Question 1

A fragmented industry is an industry that has experienced an absolute decline in unit sales over a sustained period of time.

Accepted Answer

A fragmented industry is actually one where there are many small, usually independent, companies within the industry, rather than a few large dominant ones. It does not necessarily indicate a decline in unit sales.

Question 2

The objective of divestment is to extract a firm from a declining industry.

Accepted Answer

Divestment is a strategy used by firms to exit from a declining industry and focus on core businesses or invest in new and growing industries. By divesting, the firm can free up resources to invest in more profitable businesses, reduce risks, and improve performance.

Question 3

________ are resources required to successfully compete in an industry.
A)Strategically valuable assets
B)Technological leader strategies
C)Process innovations
D)Product innovations

Accepted Answer

Strategically valuable assets are resources that are necessary for a company to succeed in an industry. These assets give the company a competitive advantage, making it difficult for competitors to replicate or obtain them, and thus, protecting the company's market position. Examples of strategically valuable assets include patents, proprietary technology, key personnel or expertise, and economies of scale. Technological leader strategies, process innovations, and product innovations are all strategies that may be employed to leverage or develop strategically valuable assets, but they are not the assets themselves.

Question 4

What is a harvest strategy?

Accepted Answer

The answer of What is a harvest strategy?...

Question 5

Firms pursuing a harvest strategy in a declining industry do not expect to remain in the industry over the long term.

Accepted Answer

A harvest strategy involves maximizing short-term cash flows and profits, often through cost-cutting measures and reducing investments. This approach is typically adopted by firms that do not see a viable future for the industry and plan to exit or divest their business in the near future. Therefore, it is unlikely that firms pursuing a harvest strategy would expect to remain in the industry over the long term.

Question 6

What are customer-switching costs?

Accepted Answer

The answer of What are customer-switching costs?...

Question 7

If you were to purchase a new Apple iPod and were unable to use your previously downloaded library of digital music with your new iPod,this would be an example of a customer-switching cost you would incur to use Apple's product.

Accepted Answer

Customer-switching cost refers to the cost incurred by a customer when switching from one product or service to another. In this case, if a customer cannot use their previously downloaded music on a new Apple iPod, they would need to purchase their music again from Apple or find another means of accessing their music, resulting in a customer-switching cost.

Question 8

Identify and clearly distinguish between the four strategic options available to firms in a declining industry.

Accepted Answer

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Question 9

Identify the four generic industry structures and the specific strategic opportunities in each of these industries.

Accepted Answer

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Question 10

An emerging industry is an industry in which a large number of small or medium-sized firms operate and no small set of firms has a dominant market share or creates dominant technologies.

Accepted Answer

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Question 11

A firm following a niche strategy in a declining industry reduces its scope of operations and focuses on narrow segments of the declining industry.

Accepted Answer

A niche strategy involves focusing on a narrow segment of a market, and in a declining industry, this may involve further narrowing the scope of operations to maintain profitability.

Question 12

Product innovation is an effort to refine and improve a firm's current processes.

Accepted Answer

Product innovation is the creation of new or improved products, services, or processes with the goal of meeting an identified customer need or improving business performance. It is not limited to refining and improving current processes.

Question 13

All divestments are caused by industry decline.

Accepted Answer

While industry decline may be a factor in divestments, there are many other reasons why a company may choose to divest, such as a change in strategy or a need for capital.

Question 14

________ costs exist when customers make investments in order to use a firm's particular products or services.
A)First-mover-switching
B)Technological leadership-switching
C)Customer-switching
D)Process-switching

Accepted Answer

Customer-switching costs refer to the costs that customers incur when they switch from one product or service provider to another. These costs can include time investment, money spent on learning how to use the new product or service, and lost productivity.

Question 15

First movers that invest only in technology usually obtain sustained competitive advantages,even if they do not tie up strategically valuable resources in an industry before their full value is widely understood.

Accepted Answer

First movers must do more than just invest in technology; they also need to secure strategically valuable resources and create barriers to entry for competitors to achieve a sustained competitive advantage. Simply investing in technology without a broader strategic approach is often insufficient for long-term success.

Question 16

The major opportunity facing firms in fragmented industries is the implementation of strategies that begin to consolidate the industry into a smaller number of firms.

Accepted Answer

By consolidating the industry, firms can increase their market share and bargaining power, reduce competition, and achieve economies of scale. This can lead to increased profitability and growth for the firms involved.

Question 17

A consolidation strategy is a good option in what type of industry?
A)mature
B)emerging
C)fragmented
D)declining

Accepted Answer

A consolidation strategy is often most effective in fragmented industries where there are many small or medium-sized companies. In such industries, consolidation can lead to economies of scale, reduced competition, and increased market share.

Question 18

Hickory Divine is one of the leading manufacturers in the hardwood furniture industry. Hickory Divine has many small competitors, none of which controls a significant portion of the industry. Hickory, like most of the furniture manufacturers, sells its products to a broad variety of small furniture stores throughout the country, none of which represents a large percentage of Hickory's sales. When purchasing the products it uses for manufacturing its furniture, Hickory is able to choose from many suppliers since the wood it uses is an undifferentiated commodity, and Hickory is able to easily switch to any supplier that has the best price and delivery times. While growth in the hardwood furniture industry has historically been in the double digits, the industry growth rate has slowed considerably into the single digits, to approximately 5% in recent years; consumers have been purchasing less expensive furniture made of composite wood that is considerably less expensive than hardwood furniture but that looks and functions very similarly once it is painted.
-Based on the above description,the hardwood furniture industry can best be described as a(n)________ industry.
A)emerging
B)fragmented
C)consolidated
D)declining

Accepted Answer

The description of the industry as having many small competitors, none of which controls a significant portion of the market, and selling to a broad variety of small furniture stores suggests fragmentation. Additionally, the slowdown in industry growth and the shift towards less expensive composite wood furniture indicates a challenging environment for hardwood furniture manufacturers, but not necessarily a declining industry overall.

Question 19

Mature industries are characterized by elements such as increasing growth in total industry demand,significant increases in product capacity,and an overall increase in the profitability of firms in the industry.

Accepted Answer

Mature industries are actually characterized by a slowing growth rate in total industry demand, stable or decreasing product capacity, and an overall decrease in the profitability of firms in the industry due to increased competition and market saturation.

Quiz 2: Evaluating a Firms External Environment