Question 1

The telecom industry in the country of New Taria is an industry characterized by the presence of strong network effects,high brand loyalty,high economies of scale,and proprietary technology among incumbent firms.Thus,in the telecom industry,the
A) threat of substitutes is most likely high.
B) threat of new entrants is most likely low.
C) bargaining power of buyers is most likely low.
D) entry barriers are most likely nonexistent.

Accepted Answer

In this scenario, the threat of new entrants is most likely low. The threat of potential entry is reduced when network effects are present. The threat of entry describes the risk that potential competitors will enter the industry. Entry barriers, which are advantageous for incumbent firms, are obstacles that determine how easily a firm can enter an industry.

Question 2

Which of the following statements is not true about the five forces in Porter's competitive analysis model?
A) The relative strengths of the five forces that shape competition are context-dependent.
B) The stronger the five forces in an industry, the greater the industry's profit potential.
C) Competition in the model is described as the tug-of-war between the five forces to capture as much as possible of the economic value created in an industry.
D) An analysis of the five forces provides the basis for how a firm should position itself to gain and sustain a competitive advantage.

Accepted Answer

As a rule of thumb, the stronger the five forces in an industry, the lower the industry's profit potential-making the industry less attractive for competitors. The reverse is also true: the weaker the five forces, the greater the industry's profit potential-making the industry more attractive.

Question 3

Economies of scale are cost advantages that accrue for firms with
A) high fixed costs.
B) low employee turnover.
C) larger output.
D) high capital risks.

Accepted Answer

Economies of scale are cost advantages that accrue for firms with larger output because they can spread fixed costs over more units, can employ technology more efficiently, can benefit from a more specialized division of labor, and can demand better terms from their suppliers.

Question 4

What is most likely to happen when there is too much money in an economy?
A) There are too many goods and services.
B) There is a drop in interest rates.
C) There is high economic growth.
D) There is an increase in prices.

Accepted Answer

Too much money in an economy is characterized by rising prices-inflation. Inflation tends to go along with higher interest rates and lower economic growth.

Question 5

The _____ allows the scanning,monitoring,and evaluating of changes and trends in a firm's macro environment.
A) VRIO framework
B) SWOT analysis
C) BCG matrix
D) PESTEL framework

Accepted Answer

The PESTEL framework allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.

Question 6

A firm's _____ relates to its ability to create value for customers (V)while containing the cost to do so (C).
A) strategic position
B) incumbency
C) threat of entry
D) attrition rate

Accepted Answer

A firm's strategic position relates to its ability to create value for customers (V) while containing the cost to do so (C). Competitive advantage flows to the firm that is able to create as large a gap as possible between the value the firm's product or service generates and the cost required to produce it (V C).

Question 7

In 2008,BlackBerry's market cap peaked at $75 billion.By 2015 this valuation had fallen more than 90 percent,to less than $7 billion.BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological.How did technology contribute to BlackBerry's decline?
A) BlackBerry failed to offer strong security features for its device.
B) BlackBerry failed to change its device into one that could perform multiple tasks effectively.
C) BlackBerry failed to adapt to a groundswell that involved workers bringing mobile devices to work.
D) BlackBerry failed to produce an efficient emailing system using a keyboard.

Accepted Answer

Although BlackBerry devices were great in productivity applications, such as receiving and responding to email via typing on its iconic physical keyboard, they did not provide effective access to texting, surfing the web, taking pictures, or playing games. Because of this, BlackBerry declined because it could not compete with iPhone, which performed multiple tasks effectively.

Question 8

Which of the following is most likely an implication of new firms entering an industry?
A) The bargaining power of buyers will reduce.
B) The industry's overall profit potential and sales will increase.
C) The rivalry among existing competitors will reduce.
D) The incumbent firms will spend more to satisfy their existing customers.

Accepted Answer

The threat of entry by additional competitors may force incumbent firms to spend more to satisfy their existing customers. Larger investments in value creation further reduce an industry's profit potential if prices cannot be raised.

Question 9

Keeping in mind the five forces in the airline industry,which of the following best explains the situation in the industry?
A) Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry.
B) Suppliers have weak bargaining power because they offer products that are not differentiated.
C) Entry barriers in the industry are high resulting in hardly any new airlines popping up.
D) Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry.

Accepted Answer

According to Strategy Highlight 3.2, the competitive forces are quite unfavorable for generating a profit potential in the airline industry. Substitutes are readily available: If prices are seen as too high, customers can drive their cars or use the train or bus.

Question 10

Which of the following represents an economic factor in a firm's external general environment?
A) the government regulations and laws in the country in which the firm exists
B) the stage of the business cycle that the country is in
C) the values and norms prevalent in the society in which the firm operates
D) the bargaining power of the firm's suppliers and buyers

Accepted Answer

The overall economic growth rate is a measure of the change in the amount of goods and services produced by a nation's economy. It indicates what stage of the business cycle the economy is in-that is, whether business activity is expanding (boom) or contracting (recession).

Question 11

The government of Filvia has mandated that the standard minimum wage in the country be increased to $8,000 per year.This has ensured that all firms in the country pay their employees at least $8,000 per year,which has brought about a higher standard of living for the people of Filvia.Which of the following factors in a firm's general environment does this mandate best indicate?
A) ecological factors
B) sociocultural factors
C) technological factors
D) legal factors

Accepted Answer

This mandate best indicates legal factors in a firm's general environment. The legal environment captures the official outcomes of political processes as manifested in laws, mandates, regulations, and court decisions-all of which can have a direct bearing on a firm's profit potential.

Question 12

In a firm's external environment,_____ primarily capture population characteristics related to age,gender,family size,ethnicity,sexual orientation,religion,and socioeconomic class.
A) political trends
B) demographic trends
C) ecological trends
D) economic trends

Accepted Answer

Demographic trends are important sociocultural forces. These trends capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.

Question 13

Which of the following is a primary feature of the five forces model?
A) It is concerned exclusively about the intensity of rivalry among direct competitors.
B) It takes into account a firm's internal resources, capabilities, and core competencies.
C) It helps managers determine the changing speed of an industry or the rate of innovation.
D) It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

Accepted Answer

In Porter's five forces model, competition is not defined narrowly as the firm's closest competitors, but rather more broadly to include other forces in an industry: buyers, suppliers, potential new entry of other firms, and the threat of substitutes.

Question 14

Which of the following factors best contributes to the U.S.automotive industry being characterized by high entry barriers?
A) New auto companies create electric cars powered by simpler motors and gearboxes.
B) New entrants in the automotive industry expect that incumbents will not or cannot retaliate.
C) Car manufacturers require large-scale production in order to be cost-competitive.
D) Few industrial products are as easy to build as cars powered by internal combustion engines.

Accepted Answer

The U.S. automotive industry is characterized by high entry barriers. Car manufacturers require large-scale production in order to be cost-competitive.

Question 15

A firm's strategic position is likely to be strong when
A) the entry barriers within the industry it operates in are low and the exit barriers are high.
B) its suppliers and vendors can easily forward integrate and buyers can backward integrate.
C) all the five forces in Porter's model are strong.
D) the gap between the value the firm's product generates and the cost to produce it is large.

Accepted Answer

A firm's strategic position relates to its ability to create value for customers (V) while containing the cost to do so (C). Competitive advantage flows to the firm that is able to create as large a gap as possible between the value the firm's product or service generates and the cost required to produce it.

Question 16

Which of the following external forces is a part of a firm's task environment?
A) the composition of the strategic group to which the firm belongs
B) the interest rates prevalent in the economy in which the firm operates
C) the inflation level in the economy in which the firm operates
D) the recent innovations in process technology, including lean manufacturing

Accepted Answer

External factors in a firm's task environment are ones that managers do have some influence over, such as the composition of their strategic groups (a set of close rivals) or the structure of the industry.

Question 17

Which of the following is an implication of low interest rates?
A) Cost of capital for firms will be high.
B) Firms will invest less in future growth.
C) Economic growth rate will fall.
D) Consumer demand will increase.

Accepted Answer

Low interest rates have a direct bearing on consumer demand. When credit is cheap (because interest rates are low), consumers buy homes, automobiles, computers, and even vacations on credit; in turn, all of this demand fuels economic growth. During periods of low interest rates, firms can easily borrow money to finance future growth. Borrowing at lower rates lowers the cost of capital and enhances a firm's competitiveness.

Question 18

Which of the following do the sociocultural forces in a firm's external environment best represent?
A) the interest rates prevalent in an economy
B) the laws protecting small enterprises in a nation
C) the family size of the firm's target market
D) the rate of employee attrition within the firm

Accepted Answer

Sociocultural factors capture a society's cultures, norms, and values. Demographic trends are also important sociocultural forces. These trends capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.

Question 19

In the _____ developed by Michael Porter,competition is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers,suppliers,potential new entry of other firms,and the threat of substitutes.
A) PESTEL framework
B) VRIO framework
C) five forces model
D) value chain analysis

Accepted Answer

In Porter's five forces model, competition is not defined narrowly as a firm's closest competitors but rather more broadly to include other forces in an industry: buyers, suppliers, potential new entry of other firms, and the threat of substitutes.

Question 20

The primary objective of Porter's five forces model is to
A) replace a firm's competitive advantage with competitive parity.
B) understand the profit potential of different industries.
C) reduce the gap between the value of a firm's product and its cost of production.
D) break down a firm's value chain activities into primary and support.

Accepted Answer

Michael Porter developed the highly influential five forces model to help managers understand the profit potential of different industries and how they can position their respective firms to gain and sustain competitive advantage.

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

The telecom industry in the country of New Taria is an industry characterized by the presence of strong network effects,high brand loyalty,high economies of scale,and proprietary technology among incumbent firms.Thus,in the telecom industry,the

Which of the following statements is not true about the five forces in Porter's competitive analysis model?

Economies of scale are cost advantages that accrue for firms with

What is most likely to happen when there is too much money in an economy?

The _____ allows the scanning,monitoring,and evaluating of changes and trends in a firm's macro environment.

A firm's _____ relates to its ability to create value for customers (V) while containing the cost to do so (C) .

Which of the following is most likely an implication of new firms entering an industry?

Keeping in mind the five forces in the airline industry,which of the following best explains the situation in the industry?

Which of the following represents an economic factor in a firm's external general environment?

In a firm's external environment,_____ primarily capture population characteristics related to age,gender,family size,ethnicity,sexual orientation,religion,and socioeconomic class.

Which of the following is a primary feature of the five forces model?

Which of the following factors best contributes to the U.S.automotive industry being characterized by high entry barriers?

A firm's strategic position is likely to be strong when

Which of the following external forces is a part of a firm's task environment?

Which of the following is an implication of low interest rates?

Which of the following do the sociocultural forces in a firm's external environment best represent?

In the _____ developed by Michael Porter,competition is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers,suppliers,potential new entry of other firms,and the threat of substitutes.

The primary objective of Porter's five forces model is to