Strategy – FAQ – 01

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List of FAQs

Q1

The competitive pressures from substitute products tend to be weaker when…

  1. substitutes have been on the market and available for purchase for fewer than three years.
  2. existing industry members currently have sufficient capacity to supply the expected future growth in buyer demand.
  3. there are fewer than 10 sellers of substitute products.
  4. buyers have high costs in switching to substitutes.
  5. the substitute products that are currently available are weakly differentiated from one another.

Q2

Which of the following are most unlikely to qualify as driving forces?

  1. Mounting competition from substitutes, increasing efforts on the part of the industry members to collaborate with suppliers and the speed with which the number of key success factors is either rising or falling. 
  2. Product innovation and changes in who buys the industry’s product and how they use it.
  3. Changes in an industry’s long term growth rate, the entry or exit of major firms, and changes in cost and efficiency.
  4. Increasing globalization of the industry and marketing innovation.
  5. Emerging new Internet technology applications, reductions in uncertainty and business risk, regulatory influences, and government policy changes.

Q3

Which of the following is not a major question to ask in assessing a company’s industry and competitive environment?

  1. What are the key factors for future competitive success?
  2. How many companies have ensured the industry in the past year and how many gave exited the industry?
  3. Is the industry outlook conducive to good profitability?
  4. What strategic moves are rivals likely to make next?
  5. What forces are driving changes in the industry, and what impact will these changes have on competitive intensity and industry profitability?

Q4

Whether buyer bargaining power poses a strong or weak source of competitive pressure on industry members depends in part on…

  1. the price sensitivity of buyers, whether buyer switching costs are high or low, and how well-informed buyers are about the product offerings of industry members.
  2. whether entry barriers are high or low and the pool of likely entry candidates is big or small.
  3. whether the profit margins of sellers are relatively high or low.
  4. whether the overall quality of the products/services of industry members is rising or falling.
  5. whether buyer demand is local, regional, national, or global.

Q5

Which one of the following conditions acts to intensify the competitive pressures associated with the threat of entry?

  1. Industry conditions that are causing existing competitors to struggle to earn a decent profit.
  2. High entry barriers.
  3. A small pool of entry candidates.
  4. A general belief on the part of entry candidates that industry members are unwilling or unable to strongly contest the efforts of newcomers to gain a market foothold.
  5. A risky or uncertain industry outlook.

Q6

A competitive environment where there is weak to moderate rivalry among sellers, high entry barriers, weak competition from substitute products, and little bargaining leverage on the part of both suppliers and customers…

  1. typically results in a ‘buyers’ market where industry members are focused to reduce prices.
  2. is conducive to industry members earning attractive profits.
  3. gives each industry competitor the best potential for growing rapidly and strongly differentiating its product.
  4. lacks powerful driving forces and is thus likely to be relatively slow-changing and have low profit margins.
  5. requires that industry members have low costs in order to be competitively successful.

Q7

The bargaining leverage of suppliers is stronger when…

  1. there are no good substitutes for the items being furnished by the suppliers and there are only a few “preferred” suppliers of a particular level.
  2. industry members are a threat to integrate backward into the business of suppliers and to self-manufacture their own requirements.
  3. suppliers provide an item that accounts for a sizable fraction of the costs of the industry’s product.
  4. the products of suppliers are weakly differentiated, industry members have high costs in switching from one supplier to another, an the supplier industry is compose of more than five suppliers.
  5. industry members purchase in large quantities and thus are important customers of the suppliers.

Q8

Which one of the following conditions weakens the competitive pressures associated with the threat of entry?

  1. Buyer demand for the product is growing rapidly.
  2. Existing industry members are unable or unwilling to strongly contest the entry of newcomers.
  3. Existing industry members have little interest in expanding their market reach by entering product segments or geographic areas where they currently do not have a presence.
  4. Newcomers can expect to earn attractive profits.
  5. Entry barriers are relatively low or can be readily hurdled by the likely entry candidates.

Q9

The key success factors in an industry…

  1. are determined by the industry’s driving forces, by the number of different strategic groups in the industry, and by the number of different competitive strategies that industry members are employing.
  2. concern the specific resource strengths and competitive capabilities that a company must always incorporate in its strategy in order to be profitable.
  3. relate to the kinds of business models and strategies that a company must employ in order to be profitable, win a competitive edge, and give the company a chance at being the global market leader.
  4. are those competitive factors that most affect industry members’ abilities to prosper in the marketplace – the particular strategy elements, product attributes, resource strengths, competitive capabilities, and market achievement that spell the difference between being a strong competitor and a weak competitor (and sometimes the difference between profit and loss).
  5. Concern those industry-related factors that play a major role in whether a company gains a sustainable competitive advantage in trying to overcome competitive pressures and industry driving forces.

Q10

The managerial payoff from spending the time and effort to gather and digest competitive intelligence about rivals’ strategies and situations and gain some inkling of what moves they will be making comes from…

  1. learning which rival companies have winning strategies and which ones have weak or flawed strategies.
  2. separating rival companies into two groups – those who have been gaining market share and those who have been losing during the past 2-3 years.
  3. avoiding the mistake of flying blind into competitive battle and being surprised by the fresh actions of rivals and helping a company to make maneuvers to expect from its rivals.
  4. enabling company managers to determine which rival has the worst strategic and what to do to avoid making the same strategy mistakes.
  5. being in better position to know whether the company’s strategy should be mostly defensive in nature (to help protect against the strategic offensives of rivals) or mostly offensive (to try to capitalize on the strategic flaws and mistakes of competitors).

Q11

Company’s broad “macro-environment” refers to…

  1. the industry and competitive arena in which the company operates.
  2. general economic conditions plus the factors driving change in the markets being served.
  3. all the strategically significant forces and factors outside a company’s boundaries — general economic conditions, population demographics, societal values and lifestyles, technological factors, and governmental legislation and regulation.
  4. the competitive market environment that exists between a company and its competitors.
  5. the dominant economic features of a company’s industry.

Q12

Which one of the following is not part of a company’s broad macro-environment? 

  1. Conditions in the economy at large.
  2. Population demographics and societal values and lifestyles.
  3. Technological and ecological factors.
  4. Governmental regulations and legislation.
  5. The company’s resource strengths, resource weaknesses, and competitive capabilities.

Q13

Which of the following is not a major question to ask in thinking strategically about industry and competitive conditions in a given industry? 

  1. How many companies in the industry have good track records for revenue growth and profitability?
  2. What strategic moves are rivals likely to make next?
  3. What are the key factors for future competitive success?
  4. Does the outlook for the industry offer good prospects for profitability?
  5. What forces are driving changes in the industry, and what impact will these changes have on competitive intensity and industry profitability?

Q14

Thinking strategically about industry and competitive conditions in a given industry involves evaluating such considerations as…

  1. cultural, lifestyle, and demographic changes.
  2. the birth of new industries, new knowledge, and disruptive technologies.
  3. weather, climate change, and water shortages.
  4. interest rates, exchange rates, unemployment rates, inflation rates, and economic growth.
  5. how often sellers alter their prices, how sensitive buyers are to price differences among sellers, whether the item being purchased is a good or a service, and whether buyers buy frequently or infrequently.

Q15

Which of the following is not a factor to consider in identifying an industry’s dominant economic features? 

  1. The market size, growth rate and prospects.
  2. The scope of competitive rivalry including geographic area.
  3. The market demand-supply conditions.
  4. How strong driving forces and competitive forces are.
  5. The role and pace of technological change.

Q16

Which of the following is not a relevant consideration in identifying an industry’s dominant economic features? 

  1. Market size and growth rate, the geographic scope of competitive rivalry, and demand-supply conditions.
  2. How many strategic groups the industry has and which ones are most profitable and least profitable.
  3. The number and sizes of buyers, the number of rivals, and the pace of product innovation.
  4. The pace of technological change.
  5. The current industry position in its life cycle to reveal the industry’s growth prospects.

Q17

The state of competition in an industry is a function of…

  1. the competitive pressures associated with rivalry among competing sellers to attract customers.
  2. competitive pressures coming from the attempts of companies in other industries attempting to win buyers over to their substitute products.
  3. competitive pressures associated with the threat of new entrants into the marketplace.
  4. competitive pressures associated with the bargaining power of suppliers and customers.
  5. all of these.

Q18

The nature and strength of the competitive forces that prevail in an industry is generally a joint product of the…

  1. pressures associated with rivalry among sellers to attract buyer patronage.
  2. threat that firms outside the industry will decide to enter the market.
  3. attempts of companies in other industries to win buyers over to their own substitute products.
  4. competitive pressures stemming from the bargaining power of both suppliers and buyers.
  5. all of these.

Q19

Which of the following is not one of the five typical sources of competitive pressures? 

  1. The power and influence of industry driving forces.
  2. The bargaining power of suppliers and seller-supplier collaboration.
  3. The threat of new entrants into the market.
  4. The attempts of companies in other industries to win customers over to their own substitute products.
  5. The market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry.

Q20

Whether buyer bargaining power poses a strong or weak source of competitive pressure on industry members depends in part on…

  1. whether most buyers possess roughly equal or varying degrees of bargaining power.
  2. how many buyers are engaged in collaborative partnerships with sellers.
  3. whether entry barriers are high or low.
  4. whether the overall quality of the items being furnished by industry members is rising or falling.
  5. whether buyer demand is strong or declining.

Q21

Competitive pressures stemming from buyer bargaining power tend to be weaker when…

  1. the number of buyers is small, such that each customer’s business tends to be particularly important to a seller.
  2. buyer demand is growing slowly or maybe even declining.
  3. the costs incurred by buyers in switching to competing brands or to substitute products are relatively high.
  4. buyers are well informed about sellers’ products, prices, and costs.
  5. the buyer group consists of a few large buyers and the seller group consists of numerous small firms.

Q22

Which of the following conditions acts to weaken buyer bargaining power? 

  1. When buyers are unlikely to integrate backward into the business of sellers.
  2. When buyers are well informed about sellers’ products, prices, and costs.
  3. When the costs incurred by buyers in switching to competing brands or to substitute products are relatively low.
  4. When buyers have the ability to postpone purchases if they don’t like the prices offered by sellers.
  5. When buyers are few in number and/or often purchase in large quantities.

Q23

Which of the following is not a factor that causes buyer bargaining power to be stronger? 

  1. Some buyers are a threat to integrate backward into the business of sellers.
  2. The industry is composed of a few large sellers and the customer group consists of numerous buyers that purchase in fairly small quantities.
  3. Buyers have considerable discretion over whether and when they purchase the product.
  4. Buyers are well informed about sellers’ products, prices, and costs.
  5. The costs incurred by buyers in switching to competing brands or to substitute products are relatively low.

Q24

In which of the following circumstances are competitive pressures associated with the bargaining power of buyers not relatively strong?

  1. When buyer demand is growing rapidly.
  2. When buyers are relatively well informed about sellers’ products, prices, and costs.
  3. When buyers pose a major threat to integrate backward into the product market of sellers.
  4. When sellers’ products are weakly differentiated, making it easy for buyers to switch to competing brands.
  5. When buyers have considerable discretion over whether and when they purchase the product.

Q25

Which of the following factors is not a relevant consideration in judging whether buyer bargaining power is relatively strong or relatively weak? 

  1. Whether the number of buyers is small or if a customer is particularly important to the seller.
  2. Whether buyers are relatively well informed about sellers’ products, prices, and costs.
  3. Whether buyer needs and expectations are changing rapidly or slowly.
  4. Whether buyer demand is weak or strong and rapidly growing.
  5. Whether buyers pose a credible threat of integrating backward into the business of sellers.

Q26

The competitive pressures from substitute products tend to be stronger when…

  1. buyers are relatively comfortable with the quality and performance of substitutes and the costs to buyers of switching over to the substitutes are low.
  2. there are more than 10 sellers of substitute products.
  3. substitutes exhibit the latest in technological innovation.
  4. buyers have high psychic costs in severing existing brand relationships and establishing new ones.
  5. demand for the industry’s product is not very price sensitive.

Q27

Just how strong the competitive pressures are from substitute products depends on…

  1. whether the available substitutes are strongly or weakly differentiated and whether buyers make purchases frequently or infrequently.
  2. whether attractively priced substitutes are readily available and the ease with which buyers can switch to substitutes.
  3. whether the available substitutes are products or services.
  4. whether the producers of substitutes have ample budgets for new product R&D.
  5. the speed with which buyer needs and expectations are changing.

Q28

Which of the following is not a good example of a substitute product that triggers stronger competitive pressures? 

  1. Artificial sweetener as a substitute for sugar.
  2. Wireless phone service as a substitute for a landline telephone.
  3. Coca-Cola as a substitute for Pepsi.
  4. Digital cameras as substitutes for film cameras.
  5. Video-on-demand services as a substitute for renting movies from a movie rental store.

Q29

In which of the following instances are industry members not subject to stronger competitive pressures from substitute products? 

  1. The costs to buyers of switching over to the substitutes are low.
  2. Buyers are dubious about using substitutes.
  3. The quality and performance of the substitutes is well matched to what buyers need to meet their requirements.
  4. Buyer brand loyalty is weak.
  5. Substitutes are readily available at competitive prices.

Q30

Whether supplier-seller relationships in an industry represent a strong or weak source of competitive pressure is a function of…

  1. whether the profits of suppliers are relatively high or low.
  2. the number of suppliers that each seller/industry member purchases from on average.
  3. how aggressively rival industry members are trying to differentiate their products.
  4. the extent to which suppliers can exercise sufficient bargaining power to influence the terms and conditions of supply in their favor and the extent of seller-supplier collaboration in the industry.
  5. whether the prices of the items being furnished by the suppliers are rising or falling.

Q31

The bargaining leverage of suppliers is greater when…

  1. only a small number of suppliers exist and when it is difficult for industry members to switch to attractive substitutes.
  2. industry members incur low costs in switching their purchases from one supplier to another.
  3. industry members purchase in large quantities and thus are important customers of the suppliers.
  4. it makes good economic sense for industry members to vertically integrate backward.
  5. the supplier industry is composed of a large number of relatively small suppliers.

Q32

In which one of the following instances is supplier bargaining power and leverage not weakened? 

  1. When industry members pose a credible threat of backward integration into the business of suppliers.
  2. When the cost of switching from one supplier to another is low.
  3. When the buying firms purchase in large quantities and thus are important customers of the suppliers.
  4. When the item being supplied is a commodity.
  5. When the items purchased from suppliers are in short supply.

Q33

Which one of the following is not a factor that affects the strength of supplier bargaining power? 

  1. Whether needed inputs are in short or ample supply.
  2. Whether industry members are a strong threat to integrate backward into the business of suppliers.
  3. Whether industry members are struggling to make good profits because of slow-growing market demand.
  4. Whether the costs of industry members to switch their purchases to alternative suppliers or substitutes are high or low.
  5. Whether the item being supplied is a commodity that is readily available from many suppliers.

Q34

Which one of the following is not a reason industry members are often motivated to enter into collaborative partnerships with key suppliers?

  1. To reduce the costs of switching suppliers.
  2. To speed the availability of next-generation components.
  3. To enhance the quality of parts and components being supplied and reduce defect rates.
  4. To squeeze out important cost savings for both themselves and their suppliers.
  5. To reduce inventory and logistics costs.

Q35

Which one of the following does not intensify the competitive pressures associated with the threat of entry? 

  1. When incumbent firms are unable or unwilling to launch competitive initiatives to strongly contest the entry of newcomers.
  2. When industry members are struggling to earn good profits.
  3. When entry barriers are relatively low.
  4. When existing industry members are looking to expand their market reach by entering product segments or geographic areas where they currently do not have a presence.
  5. When newcomers can expect to earn attractive profits and a number of outsiders have the expertise and resources to hurdle whatever entry barriers exist.

Q36

Which one of the following increases the competitive pressures associated with the threat of entry? 

  1. When incumbent firms are likely to launch competitive initiatives to strongly contest the entry of newcomers
  2. When buyers have a high degree of loyalty to the brands and product offerings of existing industry members.
  3. When buyer demand for the product is growing fairly slowly.
  4. When few outsiders have the expertise and resources to hurdle whatever entry barriers exist.
  5. When newcomers can expect to earn attractive profits.

Q37

The competitive threat that outsiders will enter a market is weaker when…

  1. financially strong industry members send strong signals that they will launch strategic initiatives to combat the entry of newcomers.
  2. the pool of entry candidates is large and some have resources that would make them formidable market contenders.
  3. the industry’s market growth is rapid.
  4. newcomers can be expected to earn attractive profits.
  5. buyers have little loyalty to the brands and product offerings of existing industry members.

Q38

Which of the following is generally not considered as a barrier to entry?

  1. Rapid market growth.
  2. Sizable capital requirements and an array of regulatory requirements.
  3. Strong buyer loyalty to existing brands.
  4. Sizable economies of scale in production.
  5. Difficulties in gaining access to distribution and securing adequate space of retailers’ shelves.

Q39

The best test of whether potential entry is a strong or weak competitive force is…

  1. the strength of buyer loyalty to existing brands.
  2. whether the industry’s driving forces make it harder or easier for new entrants to be successful.
  3. whether the strategies of industry members are well matched to the industry’s key success factors.
  4. whether the industry offers an opportunity for a blue ocean strategy.
  5. to ask if the industry’s growth and profit prospects are strongly attractive to potential entry candidates.

Q40

The most powerful of the five competitive forces is usually…

  1. the competitive pressures that stem from the ready availability of attractively priced substitute products.
  2. the competitive pressures associated with rivalry among competing sellers in the industry for buyer patronage.
  3. the benefits that emerge from close collaboration with suppliers and the competitive pressures that such collaboration creates.
  4. the competitive pressures associated with the potential entry of new competitors.
  5. the bargaining power and leverage that large customers are able to exercise.

Q41

Factors that cause the rivalry among competing sellers to be weak include…

  1. low buyer switching costs and rival sellers that are relatively equal in size and capability.
  2. rapid growth in buyer demand and high buyer switching costs.
  3. a recent acquisition of a weak rivals by an industry outsider with the intent of turning the acquisition into a major contender.
  4. low barriers to entry and weakly differentiated products among rival sellers.
  5. slow growth in buyer demand and strongly differentiated products.

Q42

Which one of the following does not cause the rivalry among competing sellers to be weak? 

  1. High buyer switching costs.
  2. Rapid growth in buyer demand.
  3. Industry members aren’t aggressive in drawing sales and market share away from rivals.
  4. When one or more competitors become dissatisfied with their market position.
  5. Strongly differentiated products among rival sellers.

Q43

The rivalry among competing sellers tends to be less intense when…

  1. industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit sales.
  2. buyer demand is weak and many sellers have excess capacity and/or inventory.
  3. industry rivals are not particularly aggressive in drawing sales and market share away from rivals.
  4. rivals have diverse strategies and objectives and are located in different countries.
  5. rival sellers have weakly differentiated products.

Q44

Rivalry among competing sellers is generally more intense when…

  1. buyer demand is growing rapidly.
  2. the industry’s driving forces are strong and rivals have strongly differentiated products.
  3. barriers to entry are moderately high and the pool of likely entry candidates is small.
  4. industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit volume.
  5. barriers to entry are high and buyer switching costs are high.

Q45

The rivalry among competing firms tends to be more intense when…

  1. demand for the product is growing slowly, one or maybe several industry members become dissatisfied with their market position, buyers have low switching costs, and when strong companies outside the industry acquire weak firms in the industry and launch aggressive moves to build market share.
  2. the products/services of rival sellers are strongly differentiated and buyer demand is strong.
  3. rivals are relatively content with their market position.
  4. there are so many industry rivals that the impact of any one company’s actions is spread thinly across all industry members.
  5. there are fewer firms in the industry that have unequal market shares.

Q46

A competitive environment where there is weak to moderate rivalry among sellers, high entry barriers, weak competition from substitute products, and little bargaining leverage on the part of both suppliers and customers…

  1. lacks powerful driving forces.
  2. gives each industry competitor the best potential for building sustainable competitive advantage. 
  3. makes it hard for industry members to pursue a differentiation strategy.
  4. is conducive to industry members earning attractive profits.
  5. requires that industry members have low costs.

Q47

A competitive environment where there is strong rivalry among sellers, low entry barriers, strong competition from substitute products, and considerable bargaining leverage on the part of both suppliers and customers…

  1. is competitively unattractive from the standpoint of earning good profits.
  2. offers little ability to build a sustainable competitive advantage.
  3. is highly conducive to achieving strong product differentiation and high brand loyalty.
  4. offers moderate to good prospects for achieving low costs and building a sustainable competitive advantage.
  5. requires that industry members have a strongly differentiated product offering in order to be profitable.

Q48

As a rule, the stronger the collective impact of competitive pressures associated with the five competitive forces, …

  1. the stronger are the industry’s driving forces.
  2. the lower the combined profitability of industry members.
  3. the fewer companies that can achieve a competitive advantage via anything other than being the industry’s low-cost leader.
  4. the larger the number of competitive advantage opportunities for industry members.
  5. the greater the number of industry key success factors.

Q49

The “driving forces” in an industry…

  1. are usually triggered by changing technology or stronger learning/experience curve effects.
  2. usually are spawned by growing demand for the product, the outbreak of price-cutting, and big reductions in entry barriers.
  3. are major underlying causes of change in industry and competitive conditions and have the biggest influences in reshaping the industry landscape and altering competitive conditions.
  4. appear when an industry begins to mature but are seldom present during early stages of the industry life cycle.
  5. are usually triggered by shifting buyer needs and expectations or by the appearance of new substitute products.

Q50

Industry conditions change…

  1. because of such powerful driving forces as swings in buyer demand, changing interest rates, ups and downs in the economy, and higher/lower entry barriers.
  2. because of newly emerging industry threats and industry opportunities that alter the composition of the industry’s strategic groups.
  3. because new industry key success factors emerge.
  4. because forces create pressures or incentives for industry participants (competitors, customers, suppliers) to alter their actions in important ways.
  5. chiefly because of changes in the barriers to entry and the degree of competition from substitute products.

Q51

The steps involved in driving forces analysis are…

  1. developing a comprehensive list of all the potential causes of changing industry conditions.
  2. predicting which new driving forces will emerge next.
  3. determining which of the five competitive forces is the biggest driver of industry change.
  4. identifying the driving forces, assessing whether their impact will make the industry more or less attractive, and determining what strategy changes are needed to prepare for the impact of the driving forces.
  5. all of these.

Q52

Driving forces analysis…

  1. involves identifying the driving forces, assessing whether their impact will make the industry more or less attractive, and determining what strategy changes a company may need to make to prepare for the impact of the driving forces.
  2. identifies which strategic group is the most powerful.
  3. helps managers identify which industry member is likely to become (or remain) the industry leader and why.
  4. helps managers identify which key success factors are most likely to help their company gain a competitive advantage.
  5. helps managers identify which of the five competitive forces will be the strongest driver of industry change.

Q53

Which of the following is not generally a “driving force” capable of producing fundamental changes in industry and competitive conditions? 

  1. Changes in the long-term industry growth rate.
  2. Increasing globalization of the industry.
  3. Product innovation and technological change.
  4. Ups and downs in the economy and in interest rates.
  5. New government regulations or significant changes in government policy toward the industry.

Q54

Which of the following are most unlikely to qualify as driving forces? 

  1. Changes in the long-term industry growth rate, the entry or exit of major firms, and changes in cost and efficiencyIncreasing globalization of the industry and product innovation.
  2. New Internet technology applications, new government regulations, and significant changes in government policy toward the industry.
  3. Mounting competition from substitutes and increasing efforts to collaborate with suppliers via strategic alliances.
  4. Changes in who buys the industry’s product and how they use it.

Q55

Which of the following do not qualify as potential driving forces capable of inducing fundamental changes in industry and competitive conditions? 

  1. Changes in who buys the product and how they use it, changes in the long-term industry growth rate, and changes in cost and efficiency.
  2. Entry or exit of major firms, product innovation, and marketing innovation.
  3. Increases in the economic power and bargaining leverage of customers and suppliers, growing supplier-seller collaboration, and growing buyer-seller collaboration.
  4. Diffusion of technical know-how and changing societal concerns, attitudes, and lifestyles.
  5. Changes in manufacturing processes brought on by technological change, increasing globalization of the industry, and new Internet capabilities.

Q56

Which one of the following is not a common type of driving force? 

  1. Entry or exit of major firms.
  2. Changing societal concerns, attitudes, and lifestyles.
  3. Diffusion of technical know-how across more companies and more countries.
  4. Increasing efforts on the part of industry members to collaborate closely with their suppliers.
  5. Technological change and manufacturing process innovation.

Q57

An industry’s driving forces…

  1. are generally determined by competitive pressures, the sizes of strategic groups, and the power of rival firms’ competitive strategies.
  2. generally act in ways that will strengthen or weaken market demand, make competition more or less intense, and lead to higher or lower industry profitability.
  3. frequently cause a leveling off of industry growth and a reduction in the bargaining power of buyers.
  4. are normally triggered by ups and downs in the economy, higher or lower inflation rates, higher or lower interest rates, or important new strategic alliances.
  5. can be triggered by such factors as growing competitive pressures from substitute products, greater seller-supplier collaboration, and the efforts of rival firms to employ new or different offensive strategies.

Q58

A strategic group…

  1. consists of those industry members that are growing at about the same rate and have similar product line breadth.
  2. includes all rival firms having comparable profitability.
  3. is a cluster of industry rivals that have similar competitive approaches and market positions.
  4. consists of those firms whose market shares are about the same size.
  5. is made up of those firms having comparable profit margins.

Q59

A strategic group consists of those firms in an industry that…

  1. are subject to the same driving forces.
  2. are placing about the same emphasis on each distribution channel.
  3. use the same key success factors to differentiate their products.
  4. employ similar competitive approaches and occupy similar positions in the market.
  5. have similar size market shares.

Q60

Which of the following is not an appropriate guideline for developing a strategic group map for a given industry? 

  1. The variables chosen as axes for the map should indicate big differences in how rivals have positioned themselves to compete in the marketplace.
  2. The variables chosen as axes for the map can be quantitative, qualitative, or discrete and defined in terms of distinct classes and combinations.
  3. The variables chosen as axes for the map should be highly correlated.
  4. Several maps should be drawn if more than one pair of variables can help illuminate differences in the competitive positioning of industry members.
  5. The sizes of the circles on the map should be drawn proportional to the combined sales of the firms in each strategic group.

Q61

Not all positions on a strategic group map are equally attractive because…

  1. entry and exit barriers are different for each strategic group.
  2. key success factors are usually quite different for differently positioned industry participants.
  3. small strategic groups are always less profitable than large strategic groups.
  4. across-group rivalry is strongest at the outer edges of the strategic group map.
  5. industry driving forces and competitive pressures favor some companies or groups and hurt others and the profit potential of different strategic groups varies because of strengths and weaknesses in each strategic group’s position.

Q62

The payoff of good scouting reports on rivals is improved ability to…

  1. predict what strategic moves rivals are likely to make next, thereby allowing a company to prepare defensive countermoves and develop strategies to exploit rivals’ missteps.
  2. determine which rivals are in the best strategic group.
  3. figure out how many key success factors a rival has.
  4. determine whether a rival is gaining or losing market share, whether rivals are increasing or decreasing R&D spending, and what new marketing promotions are in the works.
  5. determine whether a rival has the best strategy and is the industry leader.

Q63

Having good competitive intelligence about rivals’ strategies, latest actions and announcements, resource strengths and weaknesses, and moves to improve their situation is important because…

  1. it identifies who the industry’s current market share leaders are.
  2. it helps a company to anticipate what moves rivals are likely to make next and to craft its own strategic moves.
  3. good scouting reports help identify which rival is in which strategic group.
  4. it enables company managers to determine which rival has the worst strategy and how to avoid making the same strategy mistakes.
  5. it enables more accurate predictions about how long it will take a particular rival to copy most of what the strategy leader is doing.

Q64

In seeking to predict the next moves of close or key rivals, it is useful to consider such questions as: 

  1. Which rivals badly need to increase their unit sales and market share?
  2. Are there predictable trends in the timing of rivals’ new-product launches or marketing promotions?
  3. Which rivals have a strong incentive, along with the resources, to make major strategic changes?
  4. Which rivals are likely to enter new geographic markets or expand their product offerings?
  5. All of these.

Q65

The key success factors in an industry…

  1. are the strategy elements, intangible assets, and competitive capabilities that most affect industry members’ abilities to prosper in the marketplace.
  2. are determined by the industry’s driving forces.
  3. hinge on how many different strategic groups the industry has.
  4. depend on how many rivals are trying to move from one strategic group to another.
  5. are a function of such considerations as how many firms are in the industry, how many have market shares above 5%, and whether the business models being used are similar or diverse.

Q66

An industry’s key success factors…

  1. are a function of market share, entry barriers, economies of scale, degree of vertical integration, and industry profitability.
  2. vary according to whether an industry has high or low long-term attractiveness.
  3. can be determined through identifying an industry’s dominant economic characteristics, assessing the five competitive forces, considering the impacts of the driving forces, comparing the market positions of industry members, and forecasting the likely next moves of industry rivals.
  4. can be determined from studying the “winning” strategies of the industry leaders and ruling out as potential key success factors the strategy elements of those firms considered to have “losing” strategies.
  5. depend on the relative competitive strengths of the industry leaders and how vulnerable they are to competitive attack.

Q67

In identifying an industry’s key success factors, strategists should…

  1. try to single out all factors that play a major role in shaping whether buyer demand grows rapidly or slowly.
  2. consider on what basis customers choose between competing brands, what resources and competitive capabilities firms need to be competitively successful, and what shortcomings are almost certain to put a company at a significant competitive disadvantage.
  3. consider whether the number of strategic groups is increasing or decreasing and whether the five competitive forces are powerful or relatively weak.
  4. consider what it will take to overtake the company with the industry’s overall best strategy.
  5. focus their attention on what it will take to capitalize on impacts of the industry’s driving forces.

Q68

Which of the following is not a good example of a marketing-related key success factor?

  1. High utilization of fixed assets
  2. A well-known and well-respected brand name
  3. Breadth of product line and product selection
  4. Clever advertising
  5. Courteous, personalized customer service

Q69

Which of the following is a good example of a manufacturing-related key success factor? 

  1. Global distribution capabilities
  2. High labor productivity (especially if the production process has high labor content)
  3. Low distribution cost
  4. Accurate filling of buyer orders
  5. Short delivery time capability

Q70

Which of the following factors should a company consider when determining if an industry offers good prospects for attractive profits? 

  1. The industry’s growth potential, whether competition appears destined to become stronger or weaker, how the industry’s driving forces might affect overall industry profitability, the company’s competitive position relative to rivals, and the company’s proficiency in performing industry key success factors.
  2. An assessment of which firms in the industry have the best and worst competitive strategies, whether the number of strategic groups in the industry is increasing or decreasing, and whether economies of scale and experience curve effects are a key success factor.
  3. Whether there are more than five key success factors and more than five barriers to entry.
  4. Constructing a strategic group map and assessing the attractiveness of the competitive position of each strategic group.
  5. Whether the market leaders enjoy competitive advantages and how hard it is to develop a strongly differentiated product.

Q71

Evaluating whether an industry presents a sufficiently attractive business opportunity usually does not involve a consideration of which of the following factors? 

  1. The industry’s growth potential.Whether competitive pressures will likely grow stronger or weaker.
  2. Whether the industry’s future profitability will be favorably or unfavorably affected by the prevailing driving forces.
  3. The company’s competitive position in the industry and its ability to perform industry key success factors.
  4. Whether the industry’s product is strongly or weakly differentiated.

Q72

The three parts of the external environment which affect a firm’s strategic actions are

  1. economic, political, and legal
  2. general, industry, and competitor
  3. industry, business, and product
  4. local, national, and global

Q73

The ____ environment is composed of dimensions in the broader society that can influence an industry and the firms within it.

  1. general
  2. competitor
  3. sociocultural
  4. industry

Q74

The environmental segments that comprise the general environment typically will NOT include

  1. demographic factors
  2. sociocultural factors
  3. substitute products or services
  4. technological factors

Q75

Which of the following is NOT an activity used in the external environmental analysis process?

  1. Scanning
  2. Decrypting
  3. Monitoring
  4. Assessing

Q76

Environmental scanning would be most important for which of the following organizations?

  1. A provider of hospice services for the terminally ill
  2. A web design company catering to small businesses
  3. A neighborhood sewer and water utility
  4. A manufacturer of household linens

Q77

When analysts develop feasible projections of future events and how quickly they will occur based on observed changes and trends, they are engaged in

  1. scanning
  2. monitoring
  3. forecasting
  4. assessing

Q78

A general environmental analysis can be expected to produce all of the following except…

  1. objective answers
  2. recognition of environmental trends
  3. identification of organizational opportunities
  4. identification of organizational threats

Q79

In analyzing the demographic segment of the general environment, one typically examines all of the following factors except…

  1. age structure
  2. ethnic mix
  3. distribution of income
  4. cultural values

Q80

Analyzing income distribution would include all of the following except…

  1. the purchasing power of various age groups.
  2. the discretionary income of various ethnic groups.
  3. wage differentials between male and female employees working for a large manufacturer.
  4. how income is distributed among regions of the U.S.

Q81

Demographic changes include variations in income distribution. Which of the following statements is true?

  1. Firms are most interested in the consumers comprising the top ten percent of the household income.
  2. In general, living standards have deteriorated over time.
  3. The general loss in real income has been somewhat offset by the increase in dual-career couples.
  4. Workforce diversity is making the concept of average income obsolete.

Q82

An analysis of the economic segment of the external environment would include all of the following except…

  1. interest rates
  2. trade deficits or surpluses
  3. inflation rates
  4. the move toward a contingent workforce

Q83

Characteristics of the current economic segment include all of the following except…

  1. general uncertainty.
  2. a clear understanding of future economic opportunities and threats.
  3. inability of economists to provide valid and reliable predictions.
  4. an expanding economy in Vietnam.

Q84

The economic environment refers to…

  1. the nature and direction of the economy in which a firm competes or may compete.
  2. the economic outlook of the world provided by the World Bank.
  3. an analysis of how the environmental movement and world economy interact.
  4. an analysis of how new environmental regulations will affect the U.S. economy.

Q85

The political/legal segment of an environment represents…

  1. the political preferences of different ethnic groups in the society.
  2. the technological values of different political entities in society.
  3. how organizations and governments mutually try to influence each other.
  4. the system of regulations governments at all levels place on businesses.

Q86

All of the following are aspects of the political/legal segment of the general environment except…

  1. antitrust laws
  2. attitudes and values
  3. taxation laws
  4. industries chosen for deregulation

Q87

An analysis of society’s attitudes and values would be conducted when studying the ____ segment of the general environment.

  1. sociocultural
  2. global
  3. demographic
  4. economic

Q88

The technological segment of environmental analysis includes…

  1. institutions and activities involved with creating new knowledge and translating that knowledge into new outputs.
  2. the determination of when machinery will need to be replaced in a given firm.
  3. the need for new technology in order for a firm to gain a competitive advantage.
  4. places where a firm’s technology will allow that firm to dominate a given market.

Q89

Understanding how new knowledge can develop new products, processes, or materials is a result of analyzing the ____ segment of the general environment.

  1. economic
  2. political/legal
  3. technological
  4. global

Q90

The next critical technological opportunity for organizations is predicted to be…

  1. the Internet
  2. multiphasic interventions
  3. biological engineering
  4. wireless communications

Q91

Because of threats and risks in the global environment, some firms choose to take a more cautious approach by…

  1. avoiding global markets altogether
  2. expanding only to developed countries
  3. focusing on global niche markets
  4. acquiring already established firms in foreign markets

Q92

Global warming and energy consumption trends are aspects of the ____ segment of the general environment that firms should monitor.

  1. technological
  2. physical
  3. sociocultural
  4. economic

Q93

An industry is defined as…

  1. a group of firms producing the same products or services
  2. firms producing items that sell through the same distribution channels
  3. firms that sell the same products or services to the same customer base
  4. a group of firms producing products that are close substitutes

Q94

The likelihood of entry of new competitors is affected by ____ and ____.

  1. barriers to entry, expected retaliation of current industry organizations
  2. the power of existing suppliers, buyers
  3. the profitability of the industry, the market share of its leading firm
  4. the demand for the product, the profitability of the competitors

Q95

Which of the following is NOT an entry barrier to an industry?

  1. expected competitor retaliation
  2. economies of scale
  3. customer product loyalty
  4. bargaining power of suppliers

Q96

New entrants to an industry are more likely when…

  1. it is difficult to gain access to distribution channel.
  2. economies of scale in the industry are high.
  3. product differentiation in the industry is low.
  4. capital requirements in the industry are high.

Q97

Economies of scale refer to the fact that as the…

  1. quantity of product produced in a given time period increases, the cost of manufacturing each unit increases.
  2. quantity of product produced in a given time period increases, the cost of manufacturing each unit remains constant.
  3. quantity of product produced in a given time period increases, the cost of manufacturing each unit decreases.
  4. quantity of product produced in a given time period decreases, the cost of manufacturing each unit decreases.

Q98

Product differentiation refers to the…

  1. ability of the buyers of a product to negotiate a lower price.
  2. response of incumbent firms to new entrants.
  3. belief by customers that a product is unique.
  4. fact that as more of a product is produced the cheaper it becomes per unit.

Q99

Switching costs refer to the…

  1. cost to a producer to exchange equipment in a facility when new technologies emerge.
  2. cost of changing the firm’s strategic group.
  3. one-time costs suppliers incur when selling to a different customer.
  4. one-time costs customers incur when buying from a different supplier.

Q100

Customer loyalty programs such as airline frequent flyer miles are an attempt to…

  1. decrease competitors’ access to distribution channels.
  2. develop a cost advantage independent of scale.
  3. increase customers’ switching costs.
  4. overcome the perishability of the hotel product.