Question 1

Which of the following is a valid observation of the rivalry among existing competitors?

Accepted Answer

The answer of Which of the following is a valid...

Question 2

Videoconferencing has evolved as an alternative for business travelling. This is an example of ________.

Accepted Answer

The evolution of videoconferencing as an alternative for business travelling is an example of the threat of substitutes in the market. It shows how technology has made it possible for people to conduct meetings and conferences without physically travelling, thereby creating a substitute for traditional business travelling.

Question 3

Which of the following factors increases the power of suppliers?

Accepted Answer

High switching costs make it difficult for buyers to switch to a different supplier, giving more power to the existing suppliers. Governmental regulations, low-scale operations, and competitive pressures generally decrease the power of suppliers.

Question 4

ABC Company supplies milk to retail customers in the U.S. There are many sellers offering milk and price is a major determinant of market success. Which of the following predictions about ABC Company is most likely to be true?

Accepted Answer

Since there are many sellers offering milk and price is a major determinant of market success, ABC Company is likely to face powerful buyers who have the ability to negotiate and drive prices down. Therefore, option C is the most likely prediction. Option A and D are unlikely since ABC Company is a milk supplier and not a milk producer or distributor. Option B is also unlikely since ABC Company is likely to compete on price with other sellers and not dictate terms to buyers.

Question 5

IBF Associates manufactures automotive components such as seat belts, seats, mufflers, etc. The company supplies its products to leading car manufacturers in Europe and America. Which of the following statements, if true, would indicate that IBF has high bargaining power?

Accepted Answer

A long-term contract like a five-year agreement suggests that IBF has secured a stable demand for its products, indicating high bargaining power.

Question 6

Durodoll is a leading manufacturer of decorative crafts in Canada. Which of the following, if true, will indicate that the threat of new entrants is high for Durodoll?

Accepted Answer

If the crafts that Durodoll manufactures are low-priced commodities, it indicates that there may not be a significant barrier to entry for new companies to enter the market and manufacture similar products, leading to higher competition for Durodoll. The other options, such as having a patent, a labor-intensive process, or a capital-intensive industry, may act as barriers to entry for new entrants, reducing the threat to Durodoll's market share.

Question 7

Rivalry in an industry is high when the ________.

Accepted Answer

When companies compete on price, it creates a highly competitive environment where profit margins are low, and firms are constantly fighting for market share. This leads to high rivalry in the industry as each company tries to outperform the others to gain a competitive edge.

Question 8

Network effects refer to the ________.

Accepted Answer

Network effects refer to the increased value of a product or service resulting simply because there are more people using it. This can be seen in social media platforms like Facebook, where the more people who use it, the more valuable it becomes for users and advertisers.

Question 9

Which of the following is a result of high rivalry among existing competitors?

Accepted Answer

High rivalry among existing competitors typically leads to price competition and increased costs, which ultimately leads to decreased market profitability. The other options are not necessarily a result of high rivalry among existing competitors.

Question 10

Substitutes of a product ________.

Accepted Answer

Substitutes provide the same product or service through different means. This means that they may not have the same technical specifications as the product and may operate in the same or different target markets. The presence of substitutes can have a direct impact on the profitability of the product, as consumers may switch to the substitute if it is cheaper or more convenient.

Question 11

Which of the following strategies is devised to raise switching costs?

Accepted Answer

Loyalty cards are a common strategy used to raise switching costs as they incentivize customers to continue purchasing from a particular company in order to earn rewards or benefits.

Question 12

Facebook, the world's most visited Web site as of June 2011, has millions of users. The large membership base of Facebook would mean that a user is likely to find most of his friends when he logs in to Facebook. Lack of this competence prevents new players from penetrating Facebook's market. This is an example of ________.

Accepted Answer

The situation described is an example of network effects, where the value of a product or service increases as more people use it. In this case, Facebook's large user base adds value to the site because it increases the chances of a user finding their friends on the site. This makes it harder for new competitors to enter the market and attract users away from Facebook.

Question 13

Which of the following industries has the highest switching cost?

Accepted Answer

Software industry has the highest switching cost since software products can be complex and customized to the user's needs. Additionally, once a company has invested in a certain software, it can be very difficult and expensive to switch to a new system, as it may require retraining employees, transferring data and adopting new processes. This creates a sort of lock-in effect, where customers are 'stuck' with a certain software provider.

Question 14

Which of the following companies will have the highest buying power?

Accepted Answer

The answer of Which of the following companies will have...

Question 15

________ is high in an industry when alternative products that offer attractive savings are available.

Accepted Answer

The statement is referring to the threat of substitutes, which is the degree to which alternative products or services can satisfy the same consumer needs as the original product. When there are attractive savings offered by these alternatives, the threat of substitutes is high, as consumers may switch to these substitutes instead of the original product.

Question 16

Which of the following is the best example of an attempt to create network effects?

Accepted Answer

AT&T introducing a family plan that provides free calls within the family is the best example of an attempt to create network effects. This is because by providing free calls within the family, AT&T is creating a network effect where more people within a family are incentivized to use AT&T's services. This can lead to more customers signing up for AT&T services in order to take advantage of the free calls, further increasing the network effect.

Question 17

________ are the costs that customers incur when they change suppliers.

Accepted Answer

Switching costs are the costs incurred by customers when they switch from one supplier to another. These can include both financial costs (such as fees for cancelling contracts or purchasing new equipment) and non-financial costs (such as the time and effort required to research new suppliers, negotiate new contracts, and set up new systems or processes). Switching costs can act as a barrier to entry for new competitors, as they make it more difficult for customers to switch to a new provider.

Question 18

Which of the following is one of the five competitive forces proposed by Porter?

Accepted Answer

The one of the five competitive forces proposed by Porter is the threat of substitutes. The other options - employee productivity, market volatility, and governmental influence - are not among the five forces identified by Porter.

Question 19

How did online markets affect the balance of power between buyers and suppliers?

Accepted Answer

Online markets have increased transparency, competition, and accessibility, giving buyers more options and information to make informed purchasing decisions. This shift in power has made suppliers more competitive, leading to lower prices and increased buyer power. Additionally, online reviews and ratings allow buyers to hold suppliers accountable, further increasing buyer power. Therefore, buyers have become more powerful than the sellers.

Question 20

If a supplier has a limited number of buyers, then the ________.

Accepted Answer

If a supplier has a limited number of buyers, then the buyers will have more power as they have the ability to dictate terms and negotiate prices with the supplier. This is because the supplier is dependent on a small pool of buyers for their business, giving buyers more bargaining power. Therefore, choice D is the correct answer. The other choices are not relevant or untrue in this scenario.

Quiz 2: Information Systems and Strategy