Chapter 2—External Analysis: The Identification of Opportunities and Threats
TRUE/FA!E
1. In determining its opportunities opportunities and and threats, a firm should should focus on internal processes and capabilities. ANS: F PTS: 1 DIF: as! "#$: 1 % &e'ie( the the primar! techni)ue used to anal!*e competition competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence - -: -no( -no(le ledg dgee /. "pportunities arise (hen a compan! ta0es ad'antage ad'antage of conditions conditions in its en'ironment en'ironment to formulate formulate and implement strategies that allo( it to be more profitable. ANS: T PTS: 1 DIF: as! "#$: 1 % &e'ie( the the primar! techni)ue used to anal!*e competition competition in an industr! en'ironment: the +ompetiti'e Forces modell NAT: AA+S# Anal!tic n'ironmental Influence - -: -no( -no(le ledg dgee . "'er the last last fe( decades, decades, the 2nited 2nited States steel steel industr! industr! has become become less concent concentrated rated.. ANS: F PTS: 1 DIF: Difficult "#$: % Discuss ho( industries industries e'ol'e e'ol'e o'er o'er time (ith reference reference to the industr! industr! life%c!cle life%c!cle model NAT NAT: AA+S# Anal!tic Anal!tic n'ironmental n'ironmental Influence -: -no(ledge 3. The +ott +orporation, in in the soft soft drin0 industr!, industr!, is an e4ample of of ho( a compan! failed to o'ercome o'ercome barriers to entr! in an industr!. industr!. ANS: F PTS: 1 DIF: Difficult "#$: 1 % &e'ie( the the primar! techni)ue used to anal!*e competition competition in an industr! en'ironment: the +ompetiti'e Forces model NAT NAT: AA+S# &eflecti'e Thin0ing Thin0ing n'ironmental n'ironmental Influence -: Application 5. The bottled bottled (ater (ater industr! industr! created created ne( competito competitors rs for +oca%+ola, +oca%+ola, but did not not change the basic basic industr! boundaries. ANS: F PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the the primar! techni)ue used to anal!*e competition competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence - -: -no( -no(le ledg dgee 7. In Porter8s Porter8s frame(or0, frame(or0, the stronge strongerr the fi'e forces, forces, the more limited limited the abilit! abilit! of establi established shed companies to raise prices and earn greater profits. ANS: T PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the the primar! techni)ue used to anal!*e competition competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence - -: -no( -no(le ledg dgee 9. Fortunatel! Fortunatel!,, substitut substitutee products products are not a threat if a compan! compan! is the mar0et mar0et leader. leader. ANS: F
PTS: 1
DIF:
6oderate
"#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension . The personal computer industr! is uni)uel! dependent upon a po(erful supplier, Intel. ANS: T PTS: 1 DIF: as! "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# &eflecti'e Thin0ing +reation of ;alue -: Application <. Access to cheaper capital is an e4ample of an econom! of scale. ANS: F PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic +reation of ;alue -: +omprehension 1=. 'en (hen entr! barriers are 'er! high, ne( firms ma! still enter an industr! if the! percei'e that the benefits out(eigh the costs of entr!. ANS: T PTS: 1 DIF: as! "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge 11. In general, the more that an industr!8s product is li0e a commodit!, the lo(er the intensit! of an! price (ar that ma! de'elop. ANS: F PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!ttic n'ironmental Influence -: +omprehension 1/. Strong brand lo!alt! and high customer s(itching costs are lo( barriers to entering an industr!. ANS: F PTS: 1 DIF: Difficult "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 1. >igh e4it barriers are most serious as a competiti'e threat (hen industr! demand is declining. ANS: T PTS: 1 DIF: Difficult "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 13. ?o'ernment deregulation of telephone ser'ice lo(ered the barriers to entr! and lo(ered industr! profit margins. ANS: T PTS: 1 DIF: Difficult "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the
+ompetiti'e Forces model -: +omprehension
NAT: AA+S# Anal!tic @egal &esponsibilities
15. hen bu!ers are in a (ea0 bargaining position, companies in the suppl!ing industr! must lo(er their prices to increase profits. ANS: F PTS: 1 DIF: Difficult "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: Anal!sis 17. Intense ri'alr! lo(ers prices and raises costs. ANS: T PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge 19. >igh tech industries are often dependent on complementor industries for their mutual success. ANS: T PTS: 1 DIF: 6oderate "#$: / % 4plore the concept of strategic groups and illustrate the implications for industr! anal!sis NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge 1. Starbuc0s and an independent local cafB both sell coffee and therefore belong to the same strategic group. ANS: F PTS: 1 DIF: Difficult "#$: / % 4plore the concept of strategic groups and illustrate the implications for industr! anal!sis NAT: AA+S# &eflecti'e Thin0ing Strateg! -: Anal!sis 1<. Strategic groups (ithin an industr! compete amongst themsel'es e'en though their business models ma! 'ar! greatl!. ANS: T PTS: 1 DIF: 6oderate "#$: / % 4plore the concept of strategic groups and illustrate the implications for industr! anal!sis NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge /=. &apid gro(th in industr! demand enables companies to e4pand their re'enues and profits (ithout ta0ing mar0et share a(a! from competitors. ANS: T PTS: 1 DIF: as! "#$: % Discuss ho( industries e'ol'e o'er time (ith reference to the industr! life%c!cle model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge /1. 2nfortunatel!, successful inno'ation cannot transform the nature of industr! competition. ANS: F PTS: 1 DIF: 6oderate "#$: % Discuss ho( industries e'ol'e o'er time (ith reference to the industr! life%c!cle model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge //. "ne of the defining characteristics of the mature stage of the industr! life c!cle is that gro(th is lo( or *ero.
ANS: T PTS: 1 DIF: 6oderate "#$: % Discuss ho( industries e'ol'e o'er time (ith reference to the industr! life%c!cle model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge /. The punctuated e)uilibrium 'ie( can also be described as a free*ing but not unfree*ing process in an industr!8s life c!cle. ANS: F PTS: 1 DIF: 6oderate "#$: % Discuss ho( industries e'ol'e o'er time (ith reference to the industr! life%c!cle model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge /3. hen the 'alue of the dollar is lo( compared (ith the 'alue of other currencies, products made in the 2nited States are relati'el! ine4pensi'e and products made o'erseas are relati'el! e4pensi'e. ANS: T PTS: 1 DIF: 6oderate &F: p. 9= "#$: 3 % Sho( ho( trends in the macroen'ironment can shape the nature of competition in an industr! NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension /5. +hanges in the characteristics of a population, such as age or race, are irrele'ant to the anal!sis of an industr!8s macroen'ironment. ANS: F PTS: 1 DIF: as! "#$: 3 % Sho( ho( trends in the macroen'ironment can shape the nature of competition in an industr! NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge /7. Anheuser #usch, because it dominates the mass%mar0et beer segment, does not complete (ith micro% bre(ers. ANS: F PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: Anal!sis /9. Deregulation of the mortgage industr! is an e4ample of ho( political and legal forces can impact an industr!. ANS: T PTS: 1 DIF: 6oderate "#$: 3 % Sho( ho( trends in the macroen'ironment can shape the nature of competition in an industr! NAT: AA+S# &eflecti'e Thin0ing @egal &esponsibilities -: Application /. A technological change such as the rise of the Internet can represent either an opportunit! or a threat. ANS: T PTS: 1 DIF: 6oderate "#$: 3 % Sho( ho( trends in the macroen'ironment can shape the nature of competition in an industr! NAT: AA+S# Technolog! Information Technologies -: +omprehension /<. A group of firms all ma0e tools for ba0ing %% pots, pans, measuring cups, and utensils. This group should be referred to as a mar0et segment.
ANS: F PTS: 1 DIF: Difficult "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# &eflecti'e Thin0ing n'ironmental Influence -: Anal!sis =. Interest rates ha'e an impact on the sale of autos, appliances, and capital e)uipment and thus represent a macoeconomic force. ANS: T PTS: 1 DIF: 6oderate "#$: 3 % Sho( ho( trends in the macroen'ironment can shape the nature of competition in an industr! NAT: AA+S# &eflecti'e Thin0ing n'ironmental Influence -: Anal!sis "UTI#E C$OICE
1. A group of firms all ma0e (riting implements pens, pencils, and mar0ers. This group should be referred to as aCn a. substitute. b. mar0et segment. c. sector. d. supplier. e. industr!. ANS: PTS: 1 DIF: Difficult "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# &eflecti'e Thin0ing n'ironmental Influence -: Anal!sis /. 2nited Airlines, Amtra0, and ?re!hound are all companies in the transportation a. industr!. b. sector. c. game. d. segment. e. strategic group. ANS: # PTS: 1 DIF: Difficult "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# &eflecti'e Thin0ing n'ironmental Influence -: Application . +osmetics ma0ers focus on the uni)ue needs of customers of different ages. The cosmetics ma0ers recogni*e the importance of a. shifting industr! boundaries. b. the threat of ne( entrants. c. sectors. d. mar0et segments. e. substitutes. ANS: D PTS: 1 DIF: Difficult "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# &eflecti'e Thin0ing n'ironmental Influence -: Application
3. An industr! can be defined as a group of a. companies offering products or ser'ices that are close substitutes for each other. b. t(ent! or more companies offering products or ser'ices that are close substitutes for each other. c. companies. d. companies that offer dissimilar products or ser'ices. e. companies that offer products or ser'ices to dissimilar customers. ANS: A PTS: 1 DIF: as! "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge 5. hat is the impact of shifting industr! boundaries on firms (ithin the industr!E a. >igher e4it barriers b. 6ore competitors c. &educed threat of substitutes d. ?reater bargaining po(er of suppliers e. @esser bargaining po(er of bu!ers ANS: # PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 7. hich of the follo(ing is not one of Porter8s fi'e forces, as proposed in his original modelE a. Threat of complementors b. #argaining po(er of suppliers c. &i'alr! among established companies d. Threat of ne( entrants e. Threat of mar0et changes ANS: A PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge 9. hich of the follo(ing components (as an e4tension of Porter8s original fi'e forces modelE a. &is0 of entr! b! potential competitors b. The intensit! of ri'alr! among established companies (ithin an industr! c. The bargaining po(er of bu!ers d. The bargaining po(er of suppliers e. The lac0 of substitutes for an industr!8s products ANS: A PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge . hich of the follo(ing is not a barrier to entr!E a. conomies of scale b. #rand lo!alt! c. Absolute cost ad'antages d. >igh customer bargaining po(er e. >igh customer s(itching costs
ANS: D PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge <. If economies of scale are an industr!8s primar! entr! barrier, a ne( entrant8s maor ris0 is a. its inabilit! to access labor and materials. b. the inferior )ualit! of its products. c. its inabilit! to match the inno'ation of the established firm. d. its inabilit! to produce in sufficient 'olume to match the cost ad'antages of established producers. e. its inabilit! to get bu!ers to s(itch to its product. ANS: D PTS: 1 DIF: Difficult "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic +reation of ;alue -: +omprehension 3=. As a barrier to ne( entr!, absolute cost ad'antages can be based on a. continuous ad'ertising of brand and compan! names. b. high product )ualit!, ser'ice%oriented inno'ations, and good after%sales ser'ice. c. cost reductions that arise from the mass production of standardi*ed output. d. the uni)ue abilit! of established companies to spread fi4ed costs o'er a large 'olume. e. control o'er lo(%cost inputs re)uired for production, be the! labor, materials, e)uipment, or management s0ills. ANS: PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 31. hich of the follo(ing industr! structures consists of a large number of small and medium%si*ed companies, none of (hich is in a position to determine industr! priceE a. Fragmented industr! b. +onsolidated industr! c. "ligopol! d. 6onopol! e. Sector ANS: A PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 3/. hich of the follo(ing industr! structures is dominated b! a small number of large companiesE a. Fragmented industr! b. +onsolidated industr! c. "ligopol! d. 6onopol! e. Sector ANS: + PTS: 1 DIF: 6oderate "#$: 11 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence
-: +omprehension 3. hich of the follo(ing is not a determinant of the e4tent of ri'alr! among established companiesE a. Industr! competiti'e structure b. Demand conditions c. The cost structure of firms in an industr! d. 4it barriers e. The po(er of bu!ers ANS: PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 33. The e4tent of ri'alr! among established companies is lo(est (hen a. the industr!8s product is a commodit!. b. demand is gro(ing rapidl!. c. e4it barriers are substantial. d. the industr! is entering a decline stage. e. the industr! is dominated b! a small number of large companies. ANS: # PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmenal Influence -: +omprehension 35. The bargaining po(er of an industr!8s suppliers is greater (hen a. the suppl! industr! is fragmented. b. s(itching costs are high. c. the industr! bu!s in large )uantities. d. man! substitutes are a'ailable. e. firms in the industr! can threaten bac0(ard 'ertical integration. ANS: # PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 37. Sales of complementors8 products tend to a. increase sales of the industr!8s product. b. decrease sales of the industr!8s product. c. ha'e no effect on sales of the industr!8s product. d. increase sales of substitute products. e. decrease sales of substitute products. ANS: A PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge 39. conomies of scale ma! arise from a. cost reductions gained through mass production. b. discounts on bul0 purchases of ra( material inputs and component parts. c. ad'antages gained b! spreading production costs o'er a large production 'olume. d. cost sa'ings associated (ith spreading mar0eting and ad'ertising costs o'er a large 'olume
e.
of output. all of these.
ANS: PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic +reation of ;alue -: -no(ledge 3. hich of the follo(ing is currentl! an embr!onic industr!E a. Personal computers b. #iotechnolog! c. Internet retailing d. Nanotechnolog! e. ireless communications ANS: D PTS: 1 DIF: 6oderate "#$: % Discuss ho( industries e'ol'e o'er time (ith reference to the industr! life%c!cle model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge 3<. 6embers of a strategic group a. compete directl! (ith members of other strategic groups. b. are affected b! Porter8s fi'e competiti'e forces to the same degree that members of other strategic groups are affected. c. follo( a business model that is similar to that pursued b! other companies in the group. d. earn the same rate of return. e. mo'e easil! to other groups as desired. ANS: + PTS: 1 DIF: as! "#$: / % 4plore the concept of strategic groups and illustrate the implications for industr! anal!sis NAT: AA+S# Anal!tic Strateg! -: -no(ledge 5=. A mar0et segment is a group of a. customers (ithin a mar0et that can be different from each other on the basis of their distinct attributes and specific demands. b. companies that produce similar goods or ser'ices. c. customers (ithin a mar0et that purchase goods or ser'ices in similar )uantities. d. customers (ithin a mar0et that ha'e similar le'els of profitabilit!. e. none of these. ANS: A PTS: 1 DIF: as! "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge 51. #rand lo!alt! ma! be created b! a. continuous ad'ertising. b. patent protection of products. c. product inno'ation achie'ed through compan! research and de'elopment. d. emphasis on high product )ualit!. e. all of these. ANS: PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension
5/. S(itching costs ma! arise (hen a. changing from one computer s!stem to another. b. substitute products are a'ailable at a lo(er unit cost. c. (hen there are a large number of interchangeable products. d. products are commodit!%li0e in nature. e. all of these. ANS: A PTS: 1 DIF: Difficult &F: p. 5= "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 5. >istoricall!, go'ernment reputation has a. encouraged ne( entrants into an industr!. b. constituted a maor entr! barrier into maor industries. c. neither hampered nor encouraged ne( entrants into an industr!. d. encouraged the gro(th of ne( companies. e. none of these choices. ANS: # PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic @egal &esponsibilities -: -no(ledge 53. &i'alr! refers to a. competition. b. the intensit! of competition among established companies (ithin an industr!. c. a struggle among firms using price, product design, and ad'ertising. d. all of these. e. none of these. ANS: D PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge 55. The competiti'e structure of an industr! refers to the a. number of segments in the industr!. b. number and si*e distribution of companies in the industr!. c. the number of consumers in the industr!. d. number of competing products in the industr!. e. form that competition in the industr! ta0es. ANS: # PTS: 1 DIF: as! "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge 57. +ommon e4it barriers include a. in'estments in specific assets. b. emotional attachments to an industr!. c. high fi4ed costs associated (ith lea'ing the industr!. d. ban0ruptc! regulations. e. all of these.
ANS: PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge 59. 6obilit! barriers a. pre'ent mo'ement (ithin a strategic group. b. inhibit the mo'ement of companies bet(een strategic groups in an industr!. c. inhibit the mo'ement of a compan! from one industr! to another. d. include e4it barriers of the strategic group that a compan! (ants to enter. e. are lo( (hen e4it barriers in the strategic group that a compan! is a member of are high. ANS: # PTS: 1 DIF: as! "#$: / % 4plore the concept of strategic groups and illustrate the implications for industr! anal!sis NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge 5. In gro(th industries, a. replacement demand is increasing rapidl!. b. technological e4pertise is the most important entr! barrier. c. ri'alr! is high. d. distribution channels are poorl! de'eloped. e. bu!ers are familiar (ith the industr!8s product. ANS: PTS: 1 DIF: 6oderate "#$: % Discuss ho( industries e'ol'e o'er time (ith reference to the industr! life%c!cle model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 5<. ntr! barriers in the embr!onic stage are fre)uentl! based on a. brand lo!alt!. b. economies of scale. c. absolute cost ad'antages. d. economies of scope. e. technological 0no(%ho(. ANS: PTS: 1 DIF: 6oderate "#$: % Discuss ho( industries e'ol'e o'er time (ith reference to the industr! life%c!cle model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 7=. ?ro(th industries a. t!picall! suffer from high mobilit! barriers. b. tend to be characteri*ed b! (ea0 ri'alr!. c. ha'e high ri'alr! among established companies. d. increase prices because customers are more a(are of the industr!8s product. e. pro'ide economies of scale to e4isting companies. ANS: # PTS: 1 DIF: 6oderate "#$: % Discuss ho( industries e'ole o'er time (ith reference to the industr! life%c!cle model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 71. An industr!8s bu!ers ha'e high bargaining po(er (hen a. bu!ers purchase in large )uantities. b. s(itching costs are lo(. c. it is economicall! feasible for bu!ers to purchase inputs from se'eral companies at once. d. bu!ers can threaten to enter an industr! and produce the product themsel'es.
e.
all of these.
ANS: PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 7/. Demand reaches total saturation in the GGGG stage of the industr! life c!cle. a. embr!onic b. gro(th c. sha0eout d. maturit! e. decline ANS: D PTS: 1 DIF: as! "#$: % Discuss ho( industries e'ol'e o'er time (ith reference to the industr! life%c!cle model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge 7. The threat from ne( entrants is greatest in the GGGG stage of the industr! life c!cle. a. embr!onic b. gro(th c. sha0eout d. maturit! e. decline ANS: # PTS: 1 DIF: 6oderate "#$: % Discuss ho( industries e'ol'e o'er time (ith reference to the industr! life%c!cle model NAT: AA+S# Anal!tic n'ironmental Influence -: -no(ledge 73. hich of the follo(ing is not one of the factors in the economic forces of the macroen'ironmentE a. Interest rates b. Inflation c. &egulation d. +urrenc! e4change rates e. conomic gro(th rate ANS: + PTS: 1 DIF: 6oderate "#$: 3 % Sho( ho( trends in the macroen'ironment can shape the nature of competition in an industr! NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 75. Suppliers in an industr! are most po(erful (hen a. there are fe( substitutes for the product suppliers sell. b. s(itching costs are lo(. c. companies in the industr! can threaten to enter the suppliers8 industr!. d. substitute products are readil! a'ailable. e. all of these choices ANS: A PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 77. $ulian is as0ed to e4amine the demographic en'ironment facing his emplo!er, a clothing manufacturer. hich of the follo(ing should $ulian e4amineE
a. b. c. d. e.
?o'ernment regulations Inflation 6anufacturing technolog! Aging of the population Societ!8s gro(ing interest in e4ercise
ANS: D PTS: 1 DIF: Difficult "#$: 3 % Sho( ho( trends in the macroen'ironment can shape the nature of competition in an industr! NAT: AA+S# &eflecti'e Thin0ing n'ironmental Influence -: Application 79. #e'erage ma0ers are finding that (ater sales are increasing due to consumers8 preferences for health! drin0s. hich part of the macroen'ironment does this representE a. conomic forces b. Demographic forces c. mbr!onic forces d. Political forces e. Social forces ANS: PTS: 1 DIF: Difficult "#$: 3 % Sho( ho( trends in the macroen'ironment can shape the nature of competition in an industr! NAT: AA+S# &eflecti'e Thin0ing n'ironmental Influence -: Application 7. The le'el of industr! demand a. has little effect on competition in the industr!. b. is one of the determinants of the intensit! of ri'alr! in the industr!. c. increases as the number of customers gro(s. d. is influenced b! ban0ruptc! regulations. e. all of these. ANS: PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 7<. The Internet is an e4ample of a a. technological force. b. social force. c. political and legal force. d. demographic force. e. global force. ANS: A PTS: 1 DIF: as! "#$: 3 % Sho( ho( trends in the macroen'ironment can shape the nature of competition in an industr! NAT: AA+S# Technolog! Information Technologies -: Application 9=. Due to a recent rela4ation in pollution standards, Ford 6otors is (ithdra(ing its electric%po(ered cars from sales in the 2.S. mar0et. Ford is responding to a change in (hich of the follo(ing macroen'ironmental forcesE a. conomic b. Demographic c. Political and legal d. Social
e.
Strategic
ANS: + PTS: 1 DIF: Difficult "#$: 3 % Sho( ho( trends in the macroen'ironment can shape the nature of competition in an industr! NAT: AA+S# &eflecti'e Thin0ing n'ironmental Influence -: Application 91. As a. b. c. d. e.
an industr! enters the sha0eout stage, ri'alr! among companies declines. demand is still gro(ing at a high rate. prices rise. e4cess capacit! emerges. ne( entrants come into the mar0et.
ANS: D PTS: 1 DIF: 6oderate "#$: % Discuss ho( industries e'ol'e o'er time (ith reference to the industr! life%c!cle model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 9/. 'entuall! most industries enter a decline stage (here a. gro(th becomes negati'e. b. ri'alr! among established companies usuall! decreases. c. competiti'e pressures abate. d. e4cess capacit! declines. e. demand continues to hold stead!. ANS: A PTS: 1 DIF: as! "#$: % Discuss ho( industries e'ol'e o'er time (ith reference to the industr! life%c!cle model NAT: AA+S# Anal!tic n'ironmental Influence -: +omprehension 9. @eslie is the o(ner of +rafts and Things, a local craft store that sells homemade gifts such as e(elr! and )uilts. &ecentl!, there has been an increase in the price of the items that @eslie uses to ma0e her crafts, such as beads and !arn. The rising cost of these items represent aCn GGGGG to @eslieHs business. a. opportunit! b. threat c. cost ad'antage d. ri'alr! e. strength ANS: # PTS: 1 DIF: Difficult "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# &eflecti'e Thin0ing n'ironmental Influence -: Application 93. hen shopping for clothing such as shirts and eans, T!rone (ill onl! bu! products sold b! the astern +lothing +ompan!, e'en if other brands are cheaper. astern +lothing +ompan! has GGGGG (ith T!rone. a. s(itching costs b. bargaining po(er c. ris0 of entr! d. brand lo!alt! e. economies of scale ANS: D PTS: 1 DIF: 6oderate "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# &eflecti'e Thin0ing +reation of ;alue
-: Application 95. In the earl! 1<==s, (hen the automobile (as first manufactured, the automobile industr! (ould ha'e been considered aCn a. mature industr!. b. industr! sta0eout. c. embr!onic industr!. d. gro(th industr!. e. declining industr!. ANS: + PTS: 1 DIF: Difficult "#$: % Discuss ho( industries e'ol'e o'er time (ith reference to the industr! life%c!cle model NAT: AA+S# &eflecti'e Thin0ing n'ironmental Influence -: Application 97. In part due to ad'ances in medicine, Americans are currentl! li'ing longer no( than in the past. As a result, the sale of products that meet the needs of older indi'iduals, such as de'ices that assist in (al0ing and mo'ement, ha'e increased. Age can be referred to as a a. technological force. b. demographic force. c. social force. d. political force. e. legal force. ANS: # PTS: 1 DIF: Difficult "#$: 3 % Sho( ho( trends in the macroen'ironment can shape the nature of competition in an industr! NAT: AA+S# &eflecti'e Thin0ing n'ironmental Influence -: Application 99. Philip 6orris capitali*ed on the gro(ing health consciousness trend (hen it ac)uired 6iller #re(ing +ompan!, and then redefined competition in the beer industr! (ith its introduction of lo(%calorie beer C6iller @ite. This health trend represents a GGGGGforce. a. social b. political c. legal d. technological e. demographic ANS: A PTS: 1 DIF: Difficult "#$: 3 % Sho( ho( trends in the macroen'ironment can shape the nature of competition in an industr! NAT: AA+S# &eflecti'e Thin0ing n'ironmental Influence -: Application E!!A%
9. h! is it important to understand the e4ternal en'ironment in order to thin0 strategicall!E ANS:
Strategic thin0ing allo(s managers to select those strategies that allo( their co mpanies to establish competiti'e ad'antage and outperform ri'als. As the e4ternal en'ironment continues to change in rapid and unpredictable (a!s, it is important for managers to understand the conditions that e4ist and that impact their performance and profitabilit!. ithout an understanding of the e4ternal en'ironment, the strateg! process (ould be arbitrar! and performance (ould be lo(er than it should be. #! understanding the d!namics that dri'e industries and the macroen'ironmental forces that present both opportunities and threats, managers are in a position to craft strategies that allo( them to effecti'el! steer their companies through challenging times. PTS: 1 DIF: Difficult "#$: 1 % &e'ie( the primar! techni)ue used to anal!*e competition in an industr! en'ironment: the +ompetiti'e Forces model NAT: AA+S# Anal!tic n'ironmental Influence -: 'aluation 9<. Define and then relate the concepts of sectors, industries, mar0et segments, and strategic groups. ANS: All of these concepts are useful in terms of understanding the nature of competition and the forces in the industr! en'ironment that affect performance. A s0illed strategic manager must ta0e all of these into account (hen de'eloping strategies. A sector refers to a group of closel! related industries. In terms of scope, sectors encompass the broadest set of firms. A sector is t!picall! composed of se'eral interrelated industries. An industr! refers to a group of companies offering products and ser'ices that are close substitutes for each other. 6ar0et segments refer to a distinct group of customers (ithin an industr! mar0et that can be differentiated from each other on the basis of their distinct attributes and specific demands. A strategic group is a group of companies (ithin an industr! in (hich each compan! follo(s a business model that is similar to that pursued b! other co mpanies in the group. A useful (a! to loo0 at a strategic group is as an intersection of mar0et segments and industries. The concept of a strategic group is especiall! useful in the strateg! process because it helps a compan! determine its direct competition. PTS: 1 DIF: Difficult "#$: / % 4plore the concept of strategic groups and illustrate the implications for industr! anal!sis NAT: AA+S# Anal!tic n'ironmental Influence -: S!nthesis =. 2sing the industr! life c!cle model, e4plain ho( the threats and opportunities for e4isting firms in an industr! change o'er time. ANS: In the embr!onic stage of the industr! life c!cle, barriers to entr! come fr om access to technological 0no(%ho( Ca threat. &i'alr! is relati'el! lo( due to the fragmented nature of the industr! Can opportunit!. Suppliers tend to be large and po(erful relati'e to e4isting companies, as do bu!ers Cthreats. Substitute products ma! be plentiful, ine4pensi'e, and better 0no(n to consumers Ca threat. In the gro(th stage, barriers to entr! are t!picall! )uite lo( Ca threat. &i'alr! is lo( because the gro(ing industr! creates plent! of demand Can opportunit!. #u!ers and suppliers are some(hat less po(erful relati'e to the larger companies of the gro(th stage Cmo'ing to(ard opportunities. Substitute products ma! be fe( or plentiful Can opportunit! or threat. In a mature industr!, barriers to entr! rel! on economies of scale and brand lo!alt!, and the! are )uite high Can opportunit!. &i'alr! becomes much more intense Ca threat. #u!ers and suppliers become e'en less po(erful relati'e to the large e4isting companies Copportunities. Substitute products ma! be fe( or plentiful Copportunit! or threat.
In the decline stage, there are fe( ne( entrants Can opportunit!. &i'alr! remains 'er! intense Ca threat. #u!ers and suppliers become more po(erful relati'e to e4isting firms Cmo'ing to(ard threats. Substitute products are li0el! to be plentiful and appealing to consumers Ca threat. PTS: 1 DIF: Difficult "#$: % Discuss ho( industries e'ol'e o'er time (ith reference to the industr! life%c!cle model NAT: AA+S# Anal!tic n'ironmental Influence -: 'aluation 1. Describe one maor limitation of each of the follo(ing models for competiti'e anal!sis: the fi'e forces model, the strategic groups model, and the industr! life c !cle model. Does the e4istence of these limitations mean that the models are not usefulE h! or (h! notE ANS: All three of these models fail to account for the impact that radical change and inno'ation can ha'e on an industr!. &adical change can alter the impact of the fi'e forces it can shift the strategic groupings (ithin an industr! and it can speed, slo(, or disrupt an industr!8s progress through the stages of the life c!cle model. #ecause these three models all rel! on historical e'idence to proect future trends, the possibilit! and impact of radical discontinuit! is not incorporated into them. Another limitation of each of these models is the lac0 of accounting for firm%specific characteristics and actions. These three models all assume that the en'ironment is a maor determinant of firm performance and that e'er! firm in the industr! Cor the strategic group e4periences the industr! structure in the same (a!. et empirical e'idence demonstrates that firms (ithin the industr! ha'e (idel! differing le'els of performance, so there must be other e4planator! 'ariables. According to some studies, industr! characteristics account for no more than /= percent of the 'ariance in performance across firms. A limitation of the life c!cle model is that not e'er! industr! mo'es through the same steps or in the same order or at the same rate. mpirical e'idence sho(s that industries 'ar! tremendousl! in the rate and (a! in (hich the! mature. PTS: 1 DIF: Difficult "#$: % Discuss ho( industries e'ol'e o'er time (ith reference to the industr! life%c!cle model NAT: AA+S# Anal!tic n'ironmental Influence -: 'aluation /. +onsider the macroen'ironment facing a large, international airline head)uartered in the 2nited States Csuch as American or 2nited. ?i'e at least three e4amples of i mportant trends or e'ents from each of the fi'e segments of the airline8s macroen'ironment Cmacroeconomic, technological, demographic, social, political, and legal, and e4plain (hether each represents a threat or an opportunit! for the firm. ANS: Students don8t need to conduct research to ans(er this )uestion the! should be able to ans(er from their o(n understanding and general 0no(ledge. 4amples of the t!pes of ans(ers the! should (rite are gi'en belo(. The airline industr! benefits from lo( interest rates, part of the macroeconomic • en'ironment, because it enables airlines to borro( the funds for purchasing ne( planes at lo(er cost. Americans are ta0ing shorter but more fre)uent 'acations. This social trend presents an • opportunit! for airlines to sell more tic0ets. Technological ad'ances ha'e allo(ed railroads to use fast, fuel%efficient bullet trains, (hich • can economicall! substitute for planes on short, hea'il!%tra'eled commuter routes, such as along the #oston%Ne( or0%ashington corridor. This de'elopment threatens airlines
because it reduces the number of tic0ets the! can sell and the prices the! can charge in those mar0ets. PTS: 1 DIF: Difficult "#$: 3 % Sho( ho( trends in the macroen'ironment can shape the nature of competition in an industr! NAT: AA+S# &eflecti'e Thin0ing n'ironmental Influence -: Application
