Crafting and Executing Strategy The Quest for

Competitive Advantage Concepts and Cases 22th

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Sample Test
Crafting and Executing Strategy, 22e (Thompson)
Chapter 3   Evaluating a Company’s External Environment
 
1) The strategically relevant factors outside a company’s industry boundaries
—economic conditions, political factors, sociocultural forces, technological
factors, environmental factors, and legal/regulatory conditions—are known as

1. A) the industry and the competitive arena in which the company

operates.
2. B) general economic conditions plus the factors driving change in the
markets where a company operates.
3. C) a company’s macro-environment.
4. D) the competitive market environment that exists between a company
and its competitors.
5. E) the dominant economic features of a company’s industry.

 
2) Managers must chart a company’s strategic course by
 1. A) focusing on the local environment in which they are operating.
2. B) ensuring excess production capacity and/or inventory.
3. C) competing fiercely for a share in the market.
4. D) building a bigger dealer network.
5. E) developing a thorough understanding of the company’s external and
internal environment.

 
3) The homebuilding industry is not affected by such macro-influences as

1. A) changes in mortgage interest rates, rules, and regulations that make

it easier/harder for homebuyers to obtain mortgages.
2. B) trends in household incomes and buying power.
3. C) the distinctive competences of incumbent firms.
4. D) disasters and other unanticipated events in the natural environment.
5. E) shifting preferences of families for renting versus owning a home,
and/or homes of various sizes, styles, and price ranges.

 
4) Which of the following is not one of the principal components of strategic
significance in the PESTEL analysis?

1. A) political factors including the extent to which government intervenes

in the economy
2. B) economic conditions that include the general economic climate and
specific factors such as interest rates, inflation rate, and unemployment
rate, as well as conditions in the stock and bond markets that can affect
consumer confidence
3. C) sociocultural forces that include societal values, attitudes, cultural
factors, and lifestyles that impact business
4. D) technological factors that include the pace of change and technical
developments that have the potential for impacting society
5. E) environmental forces that include the competitive structure, the
degree of industry fragmentation, and the mobility barriers that inhibit
business

 
 
 
5) The biggest strategy-shaping impact on on-demand transportation
providers such as Uber and Lyft is most likely to be

1. A) Yellow Cab companies launching mobile app campaigns for

community-connect and awareness.
2. B) Amazon launching a mobile delivery service via drones.
3. C) Apple launching a global network of driverless cars, buses, and
trucks on demand via a mobile app.
4. D) Tesla and ZipCar announcing a joint venture for electric automobile
sharing services.
5. E) Greyhound developing and marketing a mobile app for customers to
purchase intercity bus tickets.

 
6) A strategically relevant political factor in the macro-environment that will
influence the performance of all firms across the board is most likely to be

1. A) the strength of the federal banking system.

2. B) the exogenous forces related to the general environmental demand.
3. C) social factors that could fuel a political agenda and create greater
transparency.
4. D) bailouts and energy policies that are industry specific.
5. E) tax policy, fiscal policy, and tariffs providing impetus for antitrust
matters.

 
7) Avon Products at one point secured information about its biggest rival,
Mary Kay Cosmetics, by having its personnel search through the garbage bins
outside MKC’s headquarters. This is an example of

1. A) how companies in an industry can sustain good track records for

revenue growth and profitability.
2. B) strategic moves rivals are likely to make next.
3. C) industry key factors for future competitive success.
4. D) lawful gathering of competitive intelligence.
5. E) lawful but probably unethical gathering of competitive intelligence.

 
8) The impact of the macro-environment on a company’s strategic
opportunities is not exemplified by the following situation?
 1. A) Sales of Stolichnaya Vodka in the United States dwindle on account
of a boycott of Russian products.
2. B) Consumer confidence in Volkswagen drops precipitously because of
falsified emissions data.
3. C) Netflix squares off with Amazon Prime as its most potent rival in the
streaming television and film industry.
4. D) Traffic increases at the outlets of Whole Foods following its
introduction of stores comprised solely of generic products.
5. E) Sales of FitBit surge on account of a new feature that monitors users’
blood pressure.

 
9) The most powerful and widely used conceptual tool for diagnosing the
principal competitive pressures in a market is

1. A) the five forces framework.

2. B) PESTEL.
3. C) the driving forces model.
4. D) strategic group mapping.
5. E) SWOT analysis.

 
10) The competitive pressures on companies within an industry come from all
of the following except

1. A) those associated with the market maneuvering and jockeying for

buyer patronage that goes on among rival firms in the industry.
2. B) those companies in other industries attempting to win buyers over to
their substitute products.
3. C) those associated with the threat of new entrants into the
marketplace.
4. D) those associated with the bargaining power of suppliers and
customers.
5. E) those associated with environmental factors such as water
shortages.

 
11) The five forces of competitive pressures do not include

1. A) the power and influence of social/demographic trends.

 2. B) the bargaining power of suppliers and seller-supplier collaboration.
3. C) the threat of new entrants into the market.
4. D) the attempts of companies in other industries to win customers over
to their own substitute products.
5. E) the market maneuvering and jockeying for buyer patronage that goes
on among rival sellers in the industry.

 
12) Market maneuvering and jockeying for buyer patronage that goes on
among rival sellers in the industry

1. A) is less strong than the competitive pressures that stem from the
ready availability of attractively priced substitute products.
2. B) is the strongest force among the five forces that drive profitability in
an industry.
3. C) emerges from close collaboration with suppliers and the competitive
pressures that such collaboration creates.
4. D) is less important than competitive pressure associated with the
potential entry of new competitors.
5. E) has about the same impact as bargaining power and leverage that
large customers are able to exercise.

 
 
 
13) Using the five forces model of competition to determine the character and
strength of the competitive forces within a given industry involves

1. A) building the picture of competition in three steps: (1) identify the

different parties involved, along with specific factors that bring about
competitive pressures; (2) evaluate how strong the pressures stemming
from each of the five forces are (strong, moderate or weak); and (3)
determine whether the collective impact of the five competitive forces is
conducive to earning attractive profits in the industry.
2. B) building the picture of competition in two steps: (1) determine which
rival has the biggest competitive advantage and (2) assess whether the
competitive advantages possessed by various industry members allow
most industry members to earn above-average profits.
3. C) evaluating whether competition is being intensified or weakened by
the industry’s driving forces and key success factors.
 4. D) assess whether the collective impact of all five forces is weak
enough to allow industry members to go on the offensive or use a
defensive strategy to insulate against fierce competitive pressures.
5. E) gauging the overall strength of competition based on how many
industry rivals are operating with a competitive advantage and how
many are operating at a competitive disadvantage.

 
14) What makes the marketplace a competitive battlefield?

1. A) the race of industry members to build strong defenses against the

industry’s driving forces
2. B) the constant rivalry of firms to strengthen their standing with buyers
and win a competitive edge over rivals
3. C) the ongoing race among rival sellers to have the highest-quality
product
4. D) the ongoing efforts of industry members to introduce new and
improved products/services at a faster rate than their rivals
5. E) the ongoing race among rivals to achieve the fastest rate of growth in
revenues and profits

 
15) Market maneuvering among industry rivals

1. A) determines whether the industry’s strategic group map will be static

or dynamic.
2. B) centers around collaborative efforts to overcome the bargaining
power of powerful suppliers and powerful buyers.
3. C) is usually an industry’s strongest driving force.
4. D) is usually one of the two or three weakest competitive forces
because of the close familiarity that rivals have for one another’s likely
next moves.
5. E) is ongoing and dynamic, with moves and countermoves of rivals
producing a continually evolving competitive landscape that delivers
winners and losers.

 
16) Rivalry among competing sellers decreases

1. A) when buyer demand is growing rapidly.

 2. B) as it becomes less costly for buyers to switch brands.
3. C) as the products of rival sellers become commoditized.
4. D) when there is excess production relative to demand.
5. E) as the number of competitors increases.

 
 
 
17) External forces in the natural environment include

1. A) the trend toward healthier lifestyles, which can shift spending toward
exercise equipment and health clubs and away from alcohol and snack
foods.
2. B) air and/or water pollution, the depletion of irreplaceable natural
resources, or inefficient energy/resource usage.
3. C) interest rates, exchange rates, the inflation rate, the unemployment
rate, the rate of economic growth, trade deficits or surpluses, savings
rates, and per-capita domestic product.
4. D) tax policy, fiscal policy, tariffs, the political climate, and the strength
of institutions such as the federal banking system.
5. E) slow growth in buyer demand.

 
18) Legal and regulatory factors in the external environment typically do
not include

1. A) minimum wage legislation in low-wage industries (such as nursing

homes and fast food restaurants) that employ substantial numbers of
relatively unskilled workers.
2. B) consumer protection statutes
3. C) genetic engineering, nanotechnology, and solar energy technology.
4. D) antitrust laws.
5. E) occupational health and safety regulations specific to certain
industries, such as meatpacking and coalmining, where jobs are
hazardous or carry high risk of injury

 
19) Rivalry among competing sellers is generally less intense when
 1. A) there are relatively more industry key success factors.
2. B) the industry’s driving forces are weak and rivals have mostly
commodity products.
3. C) barriers to entry are moderately low and the pool of likely entry
candidates is large.
4. D) rivals are wary of making fresh moves to lower prices, introduce new
products, increase promotional efforts and advertising, and otherwise
gain sales and market share.
5. E) buyers have many alternative products or services from which to
choose.

 
20) The competitive battles among rival sellers striving for better market
positions, higher sales and market shares, and competitive advantage,
suggest the rivalry force

1. A) is stronger when firms strive to be low-cost producers than when they

use differentiation and focus strategies.
2. B) is often weak when rivals have emotional stakes in business or face
high exit barriers.
3. C) is largely unaffected by whether industry conditions tempt rivals to
use price cuts or other competitive weapons to boost unit sales.
4. D) tends to intensify when strong companies with sizable financial
resources, proven competitive capabilities, and respected brand names
hurdle entry barriers looking for growth opportunities and launch
aggressive, well-funded moves to transform into strong market
contenders.
5. E) is weaker when more firms have weakly differentiated products,
buyer demand is growing slowly, and buyers have moderate switching
costs.

 
 
 
21) In analyzing the strength of competition among rival firms, an important
consideration is

1. A) the potential for buyers to exercise strong bargaining power.

2. B) the diversity of competitors in terms of long-term direction, objectives,
strategies, and countries of origin.
 3. C) the number of firms pursuing differentiation strategies versus the
number pursuing low-cost leadership strategies and focus strategies.
4. D) the extent to which some rivals have more than two competitively
valuable competencies or capabilities.
5. E) whether the industry is characterized by a strong learning/experience
curve and whether the industry is composed of many or few strategic
groups.

 
22) The intensity of rivalry among competing sellers does not depend on
whether

1. A) the industry has more than two strong driving forces and whether the
industry has more than two diverse and capable strategic groups.
2. B) competitors are diverse in terms of long-term directions, objectives,
strategies, and countries of origin.
3. C) strong companies outside the industry have acquired weak firms in
the industry and are launching aggressive moves to transform the
acquired companies into strong market contenders.
4. D) one or two rivals have particularly powerful and successful strategies
to grow the business, attract and retain buyers, and develop a sustained
competitive advantage.
5. E) industry conditions attract industry members to use price cuts or
other competitive weapons to boost total sales volume and market
share.

 
23) In which of the following instances is rivalry among competing
sellers not more intense?

1. A) when certain competitors are dissatisfied with their market position

and make moves to bolster their standing
2. B) when strong companies outside the industry acquire weak firms in
the industry and launch aggressive moves to transform their newly
acquired competitors into stronger market contenders
3. C) when competitors are fairly equal in size and capability
4. D) when the products of rivals are weakly differentiated, buyer switching
costs are low, and market demand is growing slowly
5. E) when there are vast numbers of small rivals so the impact of any one
company’s actions is spread thinly across all industry members
 
24) Competing companies deploy whatever means necessary to strengthen
market position, including all of the following except

1. A) marketing tactics that include special sales promotions such as

introducing new or improved features or increasing the number of styles
to provide greater product selection.
2. B) differentiating their products by offering better performance features
than rivals.
3. C) improving innovation to increase product performance and quality.
4. D) making efforts to expand dealer networks.
5. E) reducing distribution capabilities and market presence.

 
 
 
25) Which of the following is generally not considered a barrier to entry?

1. A) restrictive regulatory policies

2. B) high capital requirements
3. C) strong brand preferences
4. D) many industry patents in place
5. E) weak network effects in customer demand

 
26) Potential entrants are more likely to be deterred from actually entering an
industry when

1. A) incumbent firms are willing and able to be aggressive in defending

their market positions against entry.
2. B) incumbent firms are complacent.
3. C) buyers are not particularly price-sensitive and the industry already
contains a dozen or more rivals.
4. D) the relative cost positions of incumbent firms are about the same,
such that no one incumbent has a meaningful cost advantage.
5. E) buyer switching costs are moderately low because of strong product
differentiation among incumbent firms.

 
27) Competitive pressures associated with the threat of entry are greater in all
of the following situations except when

1. A) incumbent firms are willing to strongly contest the entry of

newcomers with moves designed to make entry unprofitable.
2. B) a large pool of potential entrants exists, some of which have the
capabilities to overcome high entry barriers.
3. C) entry barriers are relatively low and buyer demand for the product is
growing rapidly, and newcomers can expect to earn attractive profits
without inviting a strong reaction from incumbents.
4. D) existing industry members are looking to expand their market reach
by entering product segments or geographic areas where they currently
do not have a presence.
5. E) customers have low brand preferences and low degrees of loyalty to
seller.

 
28) The best test of whether potential entry is a strong or weak competitive
force is

1. A) the strength of buyer loyalty to existing brands.

2. B) whether the industry’s driving forces make it harder or easier for new
entrants to be successful.
3. C) whether the strategies of industry members are well-matched to the
industry’s key success factors.
4. D) whether there are any vacant spaces on the industry’s strategic
group map.
5. E) to ask if the industry’s growth and profit prospects are strongly
attractive to potential entry candidates.

 
 
 
29) The competitive threat that outsiders will enter a market is weaker when

1. A) financially strong industry members send strong signals that they will
launch strategic initiatives to combat the entry of newcomers.
2. B) the industry’s market growth is rapid.
3. C) the pool of entry candidates is large and some have resources that
would make them formidable market contenders.
 4. D) newcomers can be expected to earn attractive profits.
5. E) buyers have little loyalty to the brands and product offerings of
existing industry members.

 
30) Which of the following is not a good example of a substitute product that
triggers stronger competitive pressures?

1. A) a salad as a substitute for French fries

2. B) wireless phones as a substitute for wired telephones
3. C) Coca-Cola as a substitute for Pepsi
4. D) snowboards as a substitute for snow skis
5. E) video-on-demand services from a cable TV company as a substitute
for going to the movies

 
31) The competitive pressures from substitute products tend to be stronger
when

1. A) good substitutes are readily available.

2. B) there are fewer number of substitute products.
3. C) substitutes have lower performance features.
4. D) buyers incur high costs in switching to substitutes.
5. E) substitutes are priced above the market.

 
32) In which of the following instances are industry members not subject to
stronger competitive pressures from substitute products?

1. A) The costs to buyers of switching over to the substitutes are low.

2. B) Buyers are dubious about using substitutes.
3. C) The quality and performance of the substitutes are well-matched to
what buyers need to meet their requirements.
4. D) Buyer brand loyalty is weak.
5. E) Substitutes are readily available at competitive prices.

 
33) Determining how strong the threat of substitutes will be entails
 1. A) identifying the relative price/performance relationship of the
substitutes, the switching costs, and the overall buyer demand for the
substitute.
2. B) identifying the attractiveness of other industries.
3. C) measuring Coke as a substitute for Pepsi and applying dynamic
simulation modeling techniques.
4. D) adopting a substitute product concentration factor to the buyer
volume.
5. E) judging whether industry members are capable of self-manufacturing
their products.

 
 
 
34) The lower the user’s switching costs, the

1. A) harder it is for the sellers of attractive substitutes to lure buyers to

their offering.
2. B) more intense the competitive pressures posed by substitute
products.
3. C) less intense the competitive pressures posed by substitute products.
4. D) greater the bargaining power from both suppliers and influential
customers.
5. E) lesser the bargaining power from both suppliers and influential
customers.

 
35) Whether supplier-seller relationships in an industry represent a strong or
weak source of competitive pressure is a function of

1. A) whether the profits of suppliers are relatively high or low.

2. B) the average number of suppliers that each seller/industry member
purchases from.
3. C) how aggressively rival industry members are trying to differentiate
their products.
4. D) whether demand for supplier products is high and they are in short
supply.
5. E) whether the prices of the items being furnished by the suppliers are
rising or falling.
 
36) The strength of competitive pressures that suppliers can exert on industry
members is MAINLY a function of

1. A) whether needed inputs are in short supply and whether suppliers

provide differentiated input that enhances performance of the product.
2. B) whether suppliers self-manufacture what they supply or source their
items from other manufacturers.
3. C) whether the industry’s position in the growth cycle is favorable.
4. D) whether technological change in the businesses of suppliers is rapid
or slow.
5. E) whether the needs and expectations of supplier-seller relationships
are changing slowly or rapidly.

 
37) The bargaining leverage of suppliers is greater when

1. A) the suppliers’ products/services account for a small percentage of

industry members’ costs.
2. B) industry members incur low costs in switching their purchases from
one supplier to another.
3. C) industry members account for a big fraction of supplier’s sales.
4. D) there is extensive seller-supplier collaboration.
5. E) the supplier industry is composed of a large number of relatively
small suppliers.

 
38) In which one of the following instances is supplier bargaining power and
leverage not weakened?

1. A) when industry members pose a credible threat of backward

integration into the business of suppliers
2. B) when the cost of switching from one supplier to another is low
3. C) when the items purchased from suppliers are in short supply
4. D) when the buying firms purchase in large quantities and thus are
important customers of the suppliers
5. E) when the item being supplied is a commodity

 
 
 
39) When an industry member is a major customer of the supplier, and the
relationship (partnership) is unusually effective and mutually advantageous

1. A) it is rare for such partnerships to have much competitive impact on

those industry members not having such partnerships.
2. B) one unfortunate outcome is that it tends to give the supply partners
much enhanced bargaining power in their dealings with these industry
members.
3. C) there is a strong likelihood such partnerships will put increased
competitive pressure on those industry members who lack productive
collaborative relationships with their suppliers.
4. D) there is a high likelihood of such partnerships reducing competitive
pressures on all industry members, provided technological change in
the suppliers’ business is rapid and the item being supplied is a
commodity.
5. E) the usual result is to reduce competitive pressures on all industry
members, provided the costs of the items furnished by supply chain
partners amount to 50 percent or more of total cost.

 
40) The higher the switching costs for industry members, the more it can

1. A) limit supplier bargaining power.

2. B) enhance supplier bargaining power.
3. C) enhance the quality of parts and components being supplied, and in
effect reduce defect rates.
4. D) provide important cost savings for the collaborative supplier-seller
relationship.
5. E) limit the supply of products and/or services.

 
41) Whether buyer-seller relationships in an industry represent a strong or
weak source of competitive pressure is a function of

1. A) the speed with which general economic conditions and interest rates
are changing.
2. B) the extent to which buyers can exercise enough bargaining power to
influence the conditions of sale in their favor and whether strategic
 partnerships between certain industry members can adversely affect
other industry members.
3. C) how many buyers purchase all of their requirements from a single
seller versus how many purchase from several sellers.
4. D) the number of buyers versus the number of sellers.
5. E) whether industry members are spending more or less on advertising.

 
42) Whether buyer bargaining power poses a strong or weak source of
competitive pressure on industry members depends in part on

1. A) the degree to which buyers have any bargaining preferences and the
extent to which buyers are price sensitive.
2. B) how many buyers are engaged in collaborative partnerships with
sellers.
3. C) whether entry barriers are high or low and the size of the pool of
likely entry candidates.
4. D) whether the overall quality of the items being furnished by industry
members is rising or falling.
5. E) whether demand-supply conditions represent a buyer’s market or a
seller’s market.

 
 
 
43) Which of the following is not a factor that causes buyer bargaining power
to be stronger?

1. A) Some buyers are a threat to integrate backward into the business of

sellers and become an important competitor.
2. B) Buyers are small and numerous relative to sellers.
3. C) Buyers have considerable discretion over whether and when they
purchase the product.
4. D) Buyers purchase the item frequently and are well-informed about
sellers’ products, prices, and costs.
5. E) The costs incurred by buyers in switching to competing brands or to
substitute products are relatively low.

 
44) Buyer bargaining power is stronger when

1. A) winning the business of certain high-profile customers offers a seller

important market exposure or prestige.
2. B) the extent and importance of collaborative partnerships and alliances
between particular sellers and buyers are credible.
3. C) buyers cannot integrate backward into the product market of sellers.
4. D) sellers’ products are differentiated, making it easy and inexpensive
for buyers to switch to competing brands.
5. E) the industry’s products are standardized or undifferentiated.

 
45) Which of the following factors is not a relevant consideration in
determining the strength of buyer bargaining power?

1. A) the relationship between the buyer market and seller market

2. B) the degree to which the seller is a manufacturer of goods and
services in substantial quantities
3. C) the degree to which buyers pose a credible threat to integrate
backward into the product market of sellers
4. D) the degree to which buyers are well-informed about a seller’s
products, prices, and costs
5. E) the degree to which industry goods are standardized and
undifferentiated

 
46) Collaborative relationships between particular sellers and buyers in an
industry can represent a source of strong competitive pressure when

1. A) virtually all buyers have strong brand attachments and are highly
brand loyal.
2. B) demand for the product is growing rapidly.
3. C) sales are made to buyer groups with either strong bargaining power
or high sensitivity.
4. D) sellers are racing to add the latest and greatest performance features
so as to attract the patronage of important or prestigious buyers.
5. E) buyers are very quality conscious.

 
47) In which of the following circumstances are competitive pressures
associated with the bargaining power of buyers relatively moderate-to-weak?

1. A) The supply of soccer balls increases during the World Cup season.
2. B) Consumers can easily compare different smartphones’ features over
the Internet before buying them.
3. C) Apple designs and manufactures its chip processors rather than
buying them from Intel.
4. D) Dairy products are usually standardized and therefore differentiated
only by price.
5. E) Buyers tend to delay purchases of luxury goods, such as home
entertainment systems, until they are on sale.

 
48) Competitive pressures stemming from buyer bargaining power tend to be
weakest in which of the following circumstances?

1. A) Most consumers vary the brands they choose for their cookware and
kitchen gadgets.
2. B) There is a global decline in the demand for cable television services.
3. C) The commercial jet aviation manufacturing industry offers highly
differentiated products.
4. D) The Internet offers a huge amount of information on a variety of
products.
5. E) Heinz owns a metal-can manufacturing subsidiary to cut back on
supplier costs.

 
49) Which of the following conditions acts to weaken buyer bargaining power?

1. A) when buyers are unlikely to integrate backward into the business of

sellers
2. B) when buyers purchase the item frequently and are well-informed
about sellers’ products, prices, and costs
3. C) when the costs incurred by buyers in switching to competing brands
or to substitute products are relatively low
4. D) when the products of rival sellers are weakly differentiated and
buyers have considerable discretion over whether and when they
purchase the product
5. E) when buyers are few in number and/or often purchase in large
quantities
 
50) Buyers are in position to exert strong bargaining power in dealing with
sellers when

1. A) their costs to switch to competing brands or to substitute products

are relatively high.
2. B) a particular seller’s product delivers quality or performance that is
very important to the buyer and is not matched by other brands.
3. C) they buy the product infrequently or in small quantities and are not
particularly well-informed about sellers’ products, prices, and costs.
4. D) buyer demand is growing rapidly.
5. E) buyers are price sensitive because the product represents a
significant portion of their purchasing budget.

 
51) Which of the following factors is not a relevant consideration in judging
whether buyer bargaining power is relatively strong or relatively weak?

1. A) whether certain customers offer sellers important market exposure or

prestige
2. B) whether customers are relatively well-informed about sellers’
products, prices, and costs
3. C) whether buyer needs and expectations are changing rapidly or slowly
4. D) whether sellers’ products are highly differentiated, making it
troublesome or costly for buyers to switch to competing brands or to
substitute products
5. E) whether buyers pose a major threat to integrate backward into the
product market of sellers

 
52) Not all buyers of an industry’s product have equal degrees of bargaining
power with sellers because

1. A) sellers in an industry provide similar products and generally their cost

structures are different because of competitive advantages in their
operation.
2. B) some sellers may be less sensitive than others to price, quality, or
service differences.
3. C) along the various stages of the value chain sellers are conducive to
earning attractive profits.
 4. D) the industry is a highly cohesive structure with limited fragmentation
and few industry members.
5. E) sellers are large and few in number relative to the number of buyers.

 
53) A competitive environment where there is weak to moderate rivalry among
sellers, high entry barriers, weak competition from substitute products, and
little bargaining leverage on the part of both suppliers and customers

1. A) lacks powerful driving forces.

2. B) gives each industry competitor the best potential for building
sustainable competitive advantage over rival firms.
3. C) makes it challenging for industry members to compete successfully
unless they can strongly differentiate their products.
4. D) is conducive to industry members earning attractive profits.
5. E) requires that industry members have low costs in order to be
competitively successful.

 
54) A competitive environment where there is strong rivalry among sellers, low
entry barriers, strong competition from substitute products, and considerable
bargaining leverage on the part of both suppliers and customers

1. A) is competitively unattractive from the standpoint of earning good

profits.
2. B) offers little ability to build a sustainable competitive advantage.
3. C) is highly conducive to achieving strong product differentiation and
high customer loyalty to the company’s brand.
4. D) offers moderate to good prospects for making a reasonable profit
and building a sustainable competitive advantage.
5. E) requires that industry members have a strongly differentiated product
offering in order to be profitable.

 
55) The stronger the collective impact of competitive pressures associated
with the five competitive forces,

1. A) the stronger are the industry’s driving forces.

2. B) the greater number of companies that can achieve a competitive
advantage via differentiation.
 3. C) the larger the number of competitive advantage opportunities for
industry members.
4. D) the greater the number of industry key success factors.
5. E) the fewer companies that can achieve a competitive advantage via
anything other than being the industry’s low-cost leader.

 
56) Based on an analysis of the five competitive forces, in which of the
following industries is profitability likely to be lowest?

1. A) pharmaceuticals
2. B) wireless lighting systems
3. C) wearable fitness and health monitors
4. D) pizza restaurants
5. E) delivery services using drones

 
 
 
57) Based on an analysis of the five competitive forces, in which of the
following industries is profitability likely to be highest?

1. A) apparel
2. B) tire manufacturing
3. C) electric and gas utilities
4. D) commercial airlines
5. E) video streaming services

 
58) As a rule, the collective impact of competitive pressures associated with
the five competitive forces

1. A) determines the strength of the industry’s driving forces.

2. B) determines the extent of the competitive pressure on industry
profitability.
3. C) means that fewer companies can achieve a competitive advantage
via anything other than being the industry’s low-cost leader.
4. D) means there will be a larger number of competitive advantage
opportunities for industry members.
 5. E) means there will be a greater number of industry key success
factors.

 
59) A company’s strategy is increasingly effective the more it can match the
company strategy to competitive conditions, so the firm can

1. A) pursue avenues that expose the firm to as many of the different

competitive pressures as possible.
2. B) shift the competitive battle in favor of the firm by altering the
underlying factors driving the five forces.
3. C) pursue ways to identify and complement the five forces’
contradictions and inferences to attract competitive growth
opportunities.
4. D) pursue avenues that promote strategic thinking about how to contest
competitor strengths and weaknesses and to create a checklist of
potential profitability preferences.
5. E) shift societal concerns, attitudes, and lifestyles by altering the pattern
of competition.

 
60) The value net framework includes an analysis of

1. A) the firm, substitutes, suppliers, customers, and competitors.

2. B) the firm, suppliers, customers, competitors, and driving forces.
3. C) substitutes, suppliers, customers, competitors, and driving forces.
4. D) the firm, suppliers, customers, competitors, and complementors.
5. E) substitutes, suppliers, customers, competitors, and potential entrants.

 
61) Which of the following is not an example of a complementor?

1. A) microprocessors and laptops

2. B) automobiles and gasoline stations
3. C) theme parks and hotels
4. D) gyms and fitness equipment
5. E) newspapers and Internet news providers

 
 
 
62) The “driving forces” in an industry

1. A) are usually triggered by changing technology or stronger

learning/experience curve effects.
2. B) usually are spawned by growing demand for the product, the
outbreak of price-cutting, and big reductions in entry barriers.
3. C) are major underlying causes of changing industry and competitive
conditions and have the biggest influences in reshaping the industry
landscape and altering competitive conditions.
4. D) appear when an industry begins to mature but are seldom present
during early stages of the industry life cycle.
5. E) are usually triggered by shifting buyer needs and expectations or by
the appearance of new substitute products.

 
63) Industry conditions change because of

1. A) such powerful driving forces as swings in buyer demand, changing

interest rates, ups and downs in the economy, and higher/lower entry
barriers.
2. B) newly emerging industry threats and industry opportunities that alter
the composition of the industry’s strategic groups.
3. C) newly emerging industry key success factors.
4. D) important forces enticing or pressuring certain industry participants
(competitors, customers, suppliers) to alter their actions in important
ways.
5. E) changes in the barriers to entry and the degree of competition from
substitute products.

 
64) You have been asked to analyze the Value Net of the major regions of the
California wine industry and have observed close relationships between
wineries and local hospitality businesses (such as restaurants and lodging
facilities) in the regions under study. Those local hospitality businesses can be
said to be

1. A) cohabitors.
2. B) competitors.
3. C) cooperators.
 4. D) complementors.
5. E) customers.

 
65) One of the steps of driving-forces analysis is to identify which

1. A) strategy changes a company may need to make to prepare for the

impacts of the driving forces.
2. B) strategic group is the most powerful.
3. C) industry member is likely to become (or remain) the industry leader
and why.
4. D) key success factors are most likely to help their company gain a
competitive advantage.
5. E) of the five competitive forces will be the strongest driver of industry
change.

 
66) Which of the following is not generally a “driving force” capable of
producing fundamental changes in industry and competitive conditions?

1. A) changes in the long-term industry growth rate

2. B) increasing globalization of the industry
3. C) product innovation and technological change
4. D) movement in the economy and in interest rates
5. E) regulatory influences and government policy changes

 
67) Which of the following is most unlikely to qualify as driving forces?

1. A) changes in the long-term industry growth rate, the entry or exit of

major firms, and changes in cost and efficiency
2. B) increasing globalization of the industry and product innovation
3. C) new Internet technology applications, new government regulations,
and significant changes in government policy toward the industry
4. D) increasing efforts to collaborate with suppliers via strategic alliances
and partnerships, escalating risk levels and normalization of cost and
efficiency in the industry
5. E) marketing innovations and changes in who buys the industry’s
product and how they use it
 
68) Which of the following does not qualify as potential driving forces capable
of inducing fundamental changes in industry and competitive conditions?

1. A) changes in who buys the product and how they use it, and changes
in the long-term industry growth rate
2. B) changes brought about by the entry or exit of major firms, product
innovation, and marketing innovation and cost efficiency
3. C) changes in the economic power and bargaining leverage of
customers and suppliers, growing supplier-seller collaboration, and
growing buyer-seller collaboration
4. D) changes in buyer preferences for differentiated products instead of
mostly standardized or identical products
5. E) changes in economies of scale and experience curve effects brought
on by changes in manufacturing technology and new Internet
capabilities

 
69) Which of the following is most. likely to qualify as a driving force?

1. A) increases in price cutting by rival sellers and the launch of major new
advertising campaigns by one or more rivals
2. B) successful introduction of innovative new products or new ways to
market products
3. C) an increase in the prices of substitute products
4. D) decisions on the part of industry’s three biggest competitors not to
pursue a strategy of striving to be the industry’s low-cost leader
5. E) decisions by one or more outsiders not to attempt to enter the
industry

 
70) Which of the following is not a common type of driving force?

1. A) reductions in uncertainty and business risk

2. B) changing societal concerns, attitudes, and lifestyles
3. C) diffusion of technical know-how across companies and countries
4. D) increasing efforts to collaborate closely with suppliers
5. E) advances in technology and manufacturing process innovation

 
 
 
71) Increasing globalization of the ride-share industry can be a driving force
because

1. A) the services provided by foreign ride-share competitors are nearly

always cheaper or of better quality than those of domestic companies.
2. B) foreign ride-share operators typically have lower costs, more
technological expertise, and greater social network integration
capabilities than domestic firms.
3. C) ride-share companies need to spread their operating reach into more
and more country markets to meet emerging consumer demand and
take advantage of available operating opportunities.
4. D) it results in ride-share companies having fewer competitors and a
strategic group map with fewer circles.
5. E) market growth rates rise, product innovation accelerates, and new
ride-share startups are increasingly likely to enter the industry.

 
72) Driving-forces analysis helps managers identify whether

1. A) the collective impact of the driving forces will act to

increase/decrease market demand, increase/decrease competition, and
raise/lower industry profitability in the years ahead.
2. B) it will become more or less important to aim the company’s strategy
at being the industry’s low-cost producer.
3. C) the driving forces will have a bigger impact on company profitability
than competitive forces.
4. D) the industry is likely to become more or less vertically integrated and
why.
5. E) competitive advantages are likely to grow or diminish in importance.

 
73) Evaluating the industry’s driving forces, as a whole, requires
understanding their influence on the attractiveness of industry environment
and generally are

1. A) determined by the sizes of strategic groups and the power of rival

firms’ competitive strategies.
 2. B) defined in ways that will strengthen or weaken market demand,
competition, and industry profitability in future years.
3. C) the cause of a reduction in the bargaining power of buyers.
4. D) triggered by movement in the economy, higher or lower interest
rates, or important new strategic alliances.
5. E) triggered by such factors as growing competitive pressures from
substitute products, and the efforts of rival firms to employ new or
different offensive strategies.

 
74) In analyzing driving forces, the strategist’s role is to

1. A) identify the driving forces and evaluate their impact on demand for
the industry’s product, the intensity of competition, and industry
profitability.
2. B) predict future marketing innovations and how fast the industry is
likely to globalize.
3. C) evaluate what stage of the life cycle the industry is in and when it is
likely to move to the next stage.
4. D) determine who is likely to exit the industry and what changes can be
expected in the industry’s strategic group map.
5. E) forecast fluctuations in product demand and how buyer needs will
most likely change.

 
 
 
75) Driving-forces analysis typically does not include

1. A) determining whether forces are acting to cause fundamental changes

in industry conditions and/or the industry’s competitiveness.
2. B) determining whether forces are acting to cause industry rivals to shift
to a different strategic group.
3. C) determining whether forces are acting to strengthen or weaken
market demand.
4. D) determining whether forces are acting to make competition more or
less intense.
5. E) determining whether forces are acting to raise or lower industry
profitability.
 
76) The real payoff of driving forces is to help managers understand

1. A) what strategy changes are needed to prepare for the impacts of the
driving forces.
2. B) the overall strength of the five competitive forces.
3. C) whether the industry’s strategic group map will be static or dynamic.
4. D) what conditions exist in the economy at large.
5. E) the extent to which rivals have more than two competitively valuable
competencies or capabilities.

 
77) Driving-forces analysis has

1. A) speculative value because it compels the firm to drive strategic intent

and collective choice into operating practices.
2. B) theoretical value because it allows managers to visualize the many
different dimensions of the preferred forces that allow for industry
functionality.
3. C) practical value and is basic to the task of thinking strategically about
where the industry is headed and how to prepare for the changes
ahead.
4. D) no real analytical value because the driving forces are already
established in the marketplace and it is too late to make astute and
timely strategy adjustments.
5. E) perceived value and is associated with identifying the close and
distant rivals within an operating industry.

 
78) Which of the following driving forces would have the least impact on the
attractiveness of the automobile industry?

1. A) changes in the long-term industry growth rate

2. B) entry or exit of major firms
3. C) shifts in who buys the product and how the product is used
4. D) changes in costs and efficiency
5. E) regulatory influences and government policy changes

 
79) What is the best technique for revealing the different market or
competitive position that rival firms occupy in the industry?

1. A) strategic group mapping

2. B) PESTEL analysis
3. C) five forces framework
4. D) the Value Net framework
5. E) competitor analysis

 
 
 
80) A strategic group

1. A) consists of those industry members that are growing at about the

same rate and have similar product line breadth.
2. B) includes all rival firms having comparable profitability.
3. C) is a cluster of industry members with similar competitive approaches
and market positions in the market.
4. D) consists of those firms whose market shares are about the same
size.
5. E) is made up of those firms having comparable profit margins.

 
81) Not all positions on a strategic group map are equally attractive because

1. A) small strategic groups are always less profitable than large strategic
groups.
2. B) entry and exit barriers are different for each strategic group.
3. C) across-group rivalry is always weakest at the outer edge of the
strategic group map.
4. D) industry-driving forces and competitive pressures favor some groups
and disadvantage others.
5. E) key success factors are substantially different for differently
positioned industry participants.

 
82) When all sellers pursue essentially identical strategies and have similar
market positions
 1. A) they remain subject to different driving forces.
2. B) they place about the same emphasis on various distribution
channels.
3. C) they use the same key success factors to differentiate their products.
4. D) the industry can be said to contain one strategic group.
5. E) they still must possess customer service attributes that differentiate
them from one another in the marketplace.

 
83) Strategic group mapping is a visual technique for displaying

1. A) how many rivals are pursuing each type of strategy.

2. B) which companies have the biggest market share and who the
industry leader really is.
3. C) the different market or competitive positions that rival firms occupy in
an industry and for identifying each rival’s closest competitors.
4. D) which companies have the highest degrees of brand loyalty.
5. E) which companies have failing business models.

 
84) Which of the following pairs of variables are least likely to be useful in
drawing a strategic group map?

1. A) geographic market scope and degree of vertical integration

2. B) brand name reputation and distribution channel emphasis
3. C) product quality and product-line breadth
4. D) level of profitability and size of market share
5. E) price/perceived quality and image range and the extent of buyer
appeal

 
 
 
85) The concept of strategic groups is relevant to industry and competitive
analysis because

1. A) firms in the same strategic groups are rarely close competitors—a

firm’s closest competitors are usually in distant strategic groups.
 2. B) strategic group maps help identify how each competing firm is
positioned and the relationship to its closest competitors.
3. C) competition grows in intensity as the number and diversity of the
strategic groups in an industry increases.
4. D) the profit potential of firms in the same strategic group is usually very
similar.
5. E) competitive pressures tend to be weaker within strategic groups than
across strategic groups.

 
86) When drawing a strategic group map

1. A) one strategic variable and one financial variable should be used as

axes for the map.
2. B) it is important for the variables used as axes to be highly correlated.
3. C) the best variables to use as axes for the map are those that identify
the competitive characteristics that delineate strategic approaches used
in the industry.
4. D) it is important to use price as the variable for the vertical axis.
5. E) the primary objective is to determine which strategic groups are
profitable and which are not.

 
87) Which of the following is not an appropriate guideline for developing a
strategic group map for a given industry?

1. A) The variables chosen as axes for the map should indicate important
differences among rival approaches.
2. B) The variables chosen as axes for the map do not have to be either
quantitative or continuous. They can be discrete variables.
3. C) The variables chosen as axes for the map should be highly
correlated.
4. D) Several maps should be drawn if more than one pair of variables
give different exposures to the competitive positioning relationships
present in the industry structure.
5. E) The sizes of the circles on the map should be drawn proportional to
the combined sales of the firms in each strategic group.

 
88) With the aid of a strategic group map for the pizza segment of the food
service industry, one can

1. A) identify easily the entry and exit barriers for each strategic group and
intersegment competition with other casual restaurants.
2. B) pinpoint precisely which pizza restaurants are in profitable strategic
groups and which are not.
3. C) identify which competitive forces are strong and which are weak for
pizza restaurants.
4. D) measure accurately whether across-group rivalry among pizza
establishments is stronger than within-group rivalry, and vice versa.
5. E) reveal which pizza establishments are close competitors and which
are distant rivals, and that not all positions on the map are equally
attractive.