Chapter 5—Analyzing the Industry and Market
TRUE/FALSE
1. Entrepreneurs identify their primary customers by recognizing a need, or pain, in the market.
2. The North American Industry Classification System (NAICS) is the classification system that was
developed by the United States, Canada, and Mexico to identify industries and to allow for common
standards and statistics across North America.
3. Industries remain static or stable over time, so it is easy for the entrepreneur to research and
understand the industry.
4. There are seven stages in the industry life cycle.
5. For every industry, the life cycle stages occur at different times and vary in duration.
6. Radical change occurs in industries when an innovation results in the obsolescence of previous
technology and drives old-line companies out of business.
7. The government can limit entry to an industry or market through strict licensing requirements and by
limiting access to raw materials via laws or high taxes and to certain locations by means of zoning
restrictions.
8. Target market research provides some of the least important data needed to decide who the first
customer will be.
9. The market research process consists of seven steps.
10. The most important data that entrepreneurs can collect on potential customers are primary data derived
from observation, online or in-person surveys, phone surveys, interviews, and informal focus groups.
MULTIPLE CHOICE
1. A/An ____ is a grouping of competitors that an entrepreneur targets.
a.
industry
b.
external environment
c.
target market
d.
market
e.
None of these choices
2. A/An ____ analysis includes the political, sociocultural, economic, and technological environments in
which the new venture will operate.
a.
market
b.
industry
c.
PEST
d.
anthropological
e.
demographic
3. The industry in which a new venture will operate is the business’s ____.
a.
external environment
b.
target demographic
c.
target market
d.
first customer
e.
None of these choices
4. Google, Wikipedia, journals, and trade magazines are examples of ____.
a.
industry analysis
b.
market research
c.
primary sources
d.
secondary sources
e.
None of these choices
5. To access the timeliest information, it is important to gather ____ on an industry.
a.
secondary data
b.
primary data
c.
blogs and social networking
d.
trade associations
e.
None of these choices
6. As more firms enter an industry, intense ____ occurs.
a.
growth
b.
adaptation
c.
differentiation
d.
shakeout
e.
decline
7. The ____ period moves the industry from many companies and high product costs, to a more stable
industry with only a few efficient firms.
a.
growth
b.
adaptation
c.
differentiation
d.
shakeout
e.
maturity
8. ____ change is found in industries where resources turn over frequently and must continually be
replaced.
a.
Progressive
b.
Intermediating
c.
Radical
d.
Creative
e.
None of these choices
9. ____ has provided a way of effectively looking at the structure of an industry and at a company’s
competitive strength and positioning relative to that industry and to the markets it serves.
a.
Porter’s Five Forces
b.
PEST
c.
Market research
d.
Industry analysis
e.
None of these choices
10. Brand equity, advertising expense, and the rate of industry growth are part of which of Porter’s forces?
a.
Threat of substitute products
b.
Customer bargaining power
c.
Supplier bargaining power
d.
Threat of new market entrants
e.
Intensity of competitive rivalry
11. The “first customer” is the customer who pays for the product or service and is the customer with the
most ____.
a.
money
b.
time
c.
pain
d.
All of these choices
e.
None of these choices
12. “How is the industry described?,” “Is the industry growing?,” and “Where are the opportunities?” are
all examples of the questions that should be answered when conducting the ____.
a.
industry trajectories
b.
industry analysis
c.
PEST analysis
d.
target market analysis
e.
first customer analysis
13. It is best to begin researching the industry by using ____ information about the industry.
a.
primary
b.
secondary
c.
market life cycle
d.
customer bargaining power
e.
None of these choices
14. Birth, growth and adaptation, and shakeout are stages of the ____ life cycle.
a.
product
b.
market
c.
industry
d.
company
e.
All of these choices
15. A new industry goes through volatile and rapid changes as companies and their respective
technologies jockey for position and the right to determine industry standards. This is what stage of the
industry life cycle?
a.
Birth
b.
Shakeout
c.
Differentiation and competition
d.
Growth and adaptation
e.
Maturity and decline
16. ____ change takes place as companies in the industry grow geographically and increase profits
through innovations in operations, processes, distribution, and technology.
a.
Radical
b.
Creative
c.
Progressive
d.
Intermediating
e.
Internet
17. The model most commonly used to help an entrepreneur analyze an industry is ____.
a.
Porter’s Four Forces Model
b.
Porter’s Five Forces Model
c.
the PEST Model
d.
the SWOT Analysis Model
e.
None of these choices
18. What is the phrase that is associated with the costs to produce a product when those costs have
declined relative to the price of industry’s goods and services?
a.
Threat of new entrants
b.
Price and quality of alternatives
c.
Switching costs
d.
Economies of scale
e.
Costs of inputs
19. To analyze specific aspects of the macro-environment, an entrepreneur should use ____.
a.
a SWOT analysis
b.
a PEST analysis
c.
Five Forces analysis
d.
All of these choices
e.
None of these choices
20. Analyzing the government, demographics, cost of capital, and rate of change are all part of the ____.
a.
PEST analysis
b.
Five Forces Analysis
c.
“rivalry among existing firms” analysis
d.
“suppliers’ bargaining power” analysis
e.
All of these choices
21. Identifying and profiling the first customer, estimating potential demand from that customer, and
identifying subsequent customer segments and needs to grow the company are goals of market
research for ____.
a.
a new company
b.
a mature company
c.
all companies, large and small
d.
companies in decline
e.
All of these choices
22. The ____ is an unserved niche that enables the entrepreneur to enter a market with no direct
competition for a time.
a.
general customer base
b.
first customer
c.
supplier
d.
industry
e.
None of these choices
23. A good starting point for gathering secondary market data is ____.
a.
the library
b.
other companies
c.
the Internet
d.
the buying habits of potential customers
e.
All of these choices
24. The market research process has ____ steps.
a.
seven
b.
five
c.
four
d.
nine
e.
two
25. The second step in the market research process is ____.
a.
assessing information needs
b.
measuring the target market with primary research
c.
determining what methods of analysis will be used
d.
researching secondary data
e.
forecasting demand for the product or service
26. Observation, online or in-person surveys, phone surveys, interviews, and informal focus group are all
ways to collect ____ data.
a.
secondary
b.
primary
c.
third-party
d.
sample
e.
All of these choices
27. ____ is the first step in an anthropological approach to customer observation.
a.
Induction
b.
Abduction
c.
Deduction
d.
Testing
e.
Interviewing
28. Providing more opportunity for clarification and discussion, the observation of nonverbal
communication, and the high response rate are all examples of the advantages of ____.
a.
in-person surveys
b.
structured interviews
c.
informal focus groups
d.
phone surveys
e.
anthropological observation
29. Age, income level, education, and buying habits are all components of the ____.
a.
competitor profile
b.
customer profile
c.
supplier profile
d.
industry profile
e.
SurveyMonkey profile
30. A/An ____ lays out the benefits, distribution channel, product/service, and potential competition for
each identified customer segment.
a.
customer matrix
b.
market matrix
c.
customer profile
d.
industry profile
e.
None of these choices
SHORT ANSWER
1. Briefly discuss how an entrepreneur would collect competitor data.
2. Cite five of the issues that should be addressed in the industry analysis.
3. Discuss the purpose of the North American Industry Classification System (NAICS), and indicate
what countries are part of the system.
4. Briefly discuss the six sources of primary industry data.
5. Briefly discuss the components/elements of the industry life cycle.
6. Discuss the four major industry trajectories that signal how fast change occurs in a particular industry.
7. Briefly discuss Porter’s Five Forces Framework that is used to analyze an industry.
8. Briefly discuss the elements of a PEST analysis.
9. Briefly discuss the Four-Step Market Research Process.
10. Discuss some of the things that should be taken into account when constructing a questionnaire.
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