Entrepreneurship: Successfully Launching New Ventures, 6e (Barringer/Ireland)
Chapter 5 Industry and Competitor Analysis
1) WriteLab, the company profiled in the opening feature of Chapter 5, believes it has created a
barrier to entry to enable it to maintain a leadership position in the education industry. Its barrier
to entry is ________.
A) the price-point of its product
B) the strength of its brand
C) its social mission
D) its economies of scale
E) that Donald McQuade, one of its co-founders, is well-established in the writing community
2) Terry Washington recently started a new firm in the financial services industry. Prior to
starting his firm, he spent considerable time doing research on the potential of the industry. The
research that Terry was doing is called ________ analysis.
A) industry
B) sector
C) commercial
D) business
E) target market
3) A(n) ________ is a group of firms producing a similar product or service, such as soft drinks,
airlines, or smartphone apps.
A) cluster
B) division
C) sector
D) industry
E) network
4) Once a firm decides to enter an industry and chooses a market in which to compete, it must
gain an understanding of its competitive environment. This challenge can be undertaken by
completing a(n) ________ analysis.
A) business
B) industry
C) competitor
D) strategic
5) Each quarter, Craig Anderson, who owns a chain of auto repair shops, does a detailed analysis
of his firm’s competitors. This analysis is called ________ analysis.
A) competitor
B) challenger
C) strategic
D) participant
E) industry
6) In various studies, researchers have found that from ________ percent of the variation in firm
profitability is directly attributable to the industry in which a firm competes.
A) 4 to 12
B) 8 to 30
C) 18 to 42
D) 22 to 56
E) 34 to 70
7) Industries that sell products to seniors, such as the eyeglass industry and the hearing aid
industry, are benefiting from the aging of the population, which is an important ________ trend.
A) environmental
B) business
C) commerce
D) statutory
E) competitive
8) Many firms benefit from an increasing ability to outsource manufacturing or service functions
to lower-cost foreign countries. This trend is referred to in the textbook as a(n) ________ trend.
A) business
B) environmental
C) commerce
D) statutory
E) economic
9) The Partnering for Success feature in Chapter 5 focuses on three things that are important for
startups to become active in to learn the ins and outs of their industries. The three items focused
on in the feature are ________.
A) local Chambers of Commerce, trade journals, and networking events
B) Facebook, industry-related e-mail listservs, and trade shows
C) trade associations, trade shows, and trade journals
D) networking events, blogs, and Facebook
E) local Chambers of Commerce, city or university-sponsored incubators, and trade associations
10) Industry analysis is business research that focuses on the potential of an industry.
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Copyright © 2019 Pearson Education, Inc.
11) A comparison analysis is a detailed evaluation of a firm’s competitors.
Answer: FALSE
Diff: 1
LO: 5.1: Explain the purpose of an industry analysis.
AACSB: Reflective Thinking
Quest. Category: Critical Thinking
12) An industry is a group of firms producing a similar product or service, such as tires, life
insurance, or smartphone apps.
13) The two trends that are most important to focus on in an industry analysis are business and
environmental trends.
14) Business trends include economic trends, social trends, technological advances, and political
and regulatory changes.
15) What is industry analysis? Why is it important for a new venture to complete a thorough
analysis of the industry it is entering?
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16) According to the textbook, the five competitive forces included in the Five Forces model
determine the average ________.
A) rate of new business starts in an industry
B) growth rate for the firms in an industry
C) rate of return for the firms in an industry
D) sales for the firms in an industry
E) failure rate for the firms in an industry
17) According to the textbook, how do well-managed firms respond to the five forces that
determine industry profitability?
A) They switch industries if the forces are too compelling.
B) They focus on one force intently and excel by overcoming that force.
C) They overcome each of the forces.
D) They ignore the forces.
E) They try to position their firms in a way that avoids or diminishes the forces.
18) In general, industries are more attractive when the ________.
A) majority of the threats are high
B) majority of the threats are low
C) threat of each of the forces is neutral-neither low nor high
D) threat of each of the five forces is high
E) threat of each of the five forces is low
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19) Generally, industries are more attractive when the threat of substitutes is ________.
A) high
B) low
C) neutral (neither high or low)
D) high for manufacturing firms and low for service firms
E) high for service firms and low for manufacturing firms
20) The price of prescription medicine is high, partly because when someone is sick there is no
real alternative to buying medicine if they want to get better. Which of Porter’s five forces
explains how this aspect of the prescription medicine industry helps keep profitability high?
A) Rivalry Among Existing Firms
B) Threat of New Entrants
C) Threat of Substitutes
D) Bargaining Power of Buyers
E) Bargaining Power of Suppliers
21) Which of Porter’s five forces is most closely associated with the concept “barrier to entry”?
A) Bargaining Power of Suppliers
B) Rivalry Among Existing Firms
C) Threat of New Entrants
D) Bargaining Power of Buyers
E) Threat of Substitutes
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22) Which of the following is NOT one of the major sources of barriers to entry?
A) Product Differentiation
B) Capital Requirements
C) Buyer Group Concentration
D) Access to Distribution Channels
E) Government and Legal Barriers
23) Shelly Brunner owns a sports-themed restaurant which is located in an upscale business
district in Chicago. One advantage that Shelly has is that she bought the lot she built her
restaurant on 25 years ago when lots in the area were selling for $50,000. Shelly knows that
several potential competitors have looked at bare lots near her business but haven’t been willing
to pay the asking prices, which are as high as $500,000. Which of the six major sources of
barriers to entry is causing a disincentive for new firms to enter Shelly’s industry?
A) Capital Requirements
B) Economies of Scale
C) Product Differentiation
D) Government and Legal Barriers
E) Cost Advantage Independent of Size
24) Some industries, like the athletic shoe industry, are dominated by a small number of firms
with strong brands. These industries are difficult to break into without spending heavily on
advertising. The barrier to entry that the firms in these types of industries have erected is referred
to as ________.
A) government and legal barriers
B) capital requirements
C) product differentiation
D) cost advantages independent of size
E) access to distribution channels
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25) Which of Porter’s five forces is most directly influenced by the number and balance of
competitors, degree of difference between products, growth rate of an industry, and level of fixed
costs?
A) Threat of New Entrants
B) Rivalry Among Existing Firms
C) Threat of Substitutes
D) Bargaining Power of Buyers
E) Bargaining Power of Suppliers
26) If a startup pioneers an industry or a new concept within an industry, the name recognition
the startup establishes may create a formidable nontraditional barrier to entry referred to as a(n)
________.
A) unique business model
B) aggressive supremacy
C) competitive superiority
D) first-mover advantage
E) aggressive tactical advantage
27) According to the example provided in Chapter 5, www.1800contacts.com possesses a
nontraditional barrier to entry referred to as ________.
A) unique business model
B) strength of management team
C) access to distribution channels
D) Internet domain name
E) first-mover advantage
28) Which of the following was NOT identified in the textbook as a nontraditional barrier to
entry?
A) Strength of management team
B) First-mover advantage
C) Unique business model
D) Product differentiation
E) Internet domain name
29) Supplier concentration, switching costs, attractiveness of substitutes, and threat of forward
integration are factors that have a direct impact on ________.
A) threat of new entrants
B) bargaining power of buyers
C) rivalry among existing firms
D) threat of substitutes
E) bargaining power of suppliers
30) Tim Rutherford is thinking about starting a firm in the medical equipment industry. In the
industry analysis Tim has been conducting, one thing he has noticed is that the medical
equipment industry is characterized by buyer group concentration. This factor concerns Tim
because it tells him that the profitability of the medical equipment industry is potentially
suppressed by the ________.
A) threat of substitutes
B) bargaining power of buyers
C) rivalry among existing firms
D) bargaining power of suppliers
31) The five competitive forces model is a framework for understanding the structure of an
32) The best industry to enter is an industry where the threat of each of Porter’s five forces is
high.
33) There are four factors that determine the threat of new entrants: number and balance of
competitors, degree of difference between products, growth rate of an industry, and level of fixed
34) In most industries, the major determinant of industry profitability is the level of competition
among the firms already competing in the industry.
35) If the buyers are concentrated and they buy from a large number of suppliers, then the
bargaining power of buyers is increased.
36) Identify the five competitive forces that determine industry profitably. Explain the purpose of
analyzing these forces.
37) Discuss the nontraditional barriers to entry identified in the chapter. Why is it important that
entrepreneurial firms utilize one or more of these forms of barriers to entry?
38) According to the textbook, the Five Forces model can be used in the following two ways:
________.
A) first, to help a firm determine whether it should enter an industry in an aggressive or a
conservative manner, and second, to help a firm determine whether to compete in international
markets in that industry.
B) first, to help a firm determine if it should enter a single or multiple niches in an industry, and
second, to help a firm determine whether it can be competitive in that industry
C) first, to help a firm determine what industry it is best equipped to compete in, and second, to
help a firm determine whether to compete in international markets in that industry
D) first, to help a firm determine what niche to enter within an industry, and second, to help a
firm determine whether it can be competitive in that industry
E) first, to help a firm determine whether it should enter a particular industry, and second, to help
a firm discern whether it can carve out an attractive position in that industry