In the general environment, many relationships exist among the various elements. General environmental trends can have positive and negative impacts on various industries. For example, the aging population might have a ______ impact on the health care industry and a ______ impact on the baby product industry. These are called _____________ impacts.

61.

In the general environment, many relationships exist among the various elements. General environmental trends can have positive and negative impacts on various industries. For example, the aging population might have a ______ impact on the health care industry and a ______ impact on the baby product industry. These are called _____________ impacts.    A.  negative; positive; demographic B.  positive; negative; technological C.  negative; positive; sociocultural D.  positive; negative; demographic The general environment is divided into six segments: demographic, sociocultural, political/legal, technological, economic, and global. The aging population is a demographic trend that could positively affect the health care industry and negatively affect the baby product industry.

AACSB: Analytic Blooms: Apply Learning Objective: 02-04 The impact of the general environment on a firm's strategies and performance. Level of Difficulty: 3 Hard Topic: The General Environment

62.

Which is considered a force in the Five-Forces model?    A.  increased deregulation in an industry B.  the threat of government intervention C.  rivalry among competing firms D.  recent technological innovation The five-forces model describes the competitive environment in terms of five basic competitive forces: the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products and services, and the intensity of rivalry among competitors in an industry.

AACSB: Analytic Blooms: Remember Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 1 Easy Topic: The Competitive Environment

63.

Which of the following firms would likely pose the least competitive threat?    A.  a firm in the same industry and in the same strategic group B.  a firm that produces substitute goods to your product line C.  a competitor to your product where a high switching cost exists D.  a firm in the same industry and in the nearest strategic group looking to join your group The competitive threat of intense rivalry can result from lack of differentiation or switching costs. When switching costs are high, this threat is lowered.

AACSB: Analytic Blooms: Understand Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 2 Medium Topic: The Competitive Environment

64.

The threat of new entrants is high when there are _______.    A.  low economies of scale B.  high capital requirements C.  high switching costs D.  high differentiation among competitors products and services High entry barriers discourage new competitors. Among the major sources of entry barriers are economies of scale, product differentiation, capital requirements, and switching costs.

AACSB: Analytic Blooms: Understand Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 2 Medium Topic: The Competitive Environment

65.

Product differentiation by incumbents act as an entry barrier because __________.    A.  new entrants cannot differentiate their products B.  incumbents will take legal action if new entrants do not differentiate their products C.  new entrants will have to spend heavily to overcome existing customer loyalties D.  it helps a firm to derive greater economies of scale When existing competitors have strong brand identification and customer loyalty, differentiation creates a barrier to entry by forcing entrants to spend heavily to overcome existing customer loyalties.

AACSB: Analytic Blooms: Understand Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 2 Medium Topic: The Competitive Environment

66.

Which of the following would be an entry barrier?    A.  large economies of scale B.  low switching costs C.  easy access to raw materials D.  low capital requirements Among the major sources of entry barriers are economies of scale, product differentiation, capital requirements, switching costs, and access to raw materials and distribution channels.

AACSB: Analytic Blooms: Remember Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 1 Easy Topic: The Competitive Environment

67.

An automobile manufacturer acquires a rental car company. This is an example of _____.    A.  backward integration B.  economies of scale C.  forward integration D.  product differentiation An example of forward integration in the text is an automobile manufacturer acquiring a rental car company. In this case, the automobile manufacturer is a potential competitor who is using forward integration to increase marketplace power.

AACSB: Analytic Blooms: Understand Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 2 Medium Topic: The Competitive Environment

68.

The bargaining power of the buyer is greater than that of the supplier when __________.    A.  volume of purchase is low B.  threat of backward integration by buyers is low C.  cost savings from the supplier's product are minimal D.  the buyer's profit margin is low A buyer group is powerful when it is concentrated or purchases large volumes relative to seller sales, it earns low profits, or the buyers pose a credible threat of backward integration.

AACSB: Analytic Blooms: Remember Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 1 Easy Topic: The Competitive Environment

69.

Buyer power will be greater when _______.    A.  the products purchased are highly differentiated B.  there are high switching costs C.  the industry product is very important to the quality of the buyer end products or services D.  it is concentrated or when a buyer group purchases large volumes relative to seller sales A buyer group is powerful when it is concentrated or purchases large volumes relative to seller sales, the products it purchases from the industry are standard or undifferentiated, the buyer faces few switching costs, or the industry product is unimportant to the quality of the buyer products or services.

AACSB: Analytic Blooms: Remember Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 1 Easy Topic: The Competitive Environment

70.

The bargaining power of suppliers increases as ____________.    A.  more suppliers enter the market B.  importance of buyers to supplier group increases C.  switching costs for buyers decrease D.  threat of forward integration by suppliers increases A supplier group will be powerful when the supplier group is dominated by a few companies and is more concentrated (few firms dominate the industry) than the industry it sells to; the industry is not an important customer of the supplier group; the supplier group's products are differentiated or it has built up switching costs for the buyer; or the supplier group poses a credible threat of forward integration.

AACSB: Analytic Blooms: Remember Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 1 Easy Topic: The Competitive Environment

71.

New communication technology can impact seemingly unrelated industries such as the airline industry. This would be an example of a ______________.    A.  threat of entry B.  backward integration C.  forward integration D.  threat of substitute products Identifying substitute products involves searching for other products or services that can perform the same function as the industry's offerings. This may lead a manager into businesses seemingly far removed from the industry. For example, the airline industry might not consider video cameras much of a threat. But as digital technology has improved and wireless and other forms of telecommunication have become more efficient, teleconferencing has become a viable substitute for business travel.

AACSB: Analytic Blooms: Understand Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 2 Medium Topic: The Competitive Environment

72.

The bargaining power of suppliers is enhanced under the following market condition:    A.  no threat of forward integration B.  low differentiation of the supplier products C.  greater availability of substitute products D.  dominance by a few suppliers A supplier group will be powerful when the supplier group is dominated by a few companies and is more concentrated (few firms dominate the industry) than the industry it sells to; the supplier group is not obliged to contend with substitute products for sale to the industry; the supplier group's products are differentiated or it has built up switching costs for the buyer; or the supplier group poses a credible threat of forward integration.

AACSB: Analytic Blooms: Remember Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 1 Easy Topic: The Competitive Environment

73.

In the Five-Forces model, conditions under which a supplier group can be powerful include all the following EXCEPT:    A.  lack of importance of the buyer to the supplier group B.  high differentiation by the supplier C.  dominance by a few suppliers D.  readily available substitute products A supplier group will be powerful when the supplier group is dominated by a few companies and is more concentrated (few firms dominate the industry) than the industry it sells to; the supplier group is not obliged to contend with substitute products for sale to the industry; the supplier group's products are differentiated or it has built up switching costs for the buyer; or the industry is not an important customer of the supplier group.

AACSB: Analytic Blooms: Remember Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 1 Easy Topic: The Competitive Environment

74.

A supplier group would be most powerful when _________.    A.  there are many suppliers B.  there are few substitute products C.  there is a low differentiation of products supplied D.  there is a high threat of backward integration by the buyers A supplier group will be powerful when the supplier group is dominated by a few companies and is more concentrated (few firms dominate the industry) than the industry it sells to; the supplier group is not obliged to contend with substitute products for sale to the industry; the supplier group products are differentiated or it has built up switching costs for the buyer; or the supplier group poses a credible threat of forward integration.

AACSB: Analytic Blooms: Remember Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 1 Easy Topic: The Competitive Environment

75.

Threat of substitute products comes from ____________.    A.  other companies in the same industry B.  foreign companies which can use cheap labor in their countries C.  firms in other industries that produce products or services that satisfy the same customer need D.  new companies in the same industry Substitute products are those products or services that can perform the same function as the industry offerings. They may be offered by businesses seemingly far removed from the industry.

AACSB: Analytic Blooms: Remember Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 1 Easy Topic: The Competitive Environment

76.

Firms would be most likely to face intense rivalry with competitors when they _________.    A.  are in a high growth industry with low fixed costs B.  are in a protected market C.  have high fixed costs D.  have low exit barriers for easy transition to another industry Intense rivalry is the result of several interacting factors, including the following: numerous or equally balanced competitors, slow industry growth, high fixed or storage costs, lack of differentiation or switching costs, capacity augmented in large increments, or high exit barriers.

AACSB: Analytic Blooms: Remember Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 1 Easy Topic: The Competitive Environment

77.

The most intense rivalry results from _____________.    A.  numerous equally balanced competitors, slow industry growth, high fixed or storage costs B.  few competitors, slow industry growth, lack of differentiation, high fixed or storage costs C.  numerous equally balanced competitors, manufacturing capacity increases only in large increments, low exit barriers D.  a high level of differentiation Intense rivalry is the result of several interacting factors, including the following: numerous or equally balanced competitors, slow industry growth, high fixed or storage costs, lack of differentiation or switching costs, capacity augmented in large increments, or high exit barriers.

AACSB: Analytic Blooms: Remember Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 1 Easy Topic: The Competitive Environment

78. (p. 60)

Exit barriers do not arise from ________.    A.  specialized assets with no alternative use B.  governmental and social pressures C.  strategic interrelationships with other business units within the same company D.  flexible costs of exit Exit barriers are economic, strategic, and emotional factors that keep firms competing even though they may be earning low or negative returns on their investments. Some exit barriers are specialized assets, fixed costs of exit, strategic interrelationships (e.g., relationships between the business units and others within a company in terms of image, marketing, shared facilities, and so on), emotional barriers, and government and social pressures (e.g., governmental discouragement of exit out of concern for job loss).

AACSB: Analytic Blooms: Remember Learning Objective: 02-05 How forces in the competitive environment can affect profitability; and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Level of Difficulty: 1 Easy Topic: The Competitive Environment

79.

Because the Internet lowers barriers to entry in most industries, it ________.    A.  decreases the threat of new entrants B.  increases the threat of new entrants C.  makes it easier to build customer loyalty D.  increases supplier power In most industries, the threat of new entrants has increased because digital and Internet-based technologies lower barriers to entry. Internet businesses may enjoy savings on traditional expenses which may encourage more entrants who see an opportunity to capture market share by offering a product or performing a service more efficiently than existing competitors.

AACSB: Analytic Blooms: Understand Learning Objective: 02-06 How the Internet and digitally based capabilities are affecting the five competitive forces and industry profitability. Level of Difficulty: 2 Medium Topic: The Competitive Environment

80.

End users are not ____________.    A.  the final consumers in a distribution channel B.  usually the C in B2C C.  likely to have greater bargaining power because of the Internet D.  the first customers in a distribution channel End users are the final customers in a distribution channel. Sales activity that is labeled B2C is concerned with end users. The Internet is likely to increase the power of these buyers, in part because the Internet provides large amounts of consumer information.

AACSB: Analytic Blooms: Understand Learning Objective: 02-06 How the Internet and digitally based capabilities are affecting the five competitive forces and industry profitability. Level of Difficulty: 2 Medium Topic: The Competitive Environment