Chapter 2 Flashcards
What does the term “general environment” refer to in the context of business strategy? A) Internal company policies
B) Factors within the industry
C) External factors beyond a firm’s control
D) Specific marketing strategies
C
What is a key characteristic of the factors in the general environment? A) They are easy to control.
B) They are hard to predict.
C) They always benefit the firm.
D) They are completely predictable.
B
Which of the following would be considered part of a firm’s general environment?
A. Decreased entry barriers.
B. Higher unemployment rates.
C. Increased bargaining power of the firm’s suppliers.
D. Increased competitive intensity.
B
Which of the following would be considered part of a firm’s general environment?
A. Decreased entry barriers.
B. Higher unemployment rates.
C. Increased bargaining power of the firm’s suppliers.
D. Increased competitive intensity.
B
The aging of the population, changes in ethnic composition, and effects of the baby
boom are
A. macroeconomic changes.
B. demographic changes.
C. global changes.
D. sociocultural changes.
B
Although changes in the general environment may often adversely or favorably impact
a firm, they seldom alter an entire industry.
F. The general environment is composed of factors that can have dramatic effects on firm
strategy. Typically, a firm has little ability to predict trends and events in the general
environment and even less ability to control them. When listening to CNBC, for example, you
can hear many experts espouse different perspectives on what action the Federal Reserve
Board may take on short-term interest rates—an action that can have huge effects on the
valuation of entire economic sectors.
The same environmental trend can often have very different effects on firms within
the same industry.
T. An example would be the rising levels of affluence in many developed countries. This bodes
well for brokerage services as well as for upscale pets and supplies. However, this trend may
adversely affect fast-food restaurants because people can afford to dine at higher-priced
restaurants.
Which of the following is NOT a characteristic typically analyzed in the demographic segment? A) Age distribution
B) Income levels
C) Market share
D) Geographic region
c
What is a key demographic element that refers to an increasing number of individuals aged 65 and older? A) Affluence Levels
B) Aging Population
C) Geographic Distribution
D) Income Disparities
B
How does rising affluence levels affect certain industries? A) It benefits low-cost retailers.
B) It increases demand for brokerage services and upscale pet supplies.
C) It has no significant impact on any industry.
D) It reduces the market for luxury goods.
B
why this question “What demographic trend can adversely affect fast-food restaurants? A) Rising affluence levels
B) Increasing aging population
C) Geographic distribution
D) Income disparities
A
Which statement about the aging population is true? A) The majority of workers aged 65 and older are retiring early.
B) More older workers are staying in the workforce full-time.
C) Younger workers are increasingly replacing older employees.
D) There is no change in the employment status of older workers.
B
Which demographic element refers to variations in income levels across different groups? A) Aging Population
B) Geographic Distribution
C) Income Disparities
D) Ethnic Composition
C
What demographic trend involves the movement of populations within and between regions? A) Aging Population
B) Geographic Distribution
C) Affluence Levels
D) Ethnic Composition
B
What does the sociocultural segment of the general environment encompass? A) Economic policies and regulations
B) Values, beliefs, and lifestyles of a society
C) Technological innovations and advancements
D) Competitive dynamics within an industry
A
A major sociocultural trend in the United States is the increased educational attainment
by women.
T
Increasingly larger numbers of women entering the work force since the early 1970s
is an example of
A. demographic changes.
B. political and legal environmental changes.
C. sociocultural changes.
D. technological developments
C
Emerging sociocultural changes in the environment include
A. changes in the ethnic composition.
B. the increasing educational attainment of women in the past decade.
C. progressively less disposable income by consumers.
D. changes in the geographic distribution of the population
B
What is a key trend related to the increased presence of women in the workforce? A) Decreased demand for business attire
B) Increased demand for cooking staples
C) Increased demand for business attire
D) No change in consumer behavior
C
How has the trend of dual-income families impacted consumer behavior? A) No significant impact on spending patterns
B) It leads to higher savings rates
C) It alters spending patterns and consumer needs
D) It decreases demand for luxury items
c
What effect do concerns for healthy diets and fitness have on the market? A) Increased demand for unhealthful foods
B) Boosts sales of exercise equipment and healthful foods
C) Decreased interest in fitness activities
D) No impact on consumer preferences
B
Which sociocultural trend has driven the demand for eco-friendly products? A) Postponement of having children
B) Increased educational attainment
C) Interest in the environment
D) Dual-income families
C
What impact does the postponement of having children have on the market? A) Increases demand for baby products
B) Affects products and services targeted at families and children
C) No impact on consumer behavior
D) Reduces the market for educational products
B
What is one significant outcome of increased educational attainment among women? A) Decreased participation in the workforce
B) Fewer women in leadership roles
C) More women in upper management positions
D) No impact on the economy
C
All of the following are important elements of the political/legal segment of the
general environment EXCEPT
A. the deregulation of utilities.
B. the Americans with Disabilities Act (ADA).
C. the increased use of Internet technology.
D. increases in the federally mandated minimum wage
C
What do political processes and legislation primarily influence in relation to industries? A) Market share and competition
B) Environmental regulations with which industries must comply
C) Consumer preferences and trends
D) Technological advancements
B
Technological innovations can create entirely new industries and alter the boundaries
of industries.
T
What does the technological segment encompass? A) Only government regulations
B) Innovative knowledge in industrial arts, engineering, applied sciences, and pure science
C) Consumer behavior trends
D) Marketing strategies
B
Which of the following is an example of a technological development? A) Changes in consumer preferences
B) The Internet
C) Regulatory compliance
D) Workforce demographics
B. EX: internet,CAD,nano-tech,AI
There is generally a weak relationship between equity markets (e.g., New York Stock
Exchange) and economic indicators.
F. They are related
To illustrate interrelationships among different segments of the general environment:
The persistence of large U.S. trade deficits (__________) has led to greater demand for
protectionist measures, such as trade barriers and quotas (__________). These measures lead
to higher prices for U.S. consumers and fuel inflation (__________).
A. macroeconomic, sociocultural, political/legal
B. macroeconomic, political/legal, economic
C. macroeconomic, technological, economic
D. macroeconomic, global, economic
B
What is the primary effect of rising interest rates on the residential home construction industry? A) Increased construction activity
B) Decreased construction activity
C) No impact on construction
D) Increased demand for homes
B
Which of the following industries is likely to be least affected by interest rate increases? A) Residential home construction
B) Automobile manufacturing
C) Prescription drug production
D) Commercial real estate
C
Interest-rate increases have a __________ impact on the residential home
construction industry and a __________ effect on industries that produce consumer
necessities such as prescription drugs or basic grocery items.
A. positive; negligible
B. negative; negligible
C. negative; positive
D. positive; negative
B
What effect do fluctuations in currency exchange rates have on international trade? A) They have no effect on trade dynamics
B) They can impact the cost of exports and imports
C) They only affect domestic markets
D) They stabilize trade relationships
B. global segment
Which of the following agreements aims to promote international commerce by lowering tariffs? A) World Trade Organization (WTO)
B) North American Free Trade Agreement (NAFTA)
C) International Monetary Fund (IMF)
D) General Agreement on Tariffs and Trade (GATT)
B
How has China’s economic emergence impacted global trade? A) It has decreased global trade opportunities
B) It has led to increased trade patterns and investment opportunities
C) It has isolated China’s economy from the rest of the world
D) It has created uniform pricing across all goods
B
What has been a significant trend among U.S. multinationals in recent years? A) Decreased foreign investment
B) Increased domestic job creation
C) Expansion of global workforces and operations abroad
D) A focus solely on local markets
c
How does the aging population in the U.S. primarily influence tax policies? A) By decreasing the need for social services
B) By increasing the number of working-age taxpayers
C) By potentially increasing tax burdens to support social security benefits
D) By eliminating tax benefits for the elderly
c
How might consumer spending patterns change as the population ages? A) Increased spending on luxury items
B) Decreased spending on healthcare products
C) Increased spending on healthcare and wellness products
D) No change in spending patterns
C
Which of the following statements best describes the impact of an aging demographic on the sociocultural environment? A) It leads to a focus on youth culture and trends
B) It results in increased emphasis on elderly care and related services
C) It decreases the importance of family values
D) It has no effect on cultural practices
b
How do advances in information technology primarily impact inflation rates? A) They increase inflation by raising production costs
B) They have no effect on inflation
C) They contribute to increased productivity, which can help lower inflation rates
D) They create monopolies that drive prices up
c
What is a key benefit of enhanced IT capabilities for firms? A) Increased need for manual labor
B) Higher operational costs
C) Ability to produce more with fewer resources
D) Decreased reliance on technology
c
Which of the following is likely a result of productivity gains from technological advancements? A) Increased prices for consumers
B) More competitive pricing strategies
C) Reduction in product quality
D) Decreased market efficiency
b
In what way can increased productivity influence overall economic performance? A) By reducing employment opportunities
B) By leading to lower output levels
C) By enhancing firms’ ability to compete and innovate
D) By stabilizing inflation rates without growth
c
How might rising labor costs be affected by advancements in information technology? A) They become irrelevant
B) They may be offset by productivity gains from IT
C) They will always increase significantly
D) They lead to job losses only
b
What effect might importation legislation allowing the import of prescription drugs have on U.S. drugstores? A) Increased operational costs
B) Reduced costs and increased product availability
C) Decreased customer satisfaction
D) Higher prices for consumers
B
How could U.S. drug manufacturers be affected by changes in importation legislation? A) They might gain exclusive rights to all drugs
B) They could face increased competition and potential revenue losses
C) They will see no impact on their sales
D) They will increase prices for all products
B
Which type of regulatory change might create opportunities for consulting firms? A) Decrease in import taxes
B) Environmental regulations requiring compliance assistance
C) Tax cuts for all industries
D) Reduction of healthcare regulations
b
What could be a potential threat to industries facing new environmental regulations? A) Decreased production efficiency
B) Increased costs for compliance
C) Expansion of market opportunities
D) Enhanced consumer trust
b
How do changes in importation legislation impact consumer choice? A) They reduce available options for consumers
B) They limit the variety of products
C) They can increase the variety and availability of products
D) They have no effect on consumer choice
c
Which of the following could be a result of increased competition due to importation legislation? A) Higher prices for consumers
B) Enhanced innovation in U.S. drug manufacturers
C) Guaranteed profits for U.S. companies
D) Decreased availability of generic drugs
b
What is one potential benefit for consumers from importation legislation? A) Fewer choices in medication
B) Lower prices for prescription drugs
C) Increased complexity in purchasing drugs
D) Decreased access to necessary medications
b
Which industry might be negatively impacted by stricter environmental regulations? A) Renewable energy
B) Consulting firms
C) Traditional manufacturing industries
D) Technology firms
c
How does globalization impact local industries? A) It has no effect on local industries
B) It creates uniformity in all markets
C) It leads to increased global competition for domestic companies
D) It reduces the need for international trade
c
What is one potential opportunity for multinational companies due to globalization? A) Decreased access to resources
B) Ability to capitalize on growing markets in emerging economies
C) Guaranteed profits in domestic markets
D) Reduced need for innovation
b
How might domestic companies need to respond to globalization? A) Ignore international trends
B) Adapt their strategies to compete with foreign companies
C) Increase prices for local consumers
D) Focus solely on local markets
b
What effect does the rise of the middle class in emerging markets have on global trade? A) It decreases demand for international products
B) It creates new consumer markets for goods and services
C) It eliminates competition for local businesses
D) It has no significant impact on global trade
b
What is one way globalization can benefit local consumers? A) Decreased variety of products available
B) Higher prices for goods
C) Access to a wider range of products from different markets
D) Less competition leading to fewer choices
c
Why might multinational companies shift their focus to emerging markets? A) To reduce their global footprint
B) To avoid competition
C) To take advantage of growing consumer bases and potential profits
D) To limit their exposure to international regulations
c
The Internet provides an electronic “staging area” for several forms of digital
communications.
t
What does the competitive environment include? A) Economic trends
B) Government regulations
C) Competitors, customers, suppliers, and potential entrants
D) Technological advancements
c
Which of the following factors directly impacts a firm’s competitive position? A) Social trends
B) Global events
C) Competitors
D) Environmental concerns
c
The competitive environment is also known as: A) The external environment
B) The task environment
C) The internal environment
D) The regulatory environmen
b. task or industry environment
Potential entrants into an industry can influence: A) The profitability of existing firms
B) Employee satisfaction
C) Market demand
D) Brand loyalty
a
What is the primary focus of the competitive environment? A) Macroeconomic factors
B) Factors that affect a firm’s strategies
C) Workforce dynamics
D) Technological innovation
b
Which of the following best describes the General Environment? A) The specific dynamics between firms in an industry
B) The external factors that affect all businesses in a society
C) Only the economic factors influencing an industry
D) The regulatory frameworks affecting a single company
b
Which of the following environments is primarily concerned with direct market interactions? A) General Environment
B) Competitive Environment
C) Macro Environment
D) Regulatory Environment
b
Porter’s Five-Forces model is designed to help us understand how social attitudes and
cultural values impact U.S. businesses.
F. examining the competitive environment
What is the primary purpose of the “five-forces” model? A) To predict future market trends
B) To analyze the competitive environment
C) To evaluate internal company strengths
D) To assess customer satisfaction
b
Porter’s Five-Forces model helps to determine both the nature of competition in an
industry and the industry’s profit potential
t
What is the primary purpose of the “five-forces analysis”? A) To assess company performance
B) To understand industry profitability
C) To analyze customer satisfaction
D) To evaluate marketing strategies
b. not necessary company profitability
What is one of the primary applications of the Five Forces Model for managers? A) To predict economic downturns
B) To decide whether to enter or exit an industry
C) To assess employee satisfaction
D) To evaluate marketing strategies
b
How does the Five Forces Model assist in resource allocation? A) By providing historical sales data
B) By offering insights into competitive pressures
C) By evaluating customer feedback
D) By analyzing employee productivity
b
Understanding each competitive force allows firms to: A) Develop strategies to mitigate threats and leverage opportunities
B) Focus solely on reducing costs
C) Increase production without market analysis
D) Ignore customer preferences
a
What strategy can firms use to enhance their competitive position according to the Five Forces Model? A) Ignoring supplier relationships
B) Strengthening relationships with distribution channels
C) Reducing product quality
D) Minimizing marketing efforts
b
One way to mitigate competitive threats identified in the Five Forces Model is to: A) Seek alternative suppliers
B) Limit product innovation
C) Increase prices without justification
D) Decrease customer service quality
a
What does the “threat of new entrants” refer to? A) The ability of firms to reduce costs
B) The potential for established firms’ profits to be reduced by new competitors
C) The influence of suppliers on pricing
D) The impact of customer loyalty on sales
b
What factors determine the level of threat posed by new entrants? A) Market size and demand
B) Existing barriers to entry and possible reactions from current competitors
C) Customer demographics
D) Technological advancements
b
High entry barriers typically have what effect on the threat of new entrants? A) Increase the threat
B) Lower the threat
C) Have no effect
D) Cause market saturation
b
How can established firms respond to new entrants? A) By ignoring market trends
B) By enhancing customer service
C) By anticipating strong retaliation against new competitors
D) By reducing production quality
c
What is one potential outcome of new entrants into an industry? A) Increased profitability for all firms
B) Erosion of incumbent market share
C) Enhanced brand loyalty for existing firms
D) Decreased competition
b
What does the extent of the threat of new entrants depend on? A) Internal company policies
B) The economic conditions of a country
C) Existing barriers to entry and reactions from existing competitors
D) The availability of financial resources
c
When is the threat of new entrants considered high? A) When economies of scale are low
B) When economies of scale are high
D) When regulatory barriers are minimal
a
What does “economies of scale” refer to? A) The ability to sell products at a higher price
B) The reduction in cost per unit as production increases
C) The diversification of product offerings
D) The increase in demand as prices decrease
b
Industries characterized by high economies of scale typically attract fewer new
entrants.
T.
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.
c
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
a
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.
c
What does product differentiation mean? A) Products are highly unique and varied
B) Existing companies have strong brands and loyal customers
C) New entrants can easily replicate products
D) Customers are indifferent to brand loyalty
B
What do low capital requirements mean for starting a business? A) It requires minimal financial investment
B) It guarantees immediate profitability
C) It allows for easy entry into the market
D) It eliminates the need for advertising
A
If capital requirements are low, what is likely to happen in the market? A) Fewer new entrants
B) Increased innovation
C) high new entrants
D) Higher prices for consumers
c
Which of the following can be considered a major barrier to entry due to high capital requirements? A) Customer preferences
B) Marketing strategies
C) Significant initial investment needed for R&D
D) Availability of raw materials
c
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.
b
What are switching costs? A) Costs associated with marketing a product
B) Fees or inconveniences customers face when changing products or services
C) The price difference between two competing products
D) Costs related to production and manufacturing
B
When switching costs are low, customers are: A) More likely to remain loyal to one brand
B) Less likely to try new products
C) More willing to experiment with new products and services
D) More concerned about product quality
C. High new entrants
In some industries, high switching costs can act as an important barrier to entry.
t
What does it mean when an incumbent’s control of distribution channels is low? A) New companies have no competition
B) Established firms have significant control over where products are sold
C) It is easy for new entrants to get their products into stores
D) Distribution channels are limited to online sales only
c
If incumbents control distribution channels effectively, what is likely to happen? A) New entrants will easily gain market share
B) New entrants may struggle to reach sufficient customers
C) Distribution costs will decrease for everyone
D) Existing brands will lose their market position
b
What is a significant impact of low control of distribution channels by incumbents? A) New entrants can quickly gain access to customers
B) Customer loyalty becomes irrelevant
C) Distribution costs rise for established firms
D) New entrants face no challenges
a
What does “cost disadvantages independent of scale” refer to? A) Advantages that exist regardless of a company’s size
B) High costs associated with production scale
C) Increased competition due to market saturation
D) Legal protections for trade secrets
A
If incumbents have low proprietary knowledge, what does this mean for new entrants? A) New companies must rely on unique technologies
B) New entrants can easily learn and apply similar knowledge
C) Incumbents can charge higher prices
D) New entrants face significant legal barriers
b
What happens if existing companies do not have exclusive access to key raw materials? A) New entrants will face higher costs
B) New entrants can also source these materials easily
C) Incumbents will dominate the market
D) Raw materials will become scarce
b
How do government subsidies affect new entrants when incumbents receive little support? A) New entrants are at a disadvantage due to lack of funding
B) New entrants do not face the same financial disadvantages
C) All companies are equally funded
D) Government support guarantees success for incumbents
b
What is the potential impact of low cost disadvantages on new companies trying to enter a market? A) They may find it easier to compete with incumbents
B) They will always struggle to gain market share
C) They will need to innovate without using existing technologies
D) They can rely solely on aggressive marketing
a
In what scenario might managers overestimate entry barriers? A) When proprietary knowledge is highly protected
B) When there is a lack of innovation in the industry
C) When new entrants creatively combine existing technologies
D) When production costs are extremely high
a,c
What does the bargaining power of buyers refer to? A) The influence buyers have on pricing and quality
B) The ability of suppliers to dictate terms
C) The impact of government regulations
D) The strength of brand loyalty among consumers
a
How can buyers influence prices in an industry? A) By increasing demand for products
B) By forcing down prices through negotiation
C) By creating exclusive contracts with suppliers
D) By diversifying their purchasing options
b
What is one way buyers can negotiate better terms? A) By reducing their overall purchases
B) By leveraging competition among suppliers
C) By increasing their market share
D) By limiting their supplier options
b
How does the bargaining power of buyers affect industry profitability? A) It typically increases profitability for all firms
B) It can reduce industry profitability
C) It has no impact on profitability
D) It creates more demand for products
b
When is the power of buyers considered high? A) When there are many buyers relative to suppliers
B) When there are fewer buyers relative to the number of suppliers
C) When suppliers have strong brand loyalty
D) When buyers have high switching costs
b
How does the volume of purchases impact buyer power? A) Buyers with low purchase volumes have more power
B) Buyers who purchase large volumes relative to seller sales have more power
C) The volume of purchases has no impact on buyer power
D) High volume purchases lead to less influence
b
Why is buyer power important when a significant percentage of a supplier’s sales come from a single buyer? A) It decreases supplier dependency
B) It increases the buyer’s negotiating leverage
C) It ensures the supplier’s market dominance
D) It leads to higher production costs for suppliers
b
The power of a buyer group is increased if the buyer group has less concentration
than the supplier group.
F
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
a
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
a
When is the power of buyers considered high? A) When suppliers offer highly differentiated products
B) When suppliers provide undifferentiated or standard products
C) When products are unique and complex
D) When there are few buyers in the market
b
What does it mean when buyers can easily switch suppliers? A) There are high switching costs
B) Products are highly customized
C) Products are similar to commodities
D) Suppliers have strong brand loyalty
c
How does low product differentiation impact buyer decisions? A) Buyers become more dependent on specific suppliers
B) Buyers are less likely to switch suppliers
C) Buyers have more leverage in negotiations
D) Buyers are more focused on brand loyalty
c
When are buyers considered to have high power regarding switching costs? A) When switching costs are high
B) When switching costs are low
C) When switching costs vary by product
D) When switching costs are moderate
b
When is the power of buyers considered high in relation to their profitability? A) When buyers have high profit margins
B) When buyers have low profit margins
C) When buyers are indifferent to pricing
D) When buyers are highly diversified
b
How does low profitability affect buyer behavior? A) Buyers become less price-sensitive
B) Buyers are motivated to lower their purchasing costs
C) Buyers focus solely on brand loyalty
D) Buyers increase their purchasing volumes
b
Why are highly profitable buyers less sensitive to price changes? A) They have more competition
B) They can afford higher prices without impacting their margins
C) They often buy in smaller quantities
D) They rely heavily on supplier relationships
b
A large fabricator of building components purchased a steel company to provide raw
materials for its production process. This is an example of
A. backward integration.
B. economies of scale.
C. forward integration.
D. product differentiation
a
What does it mean when the threat of backward integration is high for buyers? A) Buyers can secure better terms with suppliers
B) Suppliers can increase prices without consequence
C) Buyers are dependent on a single supplier
D) Suppliers have more negotiating power
a
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.
d
Buyer power will be greater when
A. the products purchased are highly differentiated.
B. there are high switching costs.
C. the industry’s product is very important to the quality of the buyer’s end products or
services.
D. it is concentrated or purchases large volumes relative to seller sales.
d
When is the power of buyers considered high in relation to the importance of a supplier’s input? A) When the supplier’s input is critical to the final product’s quality
B) When the supplier’s input is low in importance to the final product
C) When buyers rely on a single supplier
D) When the supplier has exclusive technology
b
Why are buyers more sensitive to price when the importance of the supplier’s input is low? A) They can easily find substitutes for the supplier’s input
B) They have high switching costs
C) They rely heavily on supplier relationships
D) They are committed to long-term contracts
a
What does the bargaining power of suppliers refer to? A) The ability of suppliers to dictate terms and conditions
B) The ability of buyers to negotiate prices
C) The influence of government regulations on pricing
D) The strength of brand loyalty among customers
a
How can suppliers influence an industry? A) By increasing market competition
B) By threatening to raise prices
C) By offering exclusive contracts to buyers
D) By decreasing production costs
b
What is one potential consequence of suppliers reducing the quality of goods and services? A) Increased buyer loyalty
B) Decreased supplier influence
C) Erosion of profitability for firms
D) Enhanced product differentiation
c
When is the power of suppliers considered high? A) When there are many suppliers relative to buyers
B) When suppliers are concentrated relative to buyers
C) When suppliers offer highly differentiated products
D) When buyers have low switching costs
b
In a situation where a supplier group is dominated by a few companies, what can occur? A) Increased competition among suppliers
B) Higher prices and lower quality for buyers
C) Greater innovation within the industry
D) Decreased influence over terms and conditions
b
When is the power of suppliers considered high in relation to switching costs? A) When switching costs for buyers are low
B) When switching costs for buyers are high
C) When buyers have many alternatives
D) When suppliers have low production costs
b
How do high switching costs affect buyer behavior? A) Buyers can easily switch suppliers without consequences
B) Buyers are more likely to remain loyal to their current suppliers
C) Buyers negotiate for lower prices more aggressively
D) Buyers diversify their supplier base
b. reduces options for buyers, insensitive to price fluctuations
When are switching costs for buyers considered high in relation to product differentiation? A) When suppliers offer undifferentiated products
B) When suppliers provide highly differentiated products
C) When there are many substitutes available
D) When products are standardized and easily comparable
b
When is the power of suppliers considered high in relation to substitute products? A) When there are many substitutes available
B) When substitute products are of lower quality
C) When there are few substitutes for the suppliers’ products
D) When buyers have diverse options
c
How does a low availability of substitute products affect buyers? A) It increases their negotiating power
B) It limits their options for alternatives
C) It allows them to switch suppliers easily
D) It enhances competition among suppliers
b
What is a potential outcome when suppliers’ products have few substitutes? A) Increased competition among suppliers
B) Greater price sensitivity among buyers
C) Suppliers can raise prices without losing customers
D) Buyers are more likely to switch suppliers
c
When is the power of suppliers considered high regarding the importance of customers? A) When customers are highly significant to the supplier
B) When suppliers depend heavily on a single industry
C) When the importance of the customer to the supplier is low
D) When customers have multiple options
c
How does a low importance of a customer to a supplier affect the supplier’s power? A) It decreases the supplier’s power
B) It increases the supplier’s power
C) It has no effect on supplier power
D) It leads to more competitive pricing
b
What is a likely scenario for suppliers who sell to multiple industries? A) They become highly dependent on one industry
B) They can exert more power over any single industry
C) They will always prioritize customer relationships
D) They will face less competition
b
if suppliers are not reliant on any specific industry, what can they do? A) Reduce their prices to gain more business
B) Increase their prices without fear of losing customers
C) Focus on niche markets exclusively
D) Offer more customization options
b
When is the power of suppliers considered high regarding the threat of forward integration? A) When suppliers rely solely on a single buyer
B) When suppliers threaten to sell directly to customers
C) When buyers have many alternative sources
D) When suppliers provide highly differentiated products
b
What does forward integration by suppliers mean? A) Suppliers reduce their production capacity
B) Suppliers move into the distribution of their products directly to consumers
C) Suppliers form alliances with competitors
D) Suppliers increase their reliance on buyers
b
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
d
An independent group of suppliers, such as farmers, gather to form a cooperative to
sell their products to buyers directly, replacing their former distributor. This is an example of
A. threat of entry.
B. backward integration.
C. forward integration.
D. threat of substitute products
c
) The bargaining power of suppliers is enhanced under the following market
condition:
A. no threat of forward integration.
B. low differentiation of the suppliers’ products.
C. greater availability of substitute products.
D. dominance by a few suppliers.
d
In Porter’s 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.
d
A supplier group would be most powerful when there is/are
A. many suppliers.
B. few substitute products.
C. low differentiation of products supplied.
D. high threat of backward integration by the buyers
b
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. all of these.
c
What does it mean when the price/performance ratio of substitute products is described as “attractive”? A) The substitutes are significantly more expensive than the original product
B) The substitutes offer better value for the price compared to the original product
C) The substitutes are of lower quality but cheaper
D) The substitutes are less well-known in the market
b. The threat of substitute products is high
What is the primary focus of the intensity of rivalry among competitors? A) The threat from new entrants
B) The threat from substitute products
C) The competition between existing firms in the industry
D) The influence of suppliers on prices
c
Which of the following is NOT a tactic involved in rivalries among competitors? A) Price competition
B) New product introductions
C) Supplier negotiations
D) Advertising battles
c
Why can price competition be destabilizing for an industry? A) It increases overall profitability
B) It creates brand loyalty
C) It reduces profitability as firms lower prices in response to rivals
D) It encourages innovatio
c
What can result from intense advertising battles among competitors? A) Decreased demand for products
B) Enhanced product differentiation that benefits all firms
C) Reduced market share for all firms
D) Increased customer switching costs
b
When is the intensity of competitive rivalry considered high? A) When there are only a few firms in the industry
B) When numerous firms or equally balanced competitors exist
C) When firms have significant market power
D) When customers have high switching costs
b
In an industry with no dominant leader, what is a likely behavior among firms? A) They focus solely on cost-cutting
B) They may engage in price wars and aggressive marketing
C) They avoid competitive tactics to maintain harmony
D) They rely on historical customer loyalty
b.
When is the intensity of competitive rivalry considered high? A) When there are few competitors in the market
B) When the number of competitors is high
C) When competitors are all significantly larger than others
D) When firms have differentiated products
b
When is the intensity of competitive rivalry considered high? A) When the industry is experiencing rapid growth
B) When the industry is stagnant or growing slowly
C) When there are many new entrants in the market
D) When consumer demand is increasing
b
When is the intensity of competitive rivalry considered high? A) When fixed costs are low
B) When firms face high fixed or storage costs
C) When the industry has low barriers to entry
D) When there is rapid industry growth
b
Why do high fixed or storage costs increase competitive rivalry? A) Firms are incentivized to reduce product quality
B) Firms must compete aggressively to maintain capacity and avoid excess inventory
C) Firms can easily raise prices without consequence
D) Firms collaborate to reduce overall costs
b
When is the intensity of competitive rivalry considered high? A) When products are highly differentiated
B) When there is a lack of differentiation among products
C) When firms have unique market positions
D) When customer loyalty is strong
b
When is the intensity of competitive rivalry considered high? A) When switching costs for customers are low
B) When customers face high switching costs
C) When firms offer highly differentiated products
D) When customer loyalty is strong
a
When is the intensity of competitive rivalry considered high? A) When exit barriers are low
B) When exit barriers are high
C) When firms can easily sell their assets
D) When competition is minimal
b
What are examples of high exit barriers that can lead to continued competition? A) Low fixed costs and flexible contracts
B) Specialized assets, fixed costs of exiting, and strategic relationships
C) Abundant market opportunities and customer loyalty
D) Strong advertising campaigns and innovative products
b
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, in a slow growth industry with high exit barriers.
D. have low exit barriers for easy transition to another industry
c
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.
a
Exit barriers 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. all of these.
d
Rivalry will be most intense when there is a lack of differentiation or switching
costs.
T
Rivalry is most intense when there are high exit barriers and high industry growth.
f
The more attractive the price/performance ratio of substitute products, the more
tightly it constraints an industry’s ability to charge high prices.
t
The power of suppliers will be enhanced if they are able to maintain a credible threat
of forward integration.
t
Supplier power tends to be highest in industries where products are vital to buyers,
where switching from one supplier to another is very costly, and where there are many
suppliers.
f
In the value net analysis, complementors are
A. firms that produce substitute products.
B. customers who compliment the company for their good products and services.
C. firms that produce products or services that have a positive impact on the value of a firm’s
products or services.
D. firms that supply critical inputs to a company.
c
The value net is a game-theoretic approach that
A. extends the value chain analysis.
B. is a way to analyze all the players in a game and analyze how their interactions affect a
firm’s ability to generate and appropriate value.
C. helps us to understand the evolution of the five forces over time.
D. uses network analysis to understand the relationships among different companies.
b
End users are
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. all of these
D
Incumbent firms may enjoy increased bargaining power because the Internet
A. focuses marketing efforts on end users.
B. diminishes the power of many distribution channel intermediaries.
C. increases channel conflict.
D. has reduced the number of wholesalers and distributors
B
What is one effect of the growth of web-based businesses on supplier power?
A) Increased competition among suppliers
B) More downstream outlets for suppliers to sell products
C) Higher costs for consumers
D) Reduced product quality
B
How do web-based purchasing arrangements affect customer behavior?
A) They increase customer switching rates
B) They simplify purchasing systems and discourage switching
C) They reduce the variety of available products
D) They make purchasing more complicated
B
What benefit do online procurement systems provide to suppliers?
A) Increased paperwork
B) Higher transaction costs
C) Reduced transaction costs and paperwork
D) Less direct communication with customers
c
Which of the following describes the role of proprietary software in strengthening supplier power?
A) It complicates the ordering process for buyers
B) It allows for rapid, low-cost ordering systems
C) It increases switching costs for customers
D) It eliminates the need for online sales
b
What is the concept of disintermediation in relation to supplier power?
A) Suppliers reduce their product offerings
B) Suppliers rely more on intermediaries for sales
C) Suppliers can reach customers directly, bypassing intermediaries
D) Suppliers focus on selling through traditional retail channels
c
How does the elimination of middlemen in the supply chain affect supplier power?
A) It decreases supplier power
B) It has no effect on supplier power
C) It increases supplier power
D) It reduces product availability
c
Supplier power has increased because of the Internet for all of the following reasons
EXCEPT
A. the growth of new Web-based businesses has created more outlets for suppliers to sell to.
B. some suppliers have created Web-based purchasing systems that encourage switching.
C. the process of disintermediation makes it possible for some suppliers to reach end users
directly.
D. software that links buyers to a supplier’s website has created rapid, low-cost order
capabilities.
B. → Because of the Internet and digital technologies, it is very easy for suppliers to create purchasing techniques that lower switching costs
In general, the threat of substitutes is heightened because the Internet
A. introduces new ways to accomplish the same task.
B. lowers switching costs.
C. lowers barriers to entry.
D. increases output per unit of cost.
A
How do infomediaries and consumer information websites increase the intensity of
competitive rivalry?
A. by shifting customers away from issues of price
B. by making competitors in cyberspace seem less equally balanced
C. by consolidating the marketing message that consumers use to make a purchase decision to
a few key pieces of information that the selling company has little control over
D. by highlighting a firm’s unique selling advantages
c
Complementary products are products that typically have a negative impact on the
value of a firm’s own products or services.
F
Michael Porter’s Five-Forces Analysis is a dynamic tool for analyzing industry
attractiveness.
F. The five-forces analysis also has been criticized for being essentially a static analysis.
Five-Forces analysis implicitly assumes a zero-sum game, a perspective that can be
short-sighted.
T
The Internet heightens the threat of substitutes because it creates new ways to
accomplish the same task.
T
Reintermediation is responsible for an overall reduction in business opportunities
F
Because of the Internet and digital technologies, it is very difficult for suppliers to
create purchasing techniques that lower switching costs.
F
An end user’s switching costs are potentially much higher because of the Internet
F
The Internet and digital technologies suppress the bargaining power of buyers by
providing them with more information to make buying decisions.
F. increase
In most industries, new entrants will be a bigger threat because the Internet lowers
entry barriers
T
