M5-The Impact of Market Influences: Part 2

Question 1

The best description of a value chain is that value starts with the suppliers who provide the raw materials for a production process, continues with the firm and its strategic plan, continues with the value created by the customers, and then ends with the disposal and recycling of the materials. (true or false)

Answer 1

true

Value Chain Analysis:

• must be used in conjunction with the strategic plan of the organization
• is a strategic tool that assists the firm in determining how important the perceived value of the buyers is with respect to the market the firm operates in
• is critical to assessing the competitive advantage of a firm

Question 2

Analyzing the vertical linkage of a firm means understanding the activities of the suppliers and buyers of the product and determining where value can be created external to the firm’s operations. The production manager’s visit to the supplier’s location is vertical linkage analysis. (true or false)

Answer 2

true

Question 3

Market competitiveness is often the most significant of the five forces facing a firm. Firms need to be able to anticipate the strategic moves of rival firms. If a firm is in competition with other firms who are able to respond to changes in various components affecting business, the firm faces a strong competitive force of intensity of competition (market competitiveness). (true or false)

Answer 3

true

Question 4

The following are situations that would cause competition to be an even stronger force impacting the profitability of a firm:

Answer 4

• the market is not growing fast
• there are several equal sized firms in the market
• customers do not have strong brand preferences
• the cost of exiting the market exceed the cost of continuing to operate
• Some firms profit from making certain moves to increase market share
• the various firms in the market use different types of strategic plans

Question 5

In the long run, a firm may experience increasing returns due to economies of scale which come into full play only if a large enough number of units is being produced to make it worth while to set up a fairly elaborate productive organization. (true or false)

Answer 5

true

Question 6

The five forces identified by Michael Porter that affect profitability are:

Answer 6

• Market Competitiveness
• Bargaining power of suppliers
• Bargaining power of customers
• Existence of a substitute product
• Barriers to market entry

Question 7

When customers are distinct, a seller can charge different prices to different groups by justifying that the products they are buying are unique to that specific group. There is also less power from the perspective of the customer because they cannot join together as easily and bargain with the seller. (true or false)

Answer 7

true