Question 1

Industry structures are not stable over time.The U.S.banking industry has seen major consolidation in recent years.We would expect the result of this dynamic change to be what?
A) Generally lower industry profits.
B) It will have no effect on profitability.
C) Further erosion in business.
D) Generally higher industry profits.

Accepted Answer

Having fewer competitors generally equates to higher industry profitability.

Question 2

Mr.Smith was looking to buy a car but decided to buy a motorcycle instead.The motorcycle is a _______ and comes from outside the original industry.
A) complement
B) substitute
C) convergence
D) complementor

Accepted Answer

Substitutes are products or services that come from outside the given industry which satisfy the needs of a customer.

Question 3

The five-forces-plus-complements model is useful in understanding industry profit potential,but it is only a snapshot in time.Managers must also consider ___________.
A) the cost structure
B) the industry dynamics
C) the competitive landscape
D) the strategic group

Accepted Answer

To overcome the point-in-time analysis limitation, businesses must actively consider the changes over time or industry dynamics.

Question 4

The soft drink industry has been one of the most profitable industries for years.There are two key competitors,Coke and Pepsi,who compete on product innovation and lifestyle advertising.Additionally,barriers to entry are high and supplier power is weak.Michael Porter calls this industry:
A) A positive-sum industry
B) A "five star" industry
C) A shining star industry
D) A complementary industry

Accepted Answer

A "five star" industry is one in which the five competitive forces are relatively weak and this leads to superior industry performance.

Question 5

John Connelly went to the grocery store to buy some butter.As he was looking at the butter offerings,he noticed that Pam cooking spray was advertised as $1.00 less for the same amount of product.John purchased the spray.The spray is considered to be a what?
A) A complement
B) A mobility product
C) A replacement
D) A substitute

Accepted Answer

Substitutes are products from outside the industry that meet the current needs of customers.

Question 6

When the collective strength of the five forces works against an industry:
A) Individual firms should compete on price.
B) Individual firms should move from one strategic group to another.
C) The profit potential is weak.
D) There is a high degree of profit potential.

Accepted Answer

The stronger the forces, the lower the industry's ability to earn above-average profits.

Question 7

Competitive intensity will increase when all of the following happen EXCEPT:
A) Proprietary technology is a core capability.
B) Rivals are similar in size and capability.
C) Buyers switching costs are low.
D) Exit barriers are high.

Accepted Answer

Proprietary technology protects firms from rivalry.

Question 8

Given its size and industry influence,Walmart would be a powerful buyer.Which of the following is NOT an indication of Walmart's strength as a buyer?
A) Three suppliers merge together to gain economy of scale.
B) Suppliers locate very near Walmart's corporate headquarters.
C) Walmart switches from Rubbermaid to another vendor for containers.
D) Walmart decides to start manufacturing its own clothes to sell.

Accepted Answer

Three suppliers merging together could increase their supplier influence by reducing the competition among suppliers.

Question 9

What is the sixth force of industry attractiveness?
A) Substitutes
B) Economic growth rates
C) Complements
D) Technological innovation

Accepted Answer

A complement is considered to be the sixth force of industry attractiveness because it adds value to the original product offering.

Question 10

A large textile manufacturer located in South Carolina had to exit the industry because it could no longer compete with firms from overseas.The company laid off hundreds of employees,its suppliers started to struggle,and several local establishments closed their doors.It can be said that the local economy in South Carolina was experiencing what?
A) The retaliation effects of abandonment
B) The ripple effects through the supply chain
C) The destructive role of complements
D) Dynamic industry consequences

Accepted Answer

Ripple effects happen when a firm exits the industry and the entire supply chain is adversely affected.

Question 11

Microsoft and Intel are complements to each other.Their alternating advances over time have created a ________.
A) virtuous cycle
B) virtual circle
C) circle of complements
D) mobility barrier

Accepted Answer

Microsoft and Intel created a virtuous cycle that is mutually beneficial to the firms.

Question 12

Which of the following would NOT indicate that buyers are a strong competitive force?
A) They can integrate backward.
B) They can purchase from several sellers.
C) They are reliant on the industry's product.
D) They buy in large quantities.

Accepted Answer

When buyers are reliant on an industry's product, it weakens their bargaining power.

Question 13

The competitive threat of potential entry is NOT strong when _____________.
A) there will be expected competitive retaliation
B) there are sizable economies of scale
C) there are strong brand preferences and customers are loyal
D) All of these

Accepted Answer

Entry barriers include competitive retaliation, large economies of scale, and brand loyalty.

Question 14

Exit barriers are obstacles that determine how easily a firm can leave the industry.When exit barriers are high,what happens to industry attractiveness?
A) It decreases.
B) It increases.
C) It becomes a complement.
D) It has no impact.

Accepted Answer

High exit barriers cause firms to stay in the industry longer than they may want to and increases rivalry, thereby reducing potential profits.

Question 15

Applying the five forces model to the airline and soft drink industries demonstrates all EXCEPT which of the following?
A) The soft drink industry has fairly low forces.
B) The airline industry has a high level of forces.
C) The profit level should be higher in the soft drink industry than the airline industry.
D) The macro environmental forces are similar between the airline and soft drink industries.

Accepted Answer

The five forces model does not address macro environmental factors such as those found in PESTEL.

Question 16

Competitive rivalry will get weaker when all of the following happen EXCEPT:
A) Demand is growing.
B) Exit barriers are low.
C) Products are differentiated.
D) One firm's actions will have little direct impact on a rival.

Accepted Answer

High exit barriers intensify rivalry.

Question 17

Which of the following would NOT indicate that sellers are a strong competitive force?
A) Substitutes exist for their components.
B) They can supply the component for a cheaper cost than industry makers can produce it.
C) The buyers of their component are not important customers.
D) The component that they supply affects buyer product quality.

Accepted Answer

When substitutes exist for a supplier's product, it weakens their bargaining power.

Question 18

A ____________ is a product or service that can help raise demand in an industry by indirectly enhancing performance or decreasing prices.
A) core competency
B) substitute
C) complement
D) component

Accepted Answer

A complement is a product, service, or competency that adds value to, and increases the demand for, the primary product offering.

Question 19

Which of the following is NOT a major consideration of barriers to entry?
A) Capital requirements
B) Brand identity
C) Positive growth rate
D) Economies of scale

Accepted Answer

Positive growth rates in an industry attract entrants, so it is not an entry barrier.

Question 20

The U.S.airline industry has intense rivalry,primarily undifferentiated products,low entry barriers,and low switching costs.Furthermore,suppliers of aircraft engines to the industry have strong bargaining power.It is no surprise that this industry has been one of the least profitable for years.Michael Porter calls this industry what?
A) A zero-sum industry
B) A "zero star" industry
C) A declining star industry
D) A competitively dynamic industry

Accepted Answer

A "zero star" industry is an industry in which the five competitive forces are strong, which leads to inferior industry performance.

Quiz 3: External Analysis: Industry Structure, Competitive Forces, and Strategic Groups

Industry structures are not stable over time.The U.S.banking industry has seen major consolidation in recent years.We would expect the result of this dynamic change to be what?

Mr.Smith was looking to buy a car but decided to buy a motorcycle instead.The motorcycle is a _______ and comes from outside the original industry.

The five-forces-plus-complements model is useful in understanding industry profit potential,but it is only a snapshot in time.Managers must also consider ___________.

The soft drink industry has been one of the most profitable industries for years.There are two key competitors,Coke and Pepsi,who compete on product innovation and lifestyle advertising.Additionally,barriers to entry are high and supplier power is weak.Michael Porter calls this industry:

John Connelly went to the grocery store to buy some butter.As he was looking at the butter offerings,he noticed that Pam cooking spray was advertised as $1.00 less for the same amount of product.John purchased the spray.The spray is considered to be a what?

When the collective strength of the five forces works against an industry:

Competitive intensity will increase when all of the following happen EXCEPT:

Given its size and industry influence,Walmart would be a powerful buyer.Which of the following is NOT an indication of Walmart's strength as a buyer?

What is the sixth force of industry attractiveness?

Microsoft and Intel are complements to each other.Their alternating advances over time have created a ________.

Which of the following would NOT indicate that buyers are a strong competitive force?

The competitive threat of potential entry is NOT strong when _____________.

Exit barriers are obstacles that determine how easily a firm can leave the industry.When exit barriers are high,what happens to industry attractiveness?

Applying the five forces model to the airline and soft drink industries demonstrates all EXCEPT which of the following?

Competitive rivalry will get weaker when all of the following happen EXCEPT:

Which of the following would NOT indicate that sellers are a strong competitive force?

A ____________ is a product or service that can help raise demand in an industry by indirectly enhancing performance or decreasing prices.

Which of the following is NOT a major consideration of barriers to entry?