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Chapter Test
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Which of the following is not one of the questions that needs to be answered in thinking strategically about a company's industry and competitive environment?
A)What kinds of competitive forces are industry members facing, and how strong is each force?
B)What emerging opportunities and threats are evident in the industry environment?
C)What market positions do industry rivals occupy—who is strongly/weakly positioned and who is not?
D)What are the key factors for future competitive success?
In identifying an industry's dominant economic features, there is a need to consider such things as
A)market size and growth rate, the number of buyers, the scope of competitive rivalry, the number of rivals, demand-supply conditions, product innovation, the degree of product differentiation, the presence of scale economies and/or learning/experience curve effects, and the pace of technological change.
B)the threat of additional entry into the industry and what the industry's key success factors are.
C)the strength of competitive pressures from producers of substitute products and which competitors are in which strategic groups.
D)the extent and importance of seller-supplier collaborative partnerships, the extent and importance of seller-buyer collaborative partnerships, and the bargaining leverage of sellers and buyers.
E)All of these.
According to both the text discussion and the summary in Figure 3.4, which of the following is not among the factors that determine whether competitive rivalry among industry members is strong, moderate, or weak?
A)Whether buyer demand for the product is growing rapidly or slowly
B)Whether customers' costs to switch brands is low or high
C)How active industry rivals are in initiating fresh competitive moves and in using the various weapons of competition to improve their market standing and business performance
D)Whether there are few or many rival sellers and whether there are big differences in their sizes and competitive capabilities
E)Whether industry members are vertically integrated and whether the industry is characterized by significant scale economies and rapid technological change
The rivalry among competing sellers in an industry intensifies
A)when buyer demand for the product is growing rapidly.
B)when customers are brand loyal and their costs to switch to competing brands or substitute products are relatively high.
C)when buyer demand is strong and sellers have little or no excess capacity and only minimal inventories.
D)as the number of rivals increases and as they become more equal in size and competitive capability.
E)when the products of rival sellers are highly differentiated products and the industry consists of so many rivals that any one company's actions have little direct impact on rivals' business.
Factors that cause the rivalry among competing sellers to be weak include
A)low buyer switching costs.
B)slow growth in buyer demand.
C)strong buyer loyalty, rapid growth in buyer demand, and so many industry rivals that any one company's actions have little impact on the businesses of its rivals.
D)standardized or else weakly differentiated products among rival sellers.
E)the presence of one or more rivals that are dissatisfied with their current position and market share.
According to both the text discussion and the summary in Figure 3.5, competitive pressures associated with the threat of new entrants grow stronger when
A)buyer demand is growing slowly and the pool of entry candidates is small.
B)the number of customers for the industry's product is large and the product offerings of rival sellers are strongly differentiated.
D)there are not many competitors already in the industry, their products are highly differentiated, and buyers are brand loyal.
E)a small percentage of companies in the industry are currently earning above-average profits, entry barriers are high, and buyers are not brand loyal.
A)Low levels of brand loyalty on the part of customers and the presence of more than 20 rivals in the industry
B)Rapid market growth, low buyer switching costs, and weak brand preferences and customer loyalty
C)Product offerings that are pretty much standardized from rival to rival
E)The industry is not characterized by scale economies and/or sizable learning/experience curve effects and few firms in the industry hold key patents and/or possess significant proprietary technology not readily available to a newcomer
Based on both the chapter discussion and the summary in Figure 3.6, competitive pressures stemming from substitute products are weaker when
B)the industry consists of a relatively large number of rival sellers that are fairly equal in size and competitive capability.
C)entry barriers are moderately high but by no means prohibitive and there is a fairly small pool of entry candidates.
D)a number of customers buy in large volumes and are in a strong bargaining position to win concessions from sellers.
E)buyer loyalty to the products they are currently purchasing is relatively low.
Which of the following is not a factor in determining whether the suppliers to an industry are a source of strong, moderate, or weak competitive pressures?
A)Whether certain needed inputs are in short supply and whether the item being supplied is a standard commodity that is readily available from many suppliers at the going market price
C)Whether industry members are major customers of suppliers and whether suppliers' sales to members of this one industry constitute a big percentage of their total sales
D)Whether the industry supply chain is global or mostly national, whether suppliers have a wide or narrow product line, and whether industry members place orders frequently or infrequently with suppliers
E)Whether certain suppliers provide a differentiated input that enhances the performance or quality of the industry's product
Which of the following is not a reason that industry rivals are often motivated to enter into strategic partnerships with key suppliers?
A)To enhance the quality of parts and components being supplied and/or to reduce defect rates
B)To speed the availability of next-generation components
C)To reduce the bargaining power they face from buyers of their products
D)To squeeze out important cost savings for both themselves and their suppliers
E)To reduce inventory and logistics costs
A)how often that 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.
B)the frequency with which rival firms change strategies and the amount of advertising that sellers utilize.
C)whether all buyers have the same degree of negotiating power, whether the item carries a high or low price tag, and whether there are many or few collaborative partnerships between sellers and buyers.
E)whether buyer demand is seasonal or year-round, whether entry barriers are high or low, and whether competitive pressures from substitutes are strong or weak.
As a rule, the stronger the collective impact of the five competitive forces,
A)the more strategic groups there are in an industry.
B)the lower the number of industry key success factors.
C)the lower the combined profitability of industry participants and the more "competitively unattractive" is the industry environment.
D)the weaker the industry's driving forces.
E)the higher the barriers to entry and the less likely it is that industry members will make fresh strategic moves very frequently.
The task of driving forces analysis is to
A)identify all the underlying factors that can cause industry profitability to rise or fall in the years ahead.
B)predict what new forces of competitive and market change will emerge next.
C)determine which of the five competitive forces is the biggest driver of industry change.
D)identify which companies are being driven to move from one strategic group to another strategic group.
Which of the following is not among the most common types of driving forces?
A)Product innovation, marketing innovation, increasing globalization of the industry, and reductions in uncertainty and business risk
B)Changes in the long-term industry growth rate, changes in who buys the product and how they use it, and growing buyer preferences for differentiated products
C)Ups and downs in interest rates, changes in the number of seller-supplier collaborative alliances, and changes in overall industry profitability
D)Emerging new Internet applications and capabilities, technological change, and the diffusion of technical know-how across more companies and more countries
E)Changes in cost and efficiency, the entry or exit of major firms, and changing societal concerns, attitudes, and lifestyles
The procedure for constructing a strategic group map involves
A)identifying the competitive characteristics that differentiate firms' market positions and competitive approaches.
B)selecting variables for the map's axes that are highly correlated.
C)using only variables for the map's axes that are quantitative in nature (qualitative measures of market positions and competitive approaches are too subjective and unreliable).
D)plotting the firms on a two-variable or two-dimensional map, drawing circles around those firms occupying about the same strategy space, and making the size of the circles for each strategic group proportional to the size of its members' share of total industry sales revenues.
E)Both A and D
A strategic group map is a helpful analytical tool for
A)assessing why competitive pressures and driving forces usually impact the biggest strategic groups more so than the smaller groups.
B)determining which companies have how big a competitive advantage and how good their prospects are for increasing their market shares.
C)determining which company is the most profitable in the industry and why it is doing so well.
E)pinpointing which of the five competitive forces is the strongest and which is the weakest.
Trying to determine what strategic moves rivals are likely to make next
A)is interesting but usually has little bearing on a company's own best strategic moves.
B)usually requires evaluating the industry's key success factors as well as determining how many driving forces are present.
C)is best done by monitoring each rival's market share, earnings per share, and stock price—adverse changes in these measures signal the coming of a fresh move but as long as a company's performance on these measures is satisfactory the chance of fresh moves is slim.
D)cannot be done effectively without first drawing a strategic group map.
E)entails understanding rivals' strategies, watching their actions on a regular basis, sizing up their strengths and weaknesses, gauging how well they are faring in the marketplace, assessing how much pressure they are under to improve their performance, and evaluating the relative merits of their strategic options and alternatives so as to better predict their likely next moves.
An industry's key success factors
A)can best be determined by studying the strategies of those companies in the industry's best strategic group and those in the worst strategic group.
B)concern the particular strategy elements, product attributes, resources, competencies, competitive capabilities, and market achievements that spell the difference between being a strong competitor and a weak competitor—and sometimes between profit and loss.
C)are mainly a function of an industry's macro-environment and dominant economic features.
D)can best be determined by identifying the similarities in the strategies of rival companies—those strategy elements that are most commonly found in the strategies of rivals can be considered key success factors.
E)usually relate to technology and manufacturing-related capabilities and rarely to distribution or marketing capabilities.
Which of the following is not an important factor for company managers to consider in drawing conclusions about whether the industry presents an attractive opportunity?
A)Whether powerful competitive forces are squeezing industry profitability to subpar levels and whether competition appears destined to grow stronger or weaker
B)The industry's growth potential and the degree of uncertainty and risk in the industry's future
C)Whether industry profitability will be affected favorably or unfavorably by the prevailing driving forces
D)How many of the industry's key success factors do companies in the industry typically incorporate into their strategies
E)The company's ability to capitalize on the vulnerabilities of weakly positioned rivals and whether the company has sufficient competitive strength to defend against or counteract the factors that make the industry unattractive
Which one of the following statements is false?
A)A company's macro-environment includes all relevant external factors and influences that bear upon a company's decision to move to a different strategic group, change its strategic intent, or modify its objectives, strategy, or business model.
B)A company's strategy is increasingly effective the more it provides some insulation from competitive pressures and shifts the competitive battle in the company's favor.
C)The task of driving forces analysis is to separate the major causes of industry change from the minor ones.
D)Scouting competitors well enough to anticipate their next moves allows managers to prepare effective countermoves (perhaps even beat a rival to the punch) and to take rivals' probable actions into account in crafting their own best course of action.
E)The degree to which an industry is attractive or unattractive is not the same for all industry participants or all potential entrants because the attractiveness of the opportunities an industry presents depends heavily on whether a company has the resource strengths and competitive capabilities to capture them.

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