, the carbonated cola drink, would be ________.

Accepted Answer

According to Porter's 5-forces model, a substitute product is a product from another industry that satisfies the same customer needs. Bottled water is a substitute for Coca-Cola because it also satisfies the customer's need for hydration and refreshment, but without the carbonation and sugar content of Coca-Cola. Pepsi, Mountain Dew, and Dr. Pepper are all part of the same industry and are considered direct competitors to Coca-Cola, rather than substitutes.

Question 12

Generally, an industry is more attractive when quality substitute products are not readily available, the prices of substitute products are higher, and buyers' costs of switching products is high.

Accepted Answer

If there are no quality substitute products available, customers have no option but to purchase from the industry, giving them an advantage over any substitute products. Additionally, even if substitute products are available, if they are priced higher or buyers face high costs of switching, they may still choose to stick with the industry's products.

Question 13

The greater the leverage suppliers of key raw materials or components have, the less attractive is the industry.

Accepted Answer

If a supplier has a lot of leverage, they can increase their prices, making it more expensive for companies in the industry to produce their goods. This can lead to decreased profits and competitiveness, making the industry less attractive overall.

Question 14

Printed newspapers have seen their readership rates decline as new generations of potential readers turn to their iPads and smartphones for sources of news. This is an example of ________.

Accepted Answer

The decline in readership rates is a result of the availability of substitutes (digital devices) that are easily accessible and convenient for the new generation of readers. This poses a threat to the traditional printed newspaper industry.

Question 15

According to the five forces model, Delta Airlines is a substitute for United Airlines.

Accepted Answer

According to the five forces model, substitutes refer to alternative products or services that can fulfill the same need as the primary product or service. Therefore, Delta Airlines is not a substitute for United Airlines but rather a competitor, as they both provide air transportation services.

Question 16

Specialized knowledge is an example of a barrier to entry.

Accepted Answer

Specialized knowledge can be a barrier to entry because it may require extensive education or training that not everyone has access to. This can make it more difficult for new entrants to compete in a market dominated by established players with specialized skills or expertise.

Question 17

Porter's five forces model only considers direct competitors within a single industry.

Accepted Answer

Porter's five forces model considers five different forces that impact the competitive intensity and attractiveness of a particular industry. These forces include the threat of new entrants, the bargaining power of suppliers and customers, the threat of substitute products or services, and the intensity of competition among direct competitors. Therefore, Porter's model does not only focus on direct competitors but also takes into account several other factors that affect the industry's competitiveness.

Question 18

Generally, an industry is more attractive when the opportunity to sell a differentiated product or service is absent.

Accepted Answer

An industry is generally more attractive when there is an opportunity to sell a differentiated product or service. This allows companies to stand out and compete on factors other than price alone.

Question 19

The Five Forces Model would assess economies of scale factors in the "threat of new entrants" portion of the model.

Accepted Answer

Economies of scale are a barrier to entry, making it harder for new entrants to compete with established firms that benefit from lower costs per unit.

Question 20

Generally, an industry is more attractive when the items suppliers provide the industry account for a relatively high portion of the cost of the industry's finished product.

Accepted Answer

An industry is generally less attractive when suppliers' items account for a high portion of the cost, as this gives suppliers more power and can squeeze industry margins.

Quiz 4: Conducting a Feasibility Analysis and Designing a Business Model