International School, VNU Hanoi – Organizational Strategy Course (INS2024)

Lecturer: Dr. Doan Thu Trang (trangdt@isvnu.vn)

CHAPTER 3 - FIVE FORCES FRAMEWORK QUIZZES

I. The threat of NEW ENTRY/ ENTRANTS is reduced when…

1 …there are companies with LARGE/ SMALL economies of scale in the industry, and
hence, they have significant cost advantage.
2. …there are strong “network effects” in customer demand.
3. …customers have WEAK/ STRONG brand preferences and HIGH/ LOW degrees of
loyalty to sellers/ firms in the industry. In other words, switching cost is HIGH/ LOW.
4. …capital requirements to enter the industry is HIGH/ LOW
5. …existing companies in the industry have cost advantages thanks to possessing patents or
exclusive partnerships with the best and cheapest suppliers, favorable locations, etc. In other
words, they have cost and quality advantages that are independent of size.
6. … the regulatory policies (laws, rules, etc.) to enter the industry are STRICT/ OPEN
(EASY).
7. … Incumbent firms (firms that are already active in the industry) may operate STRONG/
WEAK retaliation to new entrants.
** In short, threats of new entry is reduced when barriers to entry (entry barriers) are LOW/
HIGH

II. The bargaining power of suppliers is high (strong) when…

1. … the suppliers’ industry is more concentrated than the industry it sells to. O in other
words, there is HIGH/ LOW demand for suppliers’ products while there are MANY/ A FEW
suppliers (that provide input for companies in the industry).
2. … suppliers DEPEND HEAVILY/ DO NOT DEPEND on the industry for a large portion
of their revenues.
3. …it is EASY/ COSTLY for incumbent firms to switch among suppliers.
4. …suppliers offer products that are DIFFERENTIATED/ SIMILAR.
5. …suppliers pose a significant threats of integrating forward into the company industry

III. The bargaining power of buyers is high (strong) when…

1. …the number of buyers is LARGE/ SMALL compared to the number of sellers in the
industry.
 International School, VNU Hanoi – Organizational Strategy Course (INS2024)
Lecturer: Dr. Doan Thu Trang (trangdt@isvnu.vn)

2. …the demand from buyers is WEAK/ STRONG in relation to the available supply
3. … orders from buyers are in LARGE/ SMALL quantity.
4. … the industry’s products are STANDARDIZED/ DIFFERENTIATED commodities.
5. … buyers’ costs of switching to competing brands or substitutes are relatively LOW/
HIGH.
6. …buyers are WELL-INFORMED/ UNAWARE about the product offerings of sellers
(product features and quality, prices, buyer reviews…).
7. …buyers pose a large threat of INTEGRATING BACKWARD into the business of sellers.

IV. The threat of SUBSTITUTES is high when …

1. …there are MANY/ A FEW substitute products, which are readily available with attractive
prices or good quality.
2. …buyer switching costs to substitute products are LOW/ HIGH
3. … buyers view the substitutes as BETTER/ WORSE in terms of quality, design, and other
relevant attributes.

V. The threat of RIVALS (SELLERS) is high when….

1. …there are MANY/ A FEW firms in the industry (the number of rivals is LARGE/
SMALL) and they are SIMILAR/ DIFFERENTIATED from each other in terms of size and
capability.
2. …the demand from buyers grows FAST/ SLOWLY or is RISING/ DECLINING.
3. … firms make strategic commitments to compete in the industry.
4. … industry exit cost is HIGH/ LOW (it is EASILY/ COSTLY to exit the industry)
5. …buyers’ switching cost is HIGH/ LOW (it is COSTLY/ EASILY for buyers to switch
among different brands in the industry)