The External Environment - Opportunities, Threats, Industry Competition, and Competitor Analysis Part 2

81. A family just changed to a different mobile phone and data service provider. They now need take some time to transfer their content to new phones and learn the features of the new service. This is an example of a: a. one-time cost of product differentiation. b. decrease in cost due to economies of scale. c. one-time cost suppliers incur when selling to a different customer. d. switching cost customers incur changing to a new supplier. ANSWER: d 82. Customer loyalty programs such as airline frequent flyer miles are an attempt to: a. decrease competitors' access to distribution channels. b. develop a cost advantage independent of scale. c. increase customers' switching costs. d. overcome the perishability of the hotel "product." ANSWER: c 83. As customers come to believe that a firm's product is unique, this allows the firm to: a. decrease its advertising expenditures. b. customize its product. c. force other companies out of the market by lowering prices. d. obtain loyal customers. ANSWER: d 84. DWK Foods has developed a line of cookies and candies sweetened exclusively with organic honey. Although DWK is selling some of the products over the Internet, in order to gain economies of scale, the products must be sold in retail outlets as well. The main barrier to entry that DWK is likely to encounter here is: a. government licensing and permits. b. access to distribution channels. c. consumers' switching costs. d. cost disadvantages independent of scale. ANSWER: b 85. For a restaurant business dependent on drive-thru customers, the major cost disadvantage independent of scale would be if: a. favorable locations are not available. b. other competitors have proprietary product technology. c. access to food and ingredients is difficult. d. other competitors have government subsidies. ANSWER: a 86. A certain marble quarry provides a unique type of marble that is richly colored and strikingly veined. It has been used for churches and public buildings throughout the world. The architect of a new headquarters for a prestigious Fortune 500 firm has specified the use of this marble, and this marble only, for the project. Which of the following statements is MOST likely to be true? a. The cost of the marble will be expensive because of the bargaining power of the supplier. b. The cost of the marble will be moderate because of the bargaining power of the buyer. c. The cost of the marble will be moderate because of economies of scale. d. The cost of the marble will be expensive because of the high strategic stakes involved. ANSWER: a 87. Suppliers are powerful when: a. satisfactory substitutes are available. b. they sell a commodity product. c. they offer a credible threat of forward integration. d. they sell in a highly concentrated industry. ANSWER: c 88. Consolidation among fuel providers serving airport facilities is viewed in the five forces model of competition as a(n): a. reduction of the airlines' ability to benefit from economies of scale. b. increase in switching costs because the airlines have no choice but to use jet fuel and other oil products. c. increase in the bargaining power of suppliers of a critical input. d. increase in the intensity of rivalry among airlines for scarce resources. ANSWER: c 89. Blood banks are highly dependent on donors. In the terminology of industry analysis, which of the following statements about donors is accurate? a. Blood donors are suppliers and are powerful because of the critical nature of what they provide to the blood bank. b. Blood donors are suppliers and are powerful because of their concentration relative to the blood bank. c. Blood donors are buyers and are not powerful because switching costs to change to alternative inputs are low. d. Blood donors are buyers and are powerful because of the volume of blood needed. ANSWER: a 90. The aircraft industry has long been dominated by two large aircraft manufacturers, Boeing and Airbus. The demand for major aircraft is low, and Boeing and Airbus aggressively compete for orders from airlines. Which of the following effects will these conditions have on the domestic airline industry? a. It will make the airline industry more attractive because of decreased supplier power. b. It will make the airline industry less attractive because of decreased supplier power. c. It will make the airline industry more attractive because of increased supplier power. d. It will make the airline industry more attractive because of a new entrant. ANSWER: a 91. Golden Lotus, an exercise club targeting healthy individuals over 50, is located in a fast-growing city in the Southwest. Which of the following factors that may have an effect on the success of Golden Lotus is the MOST directly controllable by the company? a. Sociocultural environment b. Demographics of the environment c. Economy of the local area d. Power of the customers/buyers ANSWER: d 92. Buyers are powerful when: a. there is a threat of forward integration. b. they purchase a small proportion of the supplier's output. c. switching costs are low. d. the buyers' industry is fragmented. ANSWER: c 93. The highest amount a firm can charge for its products is MOST directly affected by: a. expected retaliation from competitors. b. the cost of substitute products. c. variable costs of production. d. customers' high switching costs. ANSWER: b 94. The threat from substitutes is high when: a. switching costs are high. b. the substitute product's price is lower than the industry product's price. c. the quality of the substitute product is lower than the quality of the industry's product. d. the substitute product stimulates new process innovations within the industry. ANSWER: b 95. Media content has moved from paper, tape, and film to a digital world based on Internet technology. From the perspective of the five forces model, which of the following forces is MOST relevant here? a. Buyers b. Substitutes c. Entry barriers d. Suppliers ANSWER: b 96. All of the following are forces that create high rivalry within an industry EXCEPT: a. numerous or equally balanced competitors. b. high fixed costs. c. fast industry growth. d. high storage costs. ANSWER: c 97. In a particular industry, products need a certain level of maintenance. Customers can take the product to service companies to provide that maintenance. However, a number of manufacturers offer reasonably priced maintenance packages as well. This level of service after the sale indicates what about the industry? a. Low switching costs have empowered customers. b. The industry is moving toward differentiation of services. c. The competitive rivalry in the industry is high. d. The economic segment of the external environment has shifted, but strategies have remained the same. ANSWER: c 98. A manufacturer of washing machines has expanded its plant and created excess capacity, just as the general economy takes a downturn. The company is likely to: a. raise prices on washing machines to offset lost sales. b. be vulnerable to new entrants to an attractive market. c. suffer from intense rivalry from international manufacturers. d. offer rebates and incentives to customers to promote sales. ANSWER: d 99. When rival firms compete aggressively by trying to attract competitors' customers, this might be an indication of: a. an industry with low exit barriers. b. increasing economies of scale. c. slow industry growth. d. high switching costs. ANSWER: c 100. Mighty Green, a residential lawn chemical manufacturer, is committed to gaining market share in its industry. Mighty Green: a. is likely to raise the level of competitive rivalry in the industry. b. probably has top management who are affected by emotional barriers to exit. c. has decided that long-run above-average returns are not important. d. will probably embark on an acquisition strategy. ANSWER: a 101. Which of the following explains, in part, why rivalry among McDonald's, Wendy's, and Burger King is intense? a. There is low geographic saturation of the market. b. There is high differentiation among competing products. c. The threat of supplier forward integration is low. d. These companies are trying to find ways to differentiate their products. ANSWER: d 102. Circuit Inc. is a manufacturer of a broad range of consumer electronics products. These consumer products are all highly profitable. The firm also manufactures a low-cost component that is an essential differentiating feature for most of its consumer products. The costs to manufacture this component have risen sharply in recent months. Internal estimates now indicate the company is breaking even on the manufacture of this component. Which of the following is MOST likely? a. Circuit Inc. will likely continue to manufacture the component, even at a loss, due to low supplier power. b. Circuit Inc. will likely continue to manufacture the component, even at a loss, due to high strategic stakes. c. Circuit Inc. will likely discontinue manufacture of the component due to low strategic stakes. d. Circuit Inc. will likely discontinue manufacture of the component due to high supplier stakes. ANSWER: b 103. Exit barriers to a firm include all of the following EXCEPT: a. generic assets. b. loyalty to employees. c. government concern about job loss. d. restrictive labor agreements. ANSWER: a 104. An owner of a stable of racehorses has been earning below-average returns for more than 15 years. To a colleague, he expressed his determination to stay in horse racing until he died because "racing is in my blood." This individual is probably still racing horses because of: a. high barriers to exit. b. high switching costs. c. high fixed costs. d. low levels of competitive rivalry. ANSWER: a 105. According to the five forces model, an attractive industry would have all of the following characteristics EXCEPT: a. low barriers to entry. b. suppliers and buyers with little bargaining power. c. a moderate degree of rivalry among competitors. d. few good product substitutes. ANSWER: a 106. According to the five forces model, an unattractive industry would include all of the following characteristics EXCEPT: a. low barriers to enter. b. low supplier power due to commodity inputs. c. high threat of substitute products due to a large number of low-cost alternatives. d. high bargaining power of buyers due to low switching costs. ANSWER: b 107. The competition between firms within a strategic group is: a. greater than the competition a member of a strategic group and companies outside that strategic group. b. less intense than the competition between strategic groups. c. typically very low. d. an unknown factor in the analysis of competitive practices within a firm's strategic group. ANSWER: a 108. Firms within strategic groups: a. follow dissimilar strategies. b. follow similar strategies across certain dimensions. c. typically engage in greater intergroup rivalry than intragroup rivalry. d. exist almost exclusively in the manufacturing sector. ANSWER: b 109. All of the following are implications of strategic groups EXCEPT: a. more intense rivalry leads to a greater threat to profitability. b. the strength of the five forces is the same across strategic groups. c. competitive rivalry within strategic groups is greater than between strategic groups. d. the closer the strategic groups are in terms of strategies, the greater is the likelihood of rivalry. ANSWER: b 110. Competitor analysis focuses on: a. firms with which the company competes directly. b. firms that produce products that are substitutes. c. all firms in the industry. d. companies that might enter the industry. ANSWER: a 111. Which of the following pairs of companies would be LEAST likely to be examined together as part of competitor analysis? a. Wendy's and Taco Bell b. Samsung and Apple c. Netflix and Microsoft d. Coca-Cola and PepsiCo ANSWER: c 112. Competitor intelligence is: a. legally or illegally gained data about competitors' internal strategic processes and competitive decisions. b. strategic information gained from industrial espionage targeting international competitors. c. the set of data and information the firm gathers to better understand competitors' objectives, strategies, assumptions, and capabilities. d. illegal to gather under the Sarbanes-Oxley Act. ANSWER: c 113. Once a firm has determined its competitors' future objectives, current strategy, assumptions, and strengths and weaknesses, its next step is to develop a(n): a. environmental assessment. b. marketing plan. c. response profile. d. task force to implement the plan. ANSWER: c 114. A competitor analysis includes all of the following about competitors EXCEPT: a. future objectives. b. current strategy. c. assumptions. d. traditions. ANSWER: d 115. Clarissa is a sales representative for a large pharmaceutical firm. While calling on one of her major clients, the purchasing director of a hospital, the client told her confidential information that a sales representative from a competing firm had passed on to him. The information completely contradicts Clarissa's firm's understanding of the competitor's business strategy and would allow Clarissa's employer to gain many of the competitor's clients. Which of the following ethical implications may result from this situation? a. There is no ethical or legal concern here for Clarissa. b. The ethical dilemma is not Clarissa's but her client's, since he passed on confidential information to her voluntarily. c. The ethical dilemma here is the right of competitors not to reveal certain information. d. This is an example of ethical competitor intelligence obtained as eavesdropping. ANSWER: c 116. All of the following are ethical sources of data for external analysis EXCEPT: a. trade shows. b. a competitor's annual reports. c. a competitor's help-wanted advertisements. d. a competitor's confidential memos. ANSWER: d 117. Competitor intelligence could ethically come from all of the following EXCEPT: a. court records. b. financial reports. c. trade show discussions. d. eavesdropping. ANSWER: d 118. Which of the following represents a competitive intelligence practice that is both legal and ethical? a. A firm hires a competitor's employees and asks them to share the names and addresses of business contacts from their previous company. b. An executive attends a trade show solely to obtain a competitor's brochures, listen to sales pitches, and ask questions about the competitor's products. c. A city council member shares information about the decision process for selecting a contractor to build a new city council building with his wife, an executive with a construction firm bidding on the contract. d. A marketing manager sells confidential plans for a company's expansion into the Far East to a firm that is not a direct competitor. ANSWER: b 119. Which of the following intelligence-gathering techniques is MOST likely to be legal and ethical? a. Hiring investigators to examine the competitor's trash b. Entering a competitor's production plant without authorization c. Redirecting a competitor's emails to one's own company d. Attending trade show presentations given by a competitor's employees ANSWER: d 120. The U.S. Hispanic market is the third largest "Latin American" economy behind Brazil and Mexico. This impacts the __________ aspect of demographic segment analysis. a. age structure b. geographic distribution c. income distribution d. ethnic mix ANSWER: d 121. New Jersey and New York have the highest state taxes in the United States. They also have high rates of people moving out compared to people moving into the state. This impacts the __________ aspect of demographic analysis. a. age structure b. geographic distribution c. income distribution d. ethnic mix ANSWER: b 122. What are capital requirements? a. The benefits realized through incremental efficiency improvements b. The costs customers incur when they switch to a new provider c. The resources needed to invest in a new industry d. The costs incurred by a firm when it changes distributors ANSWER: c 123. The Department of Defense buys aircraft from U.S. companies for national security reasons. This is an example of a __________ barrier to entry. a. cost disadvantages independent of scale b. government policy c. capital requirements d. product differentiation ANSWER: b 124. After Amazon lowered the price on its tablets, Samsung eventually lowered the price on its tablets. Samsung needed to do this because: a. it is in the same strategic group. b. it is outside the strategic group. c. of inter-strategic group competition. d. of strategic distinctiveness. ANSWER: a 125. Applications developed for iPhones make the phone more valuable to iPhone users. App developers are __________ to Apple. a. suppliers b. customers c. competitors d. complementors ANSWER: d 126. Counterfeiting goods and exporting them from China is: a. ethical and legal. b. unethical but legal. c. ethical but illegal. d. unethical and illegal. ANSWER: d