Chapter 2

Strategic Management and Competitive Advantage, 6e (Barney)
Chapter 2 Evaluating a Firm's External Environment

1. The ________ consists of broad trends in the context in which a firm operates
that can have an impact on a firm's strategic choices.
A. micro-environment
B. general environment
C. task environment
D. internal environment
2. All of the following are elements of the general environment except
A. technological trends.
B. demographic trends.
C. industrial trends.
D. cultural trends.
3. ________ is/are the distribution of individuals in a society in terms of age, sex,
marital status, income, ethnicity, and other personal attributes that may
determine buying patterns.
A. Demographics
B. Economics
C. Technological trends
D. Culture
A) 4) The values, beliefs and

norms that guide
behavior in a society are
known as
B) A) climate.
C) B) demographics.
D) C) economics.
E) D) culture.
F) Answer: D
G) Diff: 1 Page Ref: 30
H) Learning Obj.: 2.1:
Describe the Dimensions
of the General
Environment Facing a
Firm and
I) How this Environment
can Affect a Firm's
Opportunities and
Threats.
J) AACSB: Analytical
Thinking
K) 5) When activity in an
economy is relatively low
for a short period of
time, the economy is said
L) to be in a
M) A) recession.
N) B) depression.
O) C) prosperous cycle.
P) D) boom.
Q) Answer: A
R) Diff: 2 Page Ref: 30
S) Learning Obj.: 2.1:
of the General
Firm and
T) How this Environment
can Affect a Firm's
Opportunities and
Threats.
U) AACSB: Analytical
Thinking
V)
W) 6) Civil wars, political

coups, terrorism, wars
between countries,
famines, and country or
X) regional economic
recessions are all
examples of which
element of the general
environment?
Y) A) demographics
Z) B) specific international
events
AA) C) economics
BB) D) culture
CC) Answer: B
DD) Diff: 2 Page Ref: 31
EE) Learning Obj.: 2.1:
of the General
Firm and
FF) How this Environment
can Affect a Firm's
Opportunities and
Threats.
GG) AACSB: Application of
Knowledge
HH)
II) 7) A firm's general

environment consists of
broad trends in the
context within which the
firm
JJ) operates that can have
an impact on the firm's
strategic choices.
KK) Answer: TRUE
LL) 4) The values, beliefs and
norms that guide
known as
MM) A) climate.
NN) B) demographics.
OO) C) economics.
PP) D) culture.
QQ) Answer: D
RR) Diff: 1 Page Ref: 30
SS) Learning Obj.: 2.1:
of the General
Firm and
TT) How this Environment
can Affect a Firm's
Opportunities and
Threats.
UU) AACSB: Analytical
Thinking
VV) 5) When activity in an
WW) to be in a
XX) A) recession.
YY) B) depression.
ZZ) C) prosperous cycle.
AAA) D) boom.
BBB) Answer: A
Diff: 2
CCC) Page Ref: 30
DDD) Learning Obj.: 2.1:
of the General
Firm and
How this Environment
EEE)
can Affect a Firm's

Opportunities and
Threats.
AACSB: Analytical
FFF)
Thinking
GGG)
HHH) 6) Civil wars, political

between countries,
III) regional economic
recessions are all
examples of which
environment?
JJJ) A) demographics
B) specific international
KKK)
events
C) economics
LLL)
MMM) D) culture
NNN) Answer: B
OOO) Diff: 2 Page Ref: 31
Learning Obj.: 2.1:
PPP)

of the General
Firm and
QQQ) How this Environment
can Affect a Firm's
Opportunities and
Threats.
AACSB: Application of
RRR)
Knowledge
SSS)
TTT)7) A firm's general

broad trends in the
firm
UUU) operates that can have
strategic choices.
VVV) Answer: TRUE
WWW) 4) The values, beliefs
and norms that guide
known as
A) climate.
XXX)
B) demographics.
YYY)
C) economics.
ZZZ)
AAAA)D) culture.
Answer: D
BBBB)
Diff: 1
CCCC) Page Ref: 30
Learning Obj.: 2.1:
DDDD)

of the General
Firm and
EEEE)How this Environment
can Affect a Firm's
Opportunities and
Threats.
FFFF) AACSB: Analytical
Thinking
GGGG) 5) When activity in an
HHHH) to be in a
IIII) A) recession.
JJJJ) B) depression.
KKKK) C) prosperous cycle.
LLLL) D) boom.
MMMM) Answer: A
NNNN)Diff: 2 Page Ref: 30
OOOO)Learning Obj.: 2.1:
of the General
Firm and
PPPP)How this Environment
can Affect a Firm's
Opportunities and
Threats.
QQQQ)AACSB: Analytical
Thinking
RRRR)
SSSS)6) Civil wars, political

between countries,
TTTT)regional economic
recessions are all
examples of which
environment?
UUUU)A) demographics
VVVV)B) specific
international events
WWWW)C) economics
XXXX)D) culture
YYYY)Answer: B
ZZZZ)Diff: 2 Page Ref: 31
Learning Obj.: 2.1:
AAAAA)

of the General
Firm and
BBBBB)
can Affect a Firm's

Opportunities and
Threats.
AACSB: Application of
CCCCC)
Knowledge
DDDDD)
EEEEE)7) A firm's general

broad trends in the
firm
FFFFF) operates that can have
strategic choices.
GGGGG) Answer: TRUE
HHHHH) 4) The values, beliefs
and norms that guide
known as
A) climate.
IIIII)
B) demographics.
JJJJJ)
KKKKK) C) economics.
LLLLL) D) culture.
MMMMM)Answer: D
Diff: 1
NNNNN) Page Ref: 30
Learning Obj.: 2.1:
OOOOO)

of the General
Firm and
PPPPP)
can Affect a Firm's

Opportunities and
Threats.
AACSB: Analytical
QQQQQ)
Thinking
5) When activity in an
RRRRR)

to be in a
SSSSS)
A) recession.
TTTTT)
B) depression.
UUUUU)
C) prosperous cycle.
VVVVV)
WWWWW) D) boom.
Answer: A
XXXXX)
Diff: 2
YYYYY) Page Ref: 30
Learning Obj.: 2.1:
ZZZZZ)

of the General
Firm and
AAAAAA)
can Affect a Firm's

Opportunities and
Threats.
AACSB: Analytical
BBBBBB)
Thinking
CCCCCC)
6) Civil wars, political

DDDDDD)

between countries,
regional economic
EEEEEE)
recessions are all

examples of which
environment?
A) demographics
FFFFFF)
GGGGGG) B) specific
international events
HHHHHH) C) economics
D) culture
IIIIII)
JJJJJJ)Answer: B
KKKKKK)Diff: 2 Page Ref: 31
LLLLLL)Learning Obj.: 2.1:
of the General
Firm and
MMMMMM)How this
Environment can Affect a
Firm's Opportunities and
Threats.
NNNNNN)AACSB: Application
of Knowledge
OOOOOO)
7) A firm's general
PPPPPP)
broad trends in the
firm
QQQQQQ)operates that can
have an impact on the
firm's strategic choices.
Answer: TRUE
RRRRRR)
4. The values, beliefs and norms that guide behavior in a society are known as
A. climate.
B. demographics.
C. economics.
D. culture.
5. When activity in an economy is relatively low for a short period of time, the
economy is said to be in a
A. recession.
B. depression.
C. prosperous cycle.
D. boom.
6. Civil wars, political coups, terrorism, wars between countries, famines, and
country or regional economic recessions are all examples of which element of
the general environment?
A. demographics
B. specific international events
C. economics
D. culture
7. In the S-C-P model, ________ refers to the strategies that firms in an industry
implement.
A. structure
B. strategy
C. conduct
D. performance
8. In a perfectly competitive industry,
A. there are relatively few firms operating in the industry.
B. the products and services sold by firms in the industry are very different
from each other.
C. it is very costly for firms to enter the industry.
D. it is not very costly for firms to enter or exit the industry.
E. Which of the following

best describes the
competition in the U.S.
online auction industry?
F.A) perfect competition
G. B) monopolistic
competition
H. C) oligopoly
I. D) monopoly
J. Answer: C
K. Diff: 2 Page Ref: 35
L. Learning Obj.: 2.2:
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
M. that Industry Structure
Can Influence a Firm's
Competitive Choices.
N. AACSB: Application of
Knowledge
O.
P.16) In the structure-
conduct-performance
model, the term
"structure" refers to
industry structure,
Q. which can be
measured by such factors
as the number of
competitors in an
industry.
R. Answer: TRUE
S. Diff: 2 Page Ref: 33
T.Learning Obj.: 2.2:
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
U. that Industry Structure
V. AACSB: Analytical
Thinking
W.
X. 17) In the structure-
conduct-performance
model, the term
"performance" refers
solely to the
Y.performance of
individual firms.
Z. Answer: FALSE
AA. Diff: 2 Page Ref:
33
BB. Learning Obj.: 2.2:
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
CC.that Industry Structure
DD. AACSB: Analytical
Thinking
EE.
FF. 18) In a perfectly
competitive industry, a
large number of firms
have products and
services that
GG. are similar to each
other and it is not very
costly for firms to enter
into or exit these
markets.
HH. Answer: TRUE
II. Diff: 2 Page Ref: 32
JJ. Learning Obj.: 2.2:
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
KK.that Industry Structure
LL. AACSB: Analytical
Thinking
MM.19) The S-C-P model
assumes that any
competitive advantages a
firm has in an industry
must
NN. benefit society.
OO. Answer: FALSE
PP.Which of the following
best describes the
competition in the U.S.
online auction industry?
QQ. A) perfect
competition
RR. B) monopolistic
competition
SS. C) oligopoly
TT. D) monopoly
UU. Answer: C
VV.Diff: 2 Page Ref: 35
WW.Learning Obj.: 2.2:
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
XX.that Industry Structure
YY. AACSB: Application of
Knowledge
ZZ.
AAA.16) In the structure-
conduct-performance
model, the term
industry structure,
BBB. which can be
as the number of
competitors in an
industry.
CCC. Answer: TRUE
DDD. Diff: 2 Page Ref:
33
EEE. Learning Obj.: 2.2:
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
FFF. that Industry
Structure Can Influence a
Firm's Competitive
Choices.
GGG. AACSB: Analytical
Thinking
HHH.
III. 17) In the structure-
conduct-performance
model, the term
solely to the
JJJ. performance of
individual firms.
KKK. Answer: FALSE
LLL. Diff: 2 Page Ref:
33
MMM. Learning Obj.:
2.2: Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
NNN. that Industry
Firm's Competitive
Choices.
OOO. AACSB: Analytical
Thinking
PPP.
QQQ. 18) In a perfectly
have products and
services that
RRR. are similar to each
into or exit these
markets.
SSS. Answer: TRUE
TTT. Diff: 2 Page Ref:
32
UUU. Learning Obj.: 2.2:
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
VVV. that Industry
Firm's Competitive
Choices.
WWW. AACSB:
Analytical Thinking
XXX. 19) The S-C-P model
assumes that any
must
YYY. benefit society.
ZZZ. Answer: FALSE
AAAA. Which of the
following best describes
the competition in the
U.S. online auction
industry?
BBBB. A) perfect
competition
CCCC. B) monopolistic
competition
DDDD. C) oligopoly
EEEE. D) monopoly
FFFF.Answer: C
GGGG. Diff: 2 Page
Ref: 35
HHHH. Learning Obj.:
Structure-Conduct-
Performance (S-C-P)
Model Suggests
IIII.that Industry Structure
JJJJ. AACSB: Application
of Knowledge
KKKK.
LLLL.16) In the structure-
conduct-performance
model, the term
industry structure,
MMMM. which can be
as the number of
competitors in an
industry.
NNNN. Answer: TRUE
OOOO. Diff: 2 Page
Ref: 33
PPPP. Learning Obj.: 2.2:
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
QQQQ. that Industry
Firm's Competitive
Choices.
RRRR. AACSB: Analytical
Thinking
SSSS.
TTTT. 17) In the structure-
conduct-performance
model, the term
solely to the
UUUU. performance of
individual firms.
VVVV. Answer: FALSE
WWWW. Diff: 2 Page
Ref: 33
XXXX. Learning Obj.: 2.2:
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
YYYY. that Industry
Firm's Competitive
Choices.
ZZZZ. AACSB: Analytical
Thinking
AAAAA.
BBBBB. 18) In a perfectly
have products and
services that
CCCCC. are similar to each
into or exit these
markets.
DDDDD.Answer: TRUE
EEEEE. Diff: 2 Page
Ref: 32
FFFFF. Learning Obj.: 2.2:
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
GGGGG. that Industry
Firm's Competitive
Choices.
HHHHH. AACSB:
Analytical Thinking
IIIII. 19) The S-C-P model
assumes that any
must
JJJJJ. benefit society.
KKKKK. Answer: FALSE
LLLLL. Which of the
following best describes
the competition in the
U.S. online auction
industry?
MMMMM. A) perfect
competition
NNNNN. B) monopolistic
competition
OOOOO. C) oligopoly
PPPPP. D) monopoly
QQQQQ. Answer: C
RRRRR. Diff: 2 Page
Ref: 35
SSSSS. Learning Obj.: 2.2:
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
TTTTT.that Industry
Firm's Competitive
Choices.
UUUUU. AACSB:
Application of Knowledge
VVVVV.
WWWWW.16) In the
structure-conduct-
performance model, the
term "structure" refers to
industry structure,
XXXXX. which can be
as the number of
competitors in an
industry.
YYYYY.Answer: TRUE
ZZZZZ.Diff: 2 Page Ref:
33
AAAAAA. Learning Obj.:
Structure-Conduct-
Performance (S-C-P)
Model Suggests
BBBBBB. that Industry
Firm's Competitive
Choices.
CCCCCC. AACSB:
Analytical Thinking
DDDDDD.
EEEEEE. 17) In the
structure-conduct-
performance model, the
term "performance"
refers solely to the
FFFFFF. performance of
individual firms.
GGGGGG. Answer:
FALSE
HHHHHH.Diff: 2 Page
Ref: 33
IIIIII. Learning Obj.: 2.2:
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
JJJJJJ. that Industry
Firm's Competitive
Choices.
KKKKKK. AACSB:
Analytical Thinking
LLLLLL.
MMMMMM. 18) In a
perfectly competitive
industry, a large number
of firms have products
and services that
NNNNNN. are similar to
each other and it is not
very costly for firms to
enter into or exit these
markets.
OOOOOO. Answer:
TRUE
PPPPPP. Diff: 2 Page
Ref: 32
QQQQQQ. Learning Obj.:
Structure-Conduct-
Performance (S-C-P)
Model Suggests
RRRRRR. that Industry
Firm's Competitive
Choices.
SSSSSS. AACSB:
Analytical Thinking
TTTTTT. 19) The S-C-P
model assumes that any
must
UUUUUU. benefit society.
VVVVVV. Answer: FALSE
9. Which of the following best describes the competition in the U.S. online auction
industry?
A. perfect competition
B. monopolistic competition
C. oligopoly
D. monopoly
10. Within the five forces framework, the five most common threats facing firms
from their competitive environment include each of the following except
A. substitutes.
B. complementors.
C. suppliers.
D. buyers.
11. Firms in industries characterized by ________ can expect to earn only
competitive parity.
C. oligopoly
D. monopoly
12. Which type of competition is characterized by a large number of firms,
heterogeneous products and low cost of entry and exit?
C. oligopoly
D. monopoly
13. Which type of competition is characterized by a small number of firms,

homogeneous products and costly entry and exit?
C. oligopoly
D. monopoly
14. A(n) ________ is any individual, group, or organization outside a firm that seeks
to reduce the level of that firm's performance.
A) environmental threat
B) environmental opportunity
C) environmental equalizer
D) competitive advantage
15. Firms that have either recently begun operations in an industry or that threaten
to begin operations in an industry soon are considered to be ________ in the
five forces framework.
A) barriers to entry
B) new competitors
C) suppliers
D) buyers
16. ________ exist when a firm's costs rise as a function of its volume of
production.
A) Economies of scale
B) Economies of scope
C) Diseconomies of scale
D) Learning curve effects
17. All other things being equal, which of the following would lead to lower barriers
to entry in an industry?
A) The existence of economies of scale in the industry.
B) Products are highly differentiated in the industry.
C) Industry incumbents have learning-curve cost advantages.
D) Raw materials are widely and readily available at a competitive price.
18. Frequent price cutting by firms in an industry, frequent introduction of new
products by firms in an industry and intense advertising campaigns are
indications of
A) high power of buyers.
B) high threat of new entrants.
C) high levels of direct competition.
D) high threat of substitutes.
19. The threat of direct competition tends to be high when
A) there are few firms in an industry and these firms tend to be unequal in size.
B) the industry growth rate is high.
C) firms are unable to differentiate their products.
D) production capacity can be added in small increments.
20. The products or services provided by a firm's direct competitors meet ________
customer needs in ________ ways as the product provided by the firm itself.
A) different; the same
B) approximately the same; the same
C) different; different
D) approximately the same; different
21. The products or services provided by a firm's substitutes meet ________
customer needs in ________ ways as the product provided by the firm itself.
A) different; the same
B) approximately the same; the same
C) different; different
D) approximately the same; different
22. Which of the following statements regarding substitutes is accurate?
A) In the extreme, substitutes can ultimately replace an industry's products or
services.
B) Substitutes place a floor on the prices firms in an industry can charge and on
the profits firms in an industry can earn.
C) Substitutes rarely impact the profitability that firms in an industry can earn.
D) The importance of substitutes in reducing the profit potential in a wide
variety of industries is decreasing.
23. ________ make a wide variety of raw materials, labor and other critical assets
available to firms.
A) Buyers
B) Rivals
C) Suppliers
D) Substitutes
24. Which of the following attributes makes suppliers a stronger threat?
A) The supplier's industry is dominated by a small number of firms.
B) The product or service provided by suppliers is not highly differentiated.
C) Suppliers are threatened by substitutes.
D) Suppliers are not able to engage in forward vertical integration.
25. Which of the following is the best example of forward vertical integration?
A) a car dealership opening up its own automobile manufacturing plant
B) a car company opening its own dealerships to sell its products directly to
customers
C) a car company opening its own chain of video rental stores
D) a car company opening a plant to produce motorcycles
26. Buyers tend to have less power when
A) a firm has only one buyer, or a small number of buyers.
B) the products or services being sold to buyers are standard and not
differentiated.
C) the supplies they purchase are an insignificant portion of the costs of their
final products.
D) they are not earning significant economic profits.
27. Overall, the average level of performance in an industry is likely to be highest
when
A) the threat level of all five forces is high.
B) the threat level of rivalry and substitutes is low, but the threat level of
suppliers, buyers and new entrants is high.
C) the threat level of rivalry, substitutes and new entrants is high, but the threat
level of buyers and supplies is low.
D) the threat level of all five forces is low.
28. The level of direct competition in the fastfood industry can best be described as
A) low because of the numerous firms in the industry and the slowing growth
rate.
B) low because of the slowing growth rate and the competition from composite
wood furniture.
C) high because of the numerous firms in the industry and the slowing growth
rate.
D) moderate because the slowing growth rate offsets the numerous firms in the
industry.
29. The threat of suppliers in the legal industry can best be described as
A) low because there are a large number of suppliers selling an undifferentiated
product.
B) high because there are a large number of suppliers selling an
undifferentiated product.
C) moderate because the large number of suppliers is offset by the
undifferentiated products they are selling.
D) moderate because of the slowing growth rate in the industry and the
commodity nature of the products produced by suppliers.
30. Jay Z recently started Tidal, an "artist friendly" streaming company. This would
be an example of
A) complementors.
B) backward vertical integration.
C) consolidation.
D) forward vertical integration.
31. In the hardwood furniture industry, composite wood furniture would be an
example of a(n)
A) substitute.
B) rival.
C) new entrant.
D) complementor.
32. The threat of buyers in the hardwood furniture industry is best described as
A) high because there are many suppliers, none of which represents a
significant portion of the hardwood furniture industry's sales.
B) low because of the slow industry growth and the commodity nature of the
suppliers.
C) low because there are many suppliers, none of which represents a significant
portion of the hardwood furniture industry's sales.
D) high because of the slow industry growth and the commodity nature of the
suppliers.
33. If your customers value your products more when they have your product and
another firm's product rather than when they have your product alone, the
other firm is considered to be a
A) competitor.
B) complementor.
C) rival.
D) substitute.
34. An industry in which a large number of small or medium-sized firms operate
and no small set of firms has dominant market share or creates dominant
technologies is known as a(n) ________ industry.
A) fragmented
B) consolidated
C) mature
D) emerging
35. The major opportunity facing firms in fragmented industries is
A) refining their current products and emphasizing an increase in service
quality.
B) developing new products and technologies.
C) creating a first-mover advantage through technological leadership.
D) the implementation of strategies that began to consolidate the industry into
a smaller number of firms.
36. The advantages that come to firms that make important strategic and
technological decisions early in the development of an industry are known as
________ advantages.
A) first-mover
B) competitive
C) comparative
D) emerging
37. In general, first-mover advantages can arise from any of these sources except
A) technological leadership.
B) preemption of strategically valuable assets.
C) the creation of customer switching costs.
D) using an imitative strategy to introduce improved versions of competitors'
new products.
38. Mature industries are characterized by
A) an increase in total industry demand.
B) faster increases in production capacity.
C) a slowdown in the introduction of new products or services.
D) a decrease in the amount of international competition.
39. The most promising opportunity for a firm in a declining industry is to
A) establish itself as a first mover in the post-shakeout industry.
B) become a market leader in the pre-shakeout industry.
C) become a fast follower in the pre-shakeout industry.
D) merge with another firm.
40. Firms in a declining industry that engage in a long, systematic phased
withdrawal from the industry, extracting as much value as possible during the
withdrawal period, are following a(n) ________ strategy.
A) niche
B) expansion
C) divestment
D) harvest
41. In the 1980s, the video cassette rental industry had a large number of small
firms with no firm with a dominant market share. The video cassette rental
industry in the 1980s was a(n) ________ industry.
A) fragmented
B) mature
C) emerging
D) declining
42. ________ are advantages that come to firms that make important strategic and
technological decisions early in the development of an industry.
A) Visionary advantages
B) First-mover advantages
C) Comparative advantages
D) Missionary advantages
43. A consolidation strategy is a good option in what type of industry?
A) mature
B) emerging
C) fragmented
D) declining
44. ________ are resources required to successfully compete in an industry.
A) Strategically valuable assets
B) Technological leader strategies
C) Process innovations
D) Product innovations
45. ________ costs exist when customers make investments in order to use a firm's
particular products or services.
A) First-mover-switching
B) Technological leadership-switching
C) Customer-switching
D) Process-switching
46. A firm's general environment consists of broad trends in the context within
which the firm operates that can have an impact on the firm's strategic choices.
47. The aging of the "baby boomer" generation in American society is an example
of a demographic trend. ✅
48. Understanding a firm's general environment can help the firm identify some of
the threats and opportunities it faces. ✅
49. In the structure-conduct-performance model, the term "structure" refers to

industry structure, which can be measured by such factors as the number of
competitors in an industry. ✅
50. In a perfectly competitive industry, a large number of firms have products and
services that are similar to each other and it is not very costly for firms to enter
into or exit these markets. ✅
51. According to the S-C-P model, attributes of the industry structure within which
a firm operates define the range of options and constraints facing a firm. ✅
52. The five forces framework is based on the S-C-P model and identifies the five
most common threats facing firms from their local competitive environment
and the conditions under which these threats are more or less likely to be
present. ✅
53. Incumbent firms may have a whole range of cost advantages compared to new
competitors. ✅
54. The threat of entry in an industry depends on the cost of entry, and the cost of
entry, in turn, depends upon the existence and "height" of barriers to entry. ✅
55. Brand identification and customer loyalty serve as entry barriers because new
entrants not only have to absorb the standard costs associated with starting
production in a new industry, but also have to absorb the costs associated with
overcoming an incumbent firm's differentiation advantages. ✅
56. Learning-curve cost advantages are present when the cost of production falls
with the cumulative volume of production. ✅
57. In an industry, the products or services provided by a firm's direct competition

meet approximately the same customer needs in the same way as the products
or services provided by the firm itself, whereas substitutes meet approximately
the same customer needs but do so in different ways. ✅
58. The threat of buyers is greater if the products or services that are being sold to
buyers are standard and not differentiated than if the products sold to buyers
are highly differentiated. ✅
59. In general, it is rarely the case that all five forces in the five forces framework
will be equally threatening at the same time. ✅
60. Sophisticated software can enhance the value that customers receive from a
personal computer. Therefore, software can be said to be a complementor of a
personal computer. ✅
61. It is possible for a single firm to be a complementor of one firm and a
competitor of another. ✅
62. The major opportunity facing firms in fragmented industries is the
implementation of strategies that begin to consolidate the industry into a
smaller number of firms. ✅
63. If you were to purchase a new Apple iPod and were unable to use your
previously downloaded library of digital music with your new iPod, this would
be an example of a customer-switching cost you would incur to use Apple's
product. ✅
64. A firm following a niche strategy in a declining industry reduces its scope of
operations and focuses on narrow segments of the declining industry. ✅
65. Firms pursuing a harvest strategy in a declining industry do not expect to
remain in the industry over the long term. ✅
66. The objective of divestment is to extract a firm from a declining industry. ✅

67. In general, technological change creates opportunities, but not threats. ❌
68. Culture is largely the same across the world. ❌
69. In the structure-conduct-performance model, the term "performance" refers
solely to the performance of individual firms. ❌
70. The S-C-P model assumes that any competitive advantages a firm has in an
industry must benefit society. ❌
71. Monopolistically competitive industries consist of only a single firm. ❌
72. Within the five forces framework, when all five threats are very high,
competition in the industry begins to approach a monopoly. ❌
73. Diseconomies of scale exist in an industry when a firm's costs fall as a function
of that firm's volume of production. ❌
74. Proprietary technology often is more important as a barrier to entry than is
managerial know-how. ❌
75. The threat of existing competition tends to be high in an industry when firms
are able to meaningfully differentiate their products. ❌
76. A firm's supplier poses a greater threat if the supplier's industry has a large
number of firms, none of which dominate the supplying industry, than if the
supplier's industry is dominated by a small number of firms. ❌
77. Suppliers are a greater threat to firms in an industry when suppliers are
threatened by substitutes. ❌
78. If the owner of a jewelry store who normally purchased diamonds from a
diamond brokerage firm were to open his own diamond brokerage firm, this
would be an example of forward vertical integration. ❌

79. According to Bradenburger and Nalebluff, a firm's competitors help increase the
size of a firm's markets while complementors divide this market among a set of
firms. ❌
80. An emerging industry is an industry in which a large number of small or

medium-sized firms operate and no small set of firms has a dominant market
share or creates dominant technologies. ❌
81. First movers that invest only in technology usually obtain sustained competitive
advantages, even if they do not tie up strategically valuable resources in an
industry before their full value is widely understood. ❌
82. Mature industries are characterized by elements such as increasing growth in

total industry demand, significant increases in product capacity, and an overall
increase in the profitability of firms in the industry. ❌
83. Product innovation is an effort to refine and improve a firm's current
processes.❌
84. A fragmented industry is an industry that has experienced an absolute decline
in unit sales over a sustained period of time. ❌
85. All divestments are caused by industry decline. ❌
E. A(n) ________ is any

individual, group, or
organization outside a
firm that seeks to reduce
F.the level of that firm's
performance.
G. A) environmental
threat
H. B) environmental
opportunity
I. C) environmental
equalizer
J. D) competitive
advantage
K. Answer: A
L. A(n) ________ is any
individual, group, or
organization outside a
firm that seeks to reduce
the level of that firm's
performance. A)
environmental threat B)
environmental
opportunity C)
environmental equalizer
D) competitive
advantage Answer: AA)
perfect competition
M. B) monopolistic
competition
N. C) oligopoly
O. D) monopoly
P.Answer: A
Q. Diff: 3 Page Ref: 35
R. Learning Obj.: 2.3:
Describe the Five
Environmental Threats
and Indicators of When
each of
S. These Threats will
Enhance or Reduce the
Attractiveness of an
Industry.
T.AACSB: Analytical
Thinking
U.
V. 25) Which type of
competition is
characterized by a large
number of firms,
heterogeneous
W. products and low cost
of entry and exit?
X. A) perfect competition
Y.B) monopolistic
competition
Z. C) oligopoly
AA. D) monopoly
BB. Answer: B
CC.Diff: 2 Page Ref: 35
DD. Learning Obj.: 2.3:
Describe the Five
Environmental Threats
and Indicators of When
each of
EE. These Threats will
Enhance or Reduce the
Attractiveness of an
Industry.
FF. AACSB: Analytical
Thinking
GG.
HH. 26) Which type of
competition is
characterized by a small
number of firms,
homogeneous
II. products and costly
entry and exit?
JJ. A) perfect competition
KK.B) monopolistic
competition
LL. C) oligopoly
MM.D) monopoly
NN. Answer: C
OO. Diff: 2 Page
Firms in industries characterized by ________ can expect to earn only competitive
parity. A) perfect competition B) monopolistic competition C) oligopoly D) monopoly
Answer: A Diff: 3 Page Ref: 35 Learning Obj.: 2.3: Describe the Five
Environmental Threats and Indicators of When each of These Threats will Enhance or
Reduce the Attractiveness of an Industry. AACSB: Analytical Thinking 25) Which
type of competition is characterized by a large number of firms, heterogeneous
products and low cost of entry and exit? A) perfect competition B) monopolistic
competition C) oligopoly D) monopoly Answer: B Diff: 2 Page Ref: 35 Learning
Obj.: 2.3: Describe the Five Environmental Threats and Indicators of When each of
These Threats will Enhance or Reduce the Attractiveness of an Industry. AACSB:
Analytical Thinking 26) Which type of competition is characterized by a small
number of firms, homogeneous products and costly entry and exit? A) perfect
competition B) monopolistic competition C) oligopoly D) monopoly Answer: C Diff:
2 PageFirms in industries characterized by ________ can expect to earn only
competitive parity. A) perfect competition B) monopolistic competition C) oligopoly
D) monopoly Answer: A Diff: 3 Page Ref: 35 Learning Obj.: 2.3: Describe the
Five Environmental Threats and Indicators of When each of These Threats will
Enhance or Reduce the Attractiveness of an Industry. AACSB: Analytical Thinking
25) Which type of competition is characterized by a large number of firms,
heterogeneous products and low cost of entry and exit? A) perfect competition B)
monopolistic competition C) oligopoly D) monopoly Answer: B Diff: 2 Page Ref:
35 Learning Obj.: 2.3: Describe the Five Environmental Threats and Indicators of
When each of These Threats will Enhance or Reduce the Attractiveness of an
Industry. AACSB: Analytical Thinking 26) Which type of competition is
characterized by a small number of firms, homogeneous products and costly entry
and exit? A) perfect competition B) monopolistic competition C) oligopoly D)
According to
monopoly Answer: C Diff: 2 Page
the S-C-P model, attributes

of the industry structure
within which a firm
operates define the range of
options and constraints
facing a firm.
Answer: TRUE
Diff: 2 Page Ref: 33
Learning Obj.: 2.2:
Describe How the Structure-
Conduct-Performance (S-C-
P) Model Suggests
that Industry Structure Can
Influence a Firm's
AACSB: Analytical Thinking
21) Monopolistically
competitive industries
consist of only a single firm.
Answer: FALSE
Learning Obj.: 2.2:
P) Model Suggests
Influence a Firm's
22) Identify and define the

three elements of the S-C-P
model.
Answer: The three
elements of the (structure-
conduct-performance S-C-P)
model are structure,
which in this model refers
to industry structure,
measured by such factors as
the number of
competitors in an industry,
the heterogeneity of
products in an industry, and
the cost of entry and
exit in an industry, conduct,
which refers to the
strategies that firms in an
industry implement and
performance, which
includes both the
performance of individual
firms and the performance
of
the economy as a whole.
Learning Obj.: 2.2:
P) Model Suggests
Influence a Firm's
23) Within the five forces

framework, the five most
common threats facing
firms from their
competitive environment
include each of the
following except
A) substitutes.
B) complementors.
C) suppliers.
D) buyers.
Answer: B
According to the S-C-P
86.
model, attributes of the
industry structure within
which a firm
87. operates define the range
of options and constraints
facing a firm.
88. Answer: TRUE
89. Diff: 2 Page Ref: 33
90. Learning Obj.: 2.2:
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
91. that Industry Structure
92. AACSB: Analytical
Thinking
93.
94. 21) Monopolistically

consist of only a single
firm.
95. Answer: FALSE
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
Thinking
100.
101. 22) Identify and define the
three elements of the S-C-
P model.
102. Answer: The three
elements of the
(structure-conduct-
performance S-C-P) model
are structure,
103. which in this model refers
as the number of
104. competitors in an industry,
products in an industry,
and the cost of entry and
105. exit in an industry,
conduct, which refers to
the strategies that firms in
an industry implement
and
106. performance, which
includes both the
firms and the
performance of
107. the economy as a whole.
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
Thinking
112.
113. 23) Within the five forces

firms from their
114. competitive environment
include each of the
following except
115. A) substitutes.
116. B) complementors.
117. C) suppliers.
118. D) buyers.
119. Answer: B
120. According to the S-C-P model, attributes of the industry structure within which
a firm operates define the range of options and constraints facing a firm.
Answer: TRUE Diff: 2 Page Ref: 33 Learning Obj.: 2.2: Describe How the
Structure-Conduct-Performance (S-C-P) Model Suggests that Industry Structure
Can Influence a Firm's Competitive Choices. AACSB: Analytical Thinking 21)
Monopolistically competitive industries consist of only a single firm. Answer:
FALSE Diff: 3 Page Ref: 35 Learning Obj.: 2.2: Describe How the Structure-
Conduct-Performance (S-C-P) Model Suggests that Industry Structure Can
Influence a Firm's Competitive Choices. AACSB: Analytical Thinking 22)
Identify and define the three elements of the S-C-P model. Answer: The three
elements of the (structure-conduct-performance S-C-P) model are structure,
which in this model refers to industry structure, measured by such factors as
the number of competitors in an industry, the heterogeneity of products in an
industry, and the cost of entry and exit in an industry, conduct, which refers to
the strategies that firms in an industry implement and performance, which
includes both the performance of individual firms and the performance of the
economy as a whole. Diff: 2 Page Ref: 33 Learning Obj.: 2.2: Describe How
the Structure-Conduct-Performance (S-C-P) Model Suggests that Industry
Structure Can Influence a Firm's Competitive Choices. AACSB: Analytical
Thinking 23) Within the five forces framework, the five most common threats
facing firms from their competitive environment include each of the following
except A) substitutes. B) complementors. C) suppliers. D) buyers. Answer:
BAccording to the S-C-P model, attributes of the industry structure within which
a firm operates define the range of options and constraints facing a firm.
Answer: TRUE Diff: 2 Page Ref: 33 Learning Obj.: 2.2: Describe How the
Structure-Conduct-Performance (S-C-P) Model Suggests that Industry Structure
Can Influence a Firm's Competitive Choices. AACSB: Analytical Thinking 21)
which in this model refers to industry structure, measured by such factors as
the number of competitors in an industry, the heterogeneity of products in an
except A) substitutes. B) complementors. C) suppliers. D) buyers. Answer: B
According to the S-C-P

Diff: 2

which a firm
facing a firm.
122. Answer: TRUE
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
Thinking
127.

firm.
129. Answer: FALSE
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
Thinking
134.

P model.
elements of the
(structure-conduct-
are structure,
as the number of
and
includes both the
firms and the
performance of
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
Thinking
146.

firms from their
include each of the
following except
151. C) suppliers.
152. D) buyers.
153. Answer: B
154. Diff: 2
155. According to the S-C-P
which a firm
facing a firm.
157. Answer: TRUE
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
Thinking
162.

firm.
164. Answer: FALSE
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
Thinking
169.

P model.
elements of the
(structure-conduct-
are structure,
as the number of
and
includes both the
firms and the
performance of
Describe How the
Structure-Conduct-
Performance (S-C-P)
Model Suggests
Thinking
181.

firms from their
include each of the
following except
186. C) suppliers.
187. D) buyers.
188. Answer: B
189. Diff: 2
190.
191. According to the S-C-P model, attributes of the industry structure within which a
firm operates define the range of options and constraints facing a firm. Answer:
TRUE Diff: 2 Page Ref: 33 Learning Obj.: 2.2: Describe How the Structure-
which in this model refers to industry structure, measured by such factors as the
number of competitors in an industry, the heterogeneity of products in an
except A) substitutes. B) complementors. C) suppliers. D) buyers. Answer: B
Diff: 2

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Chapter 2

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Strategic Management and Competitive Advantage, 6e (Barney)

Chapter 2 Evaluating a Firm's External Environment

A) 4) The values, beliefs and

W) 6) Civil wars, political

II) 7) A firm's general

can Affect a Firm's

HHH) 6) Civil wars, political

Describe the Dimensions

TTT)7) A firm's general

Describe the Dimensions

SSSS)6) Civil wars, political

Describe the Dimensions

can Affect a Firm's

EEEEE)7) A firm's general

Describe the Dimensions

can Affect a Firm's

economy is relatively low

Describe the Dimensions

can Affect a Firm's

6) Civil wars, political

coups, terrorism, wars

recessions are all

E. Which of the following

13. Which type of competition is characterized by a small number of firms,

the threats and opportunities it faces. ✅

49. In the structure-conduct-performance model, the term "structure" refers to

into or exit these markets. ✅

overcoming an incumbent firm's differentiation advantages. ✅

with the cumulative volume of production. ✅

57. In an industry, the products or services provided by a firm's direct competition

the same customer needs but do so in different ways. ✅

are highly differentiated. ✅

will be equally threatening at the same time. ✅

61. It is possible for a single firm to be a complementor of one firm and a

smaller number of firms. ✅

operations and focuses on narrow segments of the declining industry. ✅

65. Firms pursuing a harvest strategy in a declining industry do not expect to

remain in the industry over the long term. ✅

66. The objective of divestment is to extract a firm from a declining industry. ✅

68. Culture is largely the same across the world. ❌

69. In the structure-conduct-performance model, the term "performance" refers

solely to the performance of individual firms. ❌

industry must benefit society. ❌

71. Monopolistically competitive industries consist of only a single firm. ❌

competition in the industry begins to approach a monopoly. ❌

of that firm's volume of production. ❌

74. Proprietary technology often is more important as a barrier to entry than is

are able to meaningfully differentiate their products. ❌

supplier's industry is dominated by a small number of firms. ❌

would be an example of forward vertical integration. ❌

80. An emerging industry is an industry in which a large number of small or

share or creates dominant technologies. ❌

industry before their full value is widely understood. ❌

82. Mature industries are characterized by elements such as increasing growth in

increase in the profitability of firms in the industry. ❌

83. Product innovation is an effort to refine and improve a firm's current

84. A fragmented industry is an industry that has experienced an absolute decline

in unit sales over a sustained period of time. ❌

85. All divestments are caused by industry decline. ❌

E. A(n) ________ is any

the S-C-P model, attributes

22) Identify and define the

23) Within the five forces