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Chapter 03 External Analysis: Industry Structure, Competitive Forces,
and Strategic Groups Answer Key
Multiple Choice Questions
1.
Which of the following factors best contributes to the U.S. automotive industry being
characterized by high entry barriers?
2.
The _____ allows the scanning, monitoring, and evaluating of changes and trends in a
firm's macro environment.
3.
Which of the following external forces is a part of a firm's task environment?
4.
The government of Filvia has mandated that the standard minimum wage in the country
be increased to $8,000 per year. This has ensured that all firms in the country pay their
employees at least $8,000 per year, which has brought about a higher standard of living for
the people of Filvia. Which of the following factors in a firm's general environment does
this mandate best indicate?
5.
Which of the following represents an economic factor in a firm's external general
environment?
6.
Which of the following is an implication of low interest rates?
7.
What is most likely to happen when there is too much money in an economy?
8.
In a firm's external environment, _____ primarily capture population characteristics related
to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.
9.
Which of the following do the sociocultural forces in a firm's external environment best
represent?
10.
In 2008, BlackBerry's market cap peaked at $75 billion. By 2015 this valuation had fallen
more than 90 percent, to less than $7 billion. BlackBerry fell victim to two important
PESTEL factors in its external environment: sociocultural and technological. How did
technology contribute to BlackBerry's decline?
11.
A firm's _____ relates to its ability to create value for customers (V) while containing the
cost to do so (C).
12.
The primary objective of Porter's five forces model is to
13.
In the _____ developed by Michael Porter, competition is not defined narrowly as a firm's
closest competitors but rather more broadly to include other factors in an industry like
buyers, suppliers, potential new entry of other firms, and the threat of substitutes.
14.
Which of the following is a primary feature of the five forces model?
15.
A firm's strategic position is likely to be strong when
16.
Which of the following statements is
not
true about the five forces in Porter's competitive
analysis model?
17.
Keeping in mind the five forces in the airline industry, which of the following best explains
the situation in the industry?
18.
The telecom industry in the country of New Taria is an industry characterized by the
presence of strong network effects, high brand loyalty, high economies of scale, and
proprietary technology among incumbent firms. Thus, in the telecom industry, the
19.
Which of the following is most likely an implication of new firms entering an industry?
20.
Economies of scale are cost advantages that accrue for firms with
21.
Given the industry structure in the automobile business, entering the auto manufacturing
industry doesn't seem advisable. Yet Tesla Motors is joining the fray. Rather than
attempting to compete head-on in internal combustion engines, Tesla Motors is entering
the all-electric car segment, a much less crowded niche in the overall car industry. Which
of the following is Tesla most hoping to benefit from in this market niche?
22.
Clear Calls Inc., a telephone service provider, has a large user base mainly because phone
calls and messages between all Clear Calls users are free. When a person switches to a
Clear Calls network, his or her entire network of family and friends is likely to switch to the
same network to avail the benefit of free calls and messages. In addition, an existing user
who gets a new user to register with Clear Calls Inc. is given a free wireless connection.
This has helped to keep competition away from Clear Calls. In this scenario, which of the
following factors is acting as an entry barrier for Clear Calls Inc.?
23.
First Ledger Inc., an auditing company, replaced its existing accounting software with new
accounting software from another supplier. Since the new software has different features
and abilities, First Ledger Inc. has had to spend $10,000 on training its employees to use
it. In this scenario, $10,000 represents First Ledger Inc.'s
24.
In the aircraft manufacturing industry, at least for large commercial jets, Boeing and
Airbus are the only competitors. There is not a significant threat of entry because
25.
In an industry, the threat of entry is high when
26.
How are cumulative learning and experience effects of a company most likely to affect
Michael Porter's five forces?
27.
In which of the following situations is a company that exists in the telecommunications
industry most likely to face the highest threat of entry?
28.
The relative bargaining power of suppliers is high when
29.
Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a
supermarket chain. It demands that All Needs create more shelf space in its stores for
Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, it decides to
produce its own range of cleaning agents with its own label "All Wash." In this scenario, All
Needs Inc. has exercised its bargaining power as a buyer through
30.
Which of the following features about a buyer indicates that the buyer has high bargaining
power?
31.
Buyers are highly price sensitive when
32.
Which of the following would most likely
not
indicate that sellers are a strong competitive
force in an industry?
33.
When fashion magazines face competition from fashion blogs on the web, which of the
following forces in Michael Porter's five forces model primarily gets stronger?
