Question 1

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

Accepted Answer

The Five Forces model helps to determine the level of competition in an industry by examining five key forces: the bargaining power of buyers, the bargaining power of suppliers, the threat of new entrants, the threat of substitute products or services, and the intensity of competitive rivalry. These forces ultimately determine the rate of return for firms in the industry, making choice C the correct answer.

Question 2

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

Accepted Answer

An industry is defined as a group of firms that produce similar goods or services. Each industry consists of firms that operate in the same general market and produce products or services that are similar in nature.

Question 3

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

Accepted Answer

False

Question 4

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 5

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

Accepted Answer

An industry refers to a group of firms involved in producing similar products or services. Clusters refer to geographically concentrated industries, sectors are broader categories of similar industries, and divisions are specific operational units within a company. Networks represent interconnected firms or individuals.

Question 6

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 trade associations, trade shows, and trade journals as important resources for startups to become active in and learn the ins and outs of their industries. The other options listed may also be helpful, but they are not the specific focus of this feature.

Question 7

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

Accepted Answer

Business trends can provide insights into current and future market demand, customer behavior, and industry competition, while environmental trends can impact factors such as regulations, sustainability, and social responsibility. Both are crucial factors to consider in an industry analysis.

Question 8

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

Accepted Answer

Industry analysis is a type of business research that focuses on evaluating the potential of an industry or sector. It involves examining factors such as market size, growth trends, competition, legal and regulatory environment, and technological developments that could impact the industry's future prospects. The goal of industry analysis is to help businesses make informed decisions, such as whether to enter a new market or launch a new product, based on a thorough understanding of the industry dynamics and opportunities.

Question 9

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 10

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

The answer of Many firms benefit from an increasing ability...

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 is the process of conducting research on a particular industry to determine its current and future potential. It involves analyzing market trends, competition, regulatory factors, and other factors that can impact the industry's growth and profitability.

Question 12

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

The answer of Once a firm decides to enter an...

Question 13

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. This indicates that there is a lower level of competition, supplier and buyer power is lower, and there are less potential substitutes and new entrants. This creates a more stable market environment and potentially higher profits for firms operating in the industry.

Question 14

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

Accepted Answer

When the threat of substitutes is low, consumers are less likely to switch to a different product or service, which makes the industry more attractive. This is because the industry has more control over pricing and can maintain a stable customer base. If the threat of substitutes is high, consumers will have many options to choose from and may not be loyal to a particular company or brand, which puts pressure on the industry to offer competitive prices and innovate to stay relevant. Therefore, a low threat of substitutes is generally more attractive for industries.

Question 15

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 16

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. This means they anticipate and respond to changes in the five forces by adjusting their strategy, structure, and competitive positioning. They may seek to differentiate their products or services, create barriers to entry, reduce supplier or buyer power, or adopt new technologies and innovations to stay ahead of competitors.

Question 17

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

Various studies have shown that from 8% to 30% of the variation in firm profitability is directly attributable to the industry in which a firm competes. This implies that the majority of the variation in profitability can be attributed to factors other than the industry such as the firm's strategy, management practices, and execution capabilities.

Question 18

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

The answer of What is industry analysis? Why is it...

Question 19

Greenvelope, the company profiled in the opening feature of Chapter 5, believes it has created sufficient barriers to entry to enable it to maintain a leadership position in the invitation industry. Its barriers to entry include ________.

Accepted Answer

The answer of Greenvelope, the company profiled in the opening...

Question 20

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 real alternative to prescription medicine helps keep profitability high. This is because consumers are willing to pay high prices for medicine since there are no substitutes that can effectively cure their illness.

Quiz 5: Industry and Competitor Analysis