Chapter 03 Evaluating a Company's External Environment Answer Key Multiple Choice Quest 1, A company's broad "macro-environment” refers to A. the industry and competitive arena in which the company operates. B. general economic conditions plus the factors driving change in the markets being served. ©, all the strategically significant forces and factors outside a company's boundaries— general economic conditions, population demographics, societal values and lifestyles, technological factors, and governmental legislation and regulation. . the competitive market environment that exists between a company and its ‘competitors, E, the dominant economic features of a company's industry. Strictly speaking, the macro-environment excludes a company's competitively valuable resources and capabilities and instead encompasses all of the relevant factors—political factors, economic conditions in the firm's general environment, sociocultural forces, technological factors, environmental forces, and legal/regulatory factors—making up the broad environmental context in which a company operates. See Figure 3.1 AACSB: Analytica! Thinking Accessibilty Keyboard Navigation ‘looms: Remember Ditculye 1 Easy Leaming Objective: 03-01 Identity factors in 9 company’s broad macro-environment that may have strategic ‘ignincance Topic: What are the Strategically Relevant Components ofthe Macro-Emuronrnent> Copyright © 2017 MeGraw-HillEdvcaton, All rights reserved, No rprodstion a istrbution without th prior wniten consent of McGraw Hil Education, Downloaded by Woods Four (fourwoods1130@gmail. com)2. Which one of the following is not part of a company's broad macro-environment? A. conditions in the economy at large 8. population demographics, and societal values and lifestyles technological and ecological factors D. governmental regulations and legislation he company's resource strengths, resource weaknesses, and competitive capabilities See Figure 3.1, The macro-environment excludes a company's competitively valuable internal resources and capabilities and instead encompasses all of the relevant factors —political factors, economic conditions in the firm's general environment, sociocultural forces, technological factors, environmental forces, and legal/regulatory factors—making up the broad environmental context in which a company operates; by relevant, we mean the factors are important enough that they should shape management's decisions regarding the company's long-term direction, objectives, strategy, and business model. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-02 Identify factors in a company’s broad macro-environment that may have strategic ‘significance. Topic: What are the Strategically Relevant Components of the Macro-Environment? 3. Which of the following is not a major question to ask in thinking strategically about industry and competitive conditions in a given industry? A. How many companies in the industry have good track records for revenue growth and profitability? B. What strategic moves are rivals likely to make next? C. What are the key factors for future competitive success? D. Does the outlook for the industry offer good prospects for profitability? E, What forces are driving changes in the industry, and what impact will these changes have on competitive intensity and industry profitability? ‘The correct answer refers to actions in a company's economic environment, whereas all of the other responses refer to characteristics of a company's industry and competitive environment, as shown in Figure 3.1. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 1 Easy 29 Copyright © 2017 MeGraw-HillEdacaton, All rights reserved, No rprodistion a istrbuton without th prior wniten consent of McGraw-Hil Education, ‘isdoameriswanborenstereen EY studocu Downloaded by Woods Four (fourwoodst130@gmail. com)Learning Objective: 03-01 Identify factors in a company's broad macro-environment that may have strategic ‘significance. Topic: What are the Strategically Relevant Components of the Macro-Environment? 4, Thinking strategically about industry and competitive conditions in a given industry involves evaluating such considerations as > cultural, lifestyle, and demographic changes. 8. the birth of new industries, new knowledge, and disruptive technologies, weather, climate change, and water shortages D. interest rates, exchange rates, unemployment rates, inflation rates, and economic growth. how often sellers alter their prices, how sensitive buyers are to price differences among sellers, whether the item being purchased is a good or a service, and whether buyers buy frequently or infrequently. ‘The correct answer refers to actions in a company's industry and competitive environment, whereas all of the other responses refer to characteristics of a company's economic environment, as shown in Figure 3.1, The factors and forces in a company’s external environment that have the biggest strategy-shaping impact typically pertain to the company's immediate inner ring industry and competitive environment—competitive pressures, the actions of rival firms, buyer behavior, supplier-related considerations, and so on. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 2 Medium Leaming Objective: 03-01 Identify factors in a company’s broad macro-environment that may have strategic ‘significance. Topic: What are the Strategically Relevant Components of the Macro-Environment? 330 Copyright © 2017 MeGraw-HillEdacaon, All rights reserved, No rprodistion a istrbution without th prior wniten consent of MeGraw- Hil Education, Downloaded by Woods Four (fourwoods1130@gmail. com)5. Which of the following is not a factor to consider in identifying an industry's dominant economic features? A, market size, growth rate, and prospects B. scope of competitive rivalry including geographic area market demand-supply conditions strength of both driving forces and competitive forces E. role and pace of technological change The correct answer refers to actions in a company's industry and competitive environment, whereas all of the other responses refer to characteristics of a company's economic environment, as shown in Figure 3.1. AACSB; Analytica Thinking Accessibilty Keyboard Navigation ‘looms: Understand Difficulty 2 Medium Leaming Objective: 03-01 Identify factors in 2 company’s broad macro-environment that may have strategic “ignincance Topic: What are the Strategically Relevant Components ofthe Macro-Enuronmment?> 6. Which of the following is not a relevant consideration in identifying an industry's dominant economic features? A, market size and growth rate, geographic scope of competitive rivalry, and demand- supply conditions 8. number of strategic groups in the industry as well as which groups are most or least profitable number and sizes of buyers, number of rivals, and pace of product innovation D. pace of technological change E, current industry position in its life cycle pertaining to the industry's growth prospects ‘The correct answer refers to actions in a company's industry and competitive environment, whereas all of the other responses refer to characteristics of a company's economic environment, as shown in Figure 3.1. AACSB; Analytica Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Ditneuty: 2 Medium Learning Objective: 03-01 Identity factors in a company’s broad macro-environment that may have strategic Signincance Topic: What are the Strategically Relevant Components ofthe Macro-Enuronment? a Copyright © 2017 MeGraw-Hill Education, All rights reserved, No rprodistion a istrbution without th prior wniten consent of MeGraw- Hil Education, ‘isdoamerirwanborenstennen EY studocu Downloaded by Woods Four (fourwoodst130@gmail. com)7. The state of competition in an industry is a function of A. competitive pressures associated with rivalry among competing sellers to attract customers. 8. competitive pressures coming from the attempts of companies in other industries attempting to win buyers over to their substitute products. competitive pressures associated with the threat of new entrants into the marketplace. D. competitive pressures associated with the bargaining power of suppliers and customers. All of these choices are correct, See Figure 3-2. Industry forces exerting competitive pressure include all of those listed above. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 1 Easy Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be ferce, more or less rhormal, orreiatively weak ‘Topic: How Strong are the Industry's Competitive Forces? 8. The nature and strength of the competitive forces that prevail in an industry is, generally a joint product of the A. pressures associated with rivalry among sellers to attract buyer patronage. B. threats that firms outside the industry will decide to enter the market. attempts of companies in other industries to win buyers over to their own substitute products. . pressures stemming from the bargaining power of both suppliers and buyers. All of these choices are correct, See Figure 3-2. Industry driving forces include all of those listed above, AACSB: Analytical Thinking Accessibilty: Keyboard Navigation Blooms: Understand Difficulty: 1 Easy Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be flerce, more or less hhormal, or reiatively weak ‘pic: How Strong are the Industry's Competitive Forces? 30 Copyright © 2017 MeGraw-Hill Education, All rights reserved, No rprodistion a istrbution without th prior writen consent of McGraw Hil Education, Downloaded by Woods Four (fourwoods1130@gmail. com)9. Which of the following is not one of the five typical sources of competitive pressures? A. the power and influence of industry driving forces 8. the bargaining power of suppliers and seller-supplier collaboration the threat of new entrants into the market D. the attempts of companies in other industries to win customers over to their own substitute products E, the market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry See Figure 3-2. Industry driving forces are not among the five forces exerting competitive pressure an an industry. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be ferce, more or less ‘normal, orreiatively weak ‘Topic: How Strong are the Industry's Competitive Forces? 10. Whether buyer bargaining power poses a strong or weak source of competitive pressure on industry members depends in part on A. whether most buyers possess roughly equal or varying degrees of bargaining power. B. how many buyers are engaged in collaborative partnerships with sellers. whether entry barriers are high or low. . whether the overall quality of the items being furnished by industry members is rising o falling whether buyer demand is strong or declining. See Figure 3-3. Rapid growth in buyer demand tends to weaken the bargaining power of buyers, and slower growth in buyer demand tends to strengthen the bargaining power of buyers. Alll of the other responses have no direct impact on buyer bargaining power. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be fierce, more or less ‘normal, or relatively weak Topic: How Strong are the Industry's Competitive Forces? as Copyright © 2017 MeGraw-HillEdacaton, All rights reserved, No reproduction a strbution without th prior wniten consent of McGraw Hil Education, ‘isdoamerirwanborenstennen EY studocu Downloaded by Woods Four (fourwoodst130@gmail. com)11. Competitive pressures stemming from buyer bargaining power tend to be weaker when A, the number of buyers is small, such that each customer's business tends to be particularly important to a seller. 8. buyer demand is growing slowly or maybe even declining, the costs incurred by buyers in switching to competing brands or to substitute products are relatively high. D. buyers are well informed about sellers’ products, prices, and costs. E. the buyer group consists of a few large buyers, and the seller group consists of humerous small firms. See Figure 3-3. High buyer switching costs tends to weaken the bargaining power of buyers; all of the other responses tend to increase buyer bargaining power. AACSB: Analytical Thinking Accessibility: Keyboard Navigation ‘Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be fierce, more or less ‘normal, or relatively weak, ‘Topic: How Strong are the Industry's Competitive Forces? 12. Which of the follo\ 1g conditions acts to weaken buyer bargaining power? ‘A. when buyers are unlikely to integrate backward into the business of sellers B. when buyers are well informed about sellers! products, prices, and costs when the costs incurred by buyers in switching to competing brands or to. substitute products are relatively low . when buyers have the ability to postpone purchases if they don't like the prices offered by sellers E. when buyers are few in number and/or often purchase in large quantities See Figure 3-3. The lower likelihood that buyers would integrate backward into the business of sellers tends to weaken the bargaining power of buyers; all of the other responses tend to increase buyer bargaining power. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 1 Easy Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be ferce, more or less norma), orreiatively weak. ‘Topic: How Strong are the Industry's Competitive Forces? aM Copyright © 2017 MeGraw-HillEdacaton, All rights reserved, No reproduction a strbution without th prior writen consent of MeGraw- Hil Education, Downloaded by Woods Four (fourwoods1130@gmail. com)13. Which of the following is not a factor that causes buyer bargaining power to be stronger? A, Some buyers are a threat to integrate backward into the business of sellers. B, The industry is composed of a few large sellers, and the customer group consists of numerous buyers that purchase in fairly small quantities. Buyers have considerable discretion over whether and when they purchase the product. D. Buyers are well informed about sellers’ products, prices, and costs. E, The costs incurred by buyers in switching to competing brands or to substitute products are relatively low. See Figure 3-3. A limited number of large sellers tends to weaken the bargaining power of buyers; all of the other responses tend to increase buyer bargaining power. AACSB: Analytical Thinking Accessibility: Keyboard Navigation ‘Blooms: Understand Difficulty: 1 Easy Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be fierce, more or less hnormal, or relatively weak, ‘Topic: How Strong are the Industry's Competitive Forces? 14, Inwhich of the following circumstances are competitive pressures associated with the bargaining power of buyers not relatively strong? A. when buyer demand is growing rapidly 8. when buyers are relatively well informed about sellers’ products, prices, and costs when buyers pose a major threat to integrate backward into the product market of sellers D. when sellers’ products are weakly differentiated, making it easy for buyers to switch to competing brands E, when buyers have considerable discretion over whether and when they purchase the product See Figure 3-3. Rapid growth in buyer demand tends to weaken the bargaining power of buyers; all of the other responses tend to increase buyer bargaining power. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 1 Easy Learning Objective: 03-02 Recognize the factors that cause competition in an Industry to be ferce, more or less norma), orreiatively weak. ‘Topic: How Strong are the Industry's Competitive Forces? 33s Copyright © 2017 MeGraw-Hill Education, All rights reserved, No rprodstion a istrbution without th prior writen consent of McGraw- Hil Education, ‘iedoamerirwanborenstennen EY studocu Downloaded by Woods Four (fourwoodst130@gmail. com)15. Which of the following factors is not a relevant consideration in judging whether buyer bargaining power is relatively strong or relatively weak? A, The number of buyers is small, or a customer is particularly important to the seller. 8. Buyers are relatively well informed about sellers' products, prices, and costs. Buyer needs and expectations are changing slowly or rapidly. D. Buyer demand is weak or strong and slowly or rapidly growing E. Buyers pose a credible threat of integrating backward into the business of sellers. Figure 3-3 makes no mention of the impact of buyers' needs on the competitive pressures associated with the bargaining power of buyers. Alll of the other possible responses are mentioned as impactful factors, AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 1 Easy Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be ferce, more or less norma), or reiatively weak, ‘Topic: How Strong are the Industry's Competitive Forces? 16. The competitive pressures from substitute products tend to be stronger when A. buyers are relatively comfortable with the quality and performance of substitutes, and the costs to buyers of switching over to the substitutes are low. B. there are more than 10 sellers of substitute products. substitutes exhibit the latest in technological innovation D. buyers have high psychic costs in severing existing brand relationships and establishing new ones. E, demand for the industry's product is not very price sensitive See Figure 3.4, Generally speaking, when end-users are comfortable with purchasing substitutes, when the quality and performance of substitutes is comparable, and when user's switching costs are low, the more intense are the competitive pressures posed by substitute products. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 1 Easy Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be lerce, more or less normal, orreiatively weak. ‘Topic: How Strang are the Industry's Competitive Forces? 336 Copyright © 2017 MeGraw-Hill Education, All rights reserved, No rprodstion a istrbution without th prior writen consent of McGraw- Hil Education, Downloaded by Woods Four (fourwoods1130@gmail. com)17. _ Just how strong the competitive pressures are from substitute products depends on A. whether the available substitutes are strongly or weakly differentiated and whether buyers make purchases frequently or infrequently. whether attractively priced substitutes are readily available and the ease with which buyers can switch to substitutes. whether the available substitutes are products or services. D. whether the producers of substitutes have ample budgets for new product R&D. E, the speed with which buyer needs and expectations are changing See Figure 3.4, As a rule, the desirability of substitutes, their relative quality and performance, and the end-user's switching costs tend to impact the competitive pressures posed by substitute products. AACSB: Analytical Thinking Accessibility: Keyboard Navigation ‘Blooms: Understand Difficulty: 1 Easy Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be fierce, more or less ‘normal, or relatively weak ‘Topic: How Strong are the Industry's Competitive Forces? 18. Which of the following is not a good example of a substitute product that triggers stronger competitive pressures? A. artificial sweetener as a substitute for sugar B. wireless phone service as a substitute for a landline telephone ©, Coca-Cola as a substitute for Pepsi D. digital cameras as substitutes for film cameras E. video-on-demand services as a substitute for renting movies from a movie rental store See Figure 3.4, Both Coca-Cola and Pepsi are rivals in the same industry and cannot be considered substitutes for one another. All of the remaining choices represent substitutes from different industries. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Apply irtculty: 2 Medium Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be fierce, more or less ‘normal, or reiatively weak Topic: How Strong are the Industry's Competitive Forces? Peo Copyright © 2017 MeGraw-Hill Edacaton, All righ reserved, No rprodistion a istrbution without th prior writen consent of McGraw- Hil Education, ‘isdoamerisaanborensteneen EY studocu Downloaded by Woods Four (fourwoodst130@gmail. com)19. In which of the following instances are industry members not subject to stronger competitive pressures from substitute products? A. The costs to buyers of switching over to the substitutes are low. B, Buyers are dubious about using substitutes. The quality and performance of the substitutes is well matched to what buyers need to meet their requirements. D. Buyer brand loyalty is weak. E. Substitutes are readily available at competitive prices. See Figure 3.4. As a rule, the lower the desirability of substitutes or the lower their quality and performance, the higher the user's switching costs. These factors tend to decrease the competitive pressures posed by substitute products. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 1 Easy Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be ferce, more or less norma), orreiatively weak, ‘Topic: How Strong are the Industry's Competitive Forces? 20. Whether supplier-seller relationships in an industry represent a strong or weak source of competitive pressure is a function of A, whether the profits of suppliers are relatively high or low. 8. the number of suppliers that each seller/industry member purchases from on average. C. how aggressively rival industry members are trying to differentiate their products. D. the extent to which suppliers can exercise sufficient bargaining power to influence the terms and conditions of supply in their favor and the extent of seller-supplier collaboration in the industry. E. whether the prices of the items being furnished by the suppliers are rising or falling. See Figure 3.5. When suppliers have stronger bargaining power, they can charge industry members higher prices (passing costs on to them) and limit opportunities to find better deals via switching AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be fierce, more or less ‘normal, or relatively weak, Topic: How Strong are the Industry's Competitive Forces? aa Copyright © 2017 MeGraw-HillEdacaton, All rights reserved, No rprodstion a distrbuton without th prior writen consent of McGraw-Hil Education, Downloaded by Woods Four (fourwoods1130@gmail. com)21. The bargaining leverage of suppliers is greater when A. only a small number of suppliers exist and when itis difficult for industry members to switch to attractive substitutes. 8. industry members incur low costs in switching their purchases from one supplier to another. industry members purchase in large quantities and thus are important customers of the suppliers, D. it makes good economic sense for industry members to vertically integrate backward E, the supplier industry is composed of a large number of relatively small suppliers. See Figure 3.5. When the number of suppliers of inputs is limited, suppliers tend to have stronger bargaining power and can charge industry members higher prices (passing costs on to them) and limit opportunities to find better deals via switching. AACSB: Analytical Thinking Accessibility: Keyboard Navigation ‘Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be fierce, more or less ‘normal, or relatively weak. ‘Topic: How Strong are the Industry's Competitive Forces? 22. In which one of the following instances is supplier bargaining power and leverage not weakened? A. when industry members pose a credible threat of backward integration into the business of suppliers B. when the cost of switching from one supplier to another is low when the buying firms purchase in large quantities and thus are important, customers of the suppliers D. when the item being supplied is a commodity when the items purchased from suppliers are in short supply See Figure 3.5. When inputs are in short supply, suppliers tend to have stronger bargaining power and can charge industry members higher prices (passing costs on to them) and limit opportunities to find better deals via switching, AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Diffculty: 2 Medium Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be fierce, more or less ‘normal, or reiatively weak Topic: How Strong are the Industry's Competitive Forces? a9 Copyright © 2017 MeGraw-Hill Edacaton, All gh reserved, No rprodistion a istrbuton without th prior writen consent of McGraw- Hil Education, necxmensosicerestoome EY studocu Downloaded by Woods Four (fourwoodst130@gmail. com)23. Which one of the following is not a factor that affects the strength of supplier bargaining power? A. whether needed inputs are in short or ample supply 8. whether industry members are a strong threat to integrate backward into the business of suppliers whether industry members are struggling to make good profits because of slow- growing market demand D. whether the costs of industry members to switch their purchases to alternative suppliers or substitutes are high or low E. whether the item being supplied is a commodity that is readily available from many suppliers See Figure 3.5. All of the responses, except incumbents’ struggles to make good profits in a slow-growth demand market, tend to impact the bargaining leverage of suppliers, AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be ferce, more or less norma), orreiatively weak, ‘Topic: How Strong are the Industry's Competitive Forces? 24. Which one of the following is not a reason industry members are often motivated to enter into collaborative partnerships with key suppliers? A, to reduce the costs of switching suppliers B. to speed the availability of next-generation components C. to enhance the quality of parts and components being supplied and reduce defect rates D. to squeeze out important cost savings for both themselves and their suppliers E, to reduce inventory and logistics costs See Figure 3.5. Suppliers with strong bargaining power can erode industry profitability by charging industry members higher prices, passing costs on to them, and limiting their opportunities to find better deals via switching. That said, as a rule, suppliers have less bargaining leverage when their sales to a strategic partner constitute a big percentage of their total sales. In such cases, the well-being of suppliers is closely tied to the well-being of that major customer/partner. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be flerce, more or less 340 Copyright © 2017 MeCraw-Hill Education, All gh reserved, No reproduction a strbution without th prior wniten consent of MeGraw- Hil Education, Downloaded by Woods Four (fourwoods1130@gmail. com)normal, or relatively weak. ‘pic: How Strong are the Industry's Competitive Forces? 25. Which one of the following does not intensify the competitive pressures associated with the threat of entry? A. Incumbent firms are unable or unwilling to launch competitive initiatives to strongly contest the entry of newcomers. B, Industry members are struggling to earn good profits. Entry barriers are relatively low. 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. E, Newcomers can expect to earn attractive profits, and a number of outsiders have the expertise and resources to hurdle whatever entry barriers exist. See Figure 3.6. All of the answer choices indicate an attractive industry to enter, with increased competitive pressure, except the struggle of incumbent firms to earn good profits. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Dificulty: 2 Medium Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be flerce, more or less ‘normal, or reiatively weak ‘Topic: How Strong are the Industry's Competitive Forces? 26. Which one of the following increases the competitive pressures associated with the threat of entry? A, Incumbent firms are likely to launch competitive initiatives to strongly contest the entry of newcomers. 8. Buyers have a high degree of loyalty to the brands and product offerings of existing industry members. C. Buyer demand for the product is growing fairly slowly. D. Few outsiders have the expertise and resources to hurdle whatever entry barriers exist. Newcomers can expect to earn attractive profits. See Figure 3.6, All of the answer choices indicate an attractive industry to enter, except the expectation of earning attractive profits by newer entrants. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 1 Easy Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be ferce, more or less norma), orreiatively weak. +4 Copyright © 2017 MeGraw-Hill Education, All rights reserved, No reproduction a istrbution without th prior wniten consent of McGraw Hil Education, ‘isdoameriswanborenstennen EY studocu Downloaded by Woods Four (fourwoodst130@gmail. com)Topic: How Strong are the Industry's Competitive Forces? 27. The competitive threat that outsiders will enter a market is weaker when A. financially strong industry members send strong signals that they will launch strategic initiatives to combat the entry of newcomers. B. the poo! of entry candidates is large, and some have resources that would make them formidable market contenders. C. the industry's market growth is rapid D. newcomers can be expected to earn attractive profits. E. buyers have little loyalty to the brands and product offerings of existing industry members. See Figure 3.6, All of the answer choices indicate an attractive industry to enter, except the signaling by financially strong incumbents that they will try to deter new entrants. AACSB: Analytical Thinking Accessibility: Keyboard Navigation ‘Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be ferce, more or less ‘normal, orreiatively weak Topic: How Strong are the Industry's Competitive Forces? 28. Which of the following is generally not considered as a barrier to entry? A, rapid market growth B. sizable capital reqi requirements . strong buyer loyalty to existing brands . sizable economies of scale in production E. difficulties in gaining access to distribution and securing adequate space of retailers’ shelves ements and an array of regulatory See Figure 3.6. All of the answer choices, except rapid market growth, deter new entrants; rapid market growth tends to attract new entrants. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 1 Easy Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be fierce, more or less hnormal, or relatively weak Topic: How Strong are the Industry's Competitive Forces? 342 Copyright © 2017 MeGraw-Hill Edacaton, All rights reserved, No rprodistion a distrbution without th prior writen consent of McGraw- Hil Education, Downloaded by Woods Four (fourwoods1130@gmail. com)29. The best test of whether potential entry is a strong or weak competitive force is A. the strength of buyer loyalty to existing brands. 8. whether the industry's driving forces make it harder or easier for new entrants to be successful. whether the strategies of industry members are well matched to the industry's key success factors. D. whether the industry offers an opportunity for a blue ocean strategy. 10 ask if the industry's growth and profit prospects are strongly attractive to potential entry candidates. The strongest competitive pressures associated with potential entry threats come not from outsiders but from current industry participants looking for growth opportunities. Existing industry members are often strong candidates to enter market segments or geographic areas where they currently do not have a market presence. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be ferce, more or less norma), orreiatively weak. ‘Topic: How Strong are the Industry's Competitive Forces? 30. The most powerful of the five competitive forces is usually the A. competitive pressures that stem from the ready availability of attractively priced substitute products. competitive pressures associated with rivalry among competing sellers in the industry for buyer patronage. benefits that emerge from close collaboration with suppliers and the competitive pressures that such collaboration creates. D. competitive pressures associated with the potential entry of new competitors, E, bargaining power and leverage that large customers are able to exercise. ‘The strongest of the five competitive forces is nearly always the rivalry among competing sellers of a product or service. AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-02 Recognize the factors that cause competition in an Industry to be flerce, more or less norma), orreiatively weak. ‘Topic: How Strong are the Industry's Competitive Forces? a4 Copyright © 2017 MeGraw-Hill Education, All rights reserved, No reproduction a istrbution without th prior wniten consent of McGraw- Hil Education, ‘iedoamerirwanborenstennen EY studocu Downloaded by Woods Four (fourwoodst130@gmail. com)31. Factors that cause the rivalry among competing sellers to be weak include A. low buyer switching costs and rival sellers that are relatively equal in size and capability. rapid growth in buyer demand and high buyer switching costs. a recent acquisition of a weak rival by an industry outsider with the intent of turning the acquisition into a major contender. D. low barriers to entry and weakly differentiated products among rival sellers. E, slow growth in buyer demand and strongly differentiated products. Rivalry decreases when buyer demand accelerates, buyers’ switching costs are high, and buyers do not have a proliferation of choices. In this case, sellers may find themselves with capacity shortages and/or inventory stock-outs. Excess demand conditions create a "sellers' market,” decreasing competitive pressure on industry rivals, as shown in Figure 3.7, AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be fierce, more or less ‘normal, orreiatively weak. Topic: How Strong are the Industry's Competitive Forces? 32. Which one of the following does not cause the rivalry among competing sellers to be weak? A high buyer switching costs 8. rapid growth in buyer demand C. Industry members aren't aggressive in drawing sales and market share away from rivals D. one or more competitors become dissatisfied with their market position E. strongly differentiated products among rival sellers See Figure 3.7. All of the responses characterize weak rivalry, except when one or more incumbents are dissatisfied with their position, AACSB: Analytical Thinking Accessibilty: Keyboard Navigation ‘Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Recognize the factors that cause competition in an industry to be fierce, more or less norma), orreiatively weak. ‘Topic: How Strang are the Industry's Competitive Forces? a4 Copyright © 2017 MeGraw-Hill Education, All rights reserved, No rprodistion a distrbuton without th prior wniten consent of McGraw- Hil Education, Downloaded by Woods Four (fourwoods1130@gmail. com)