Question 1

New entrants are more likely to join an industry if:
A)differentiation among existing competitors is high.
B)access to distribution channels is limited.
C)existing competitors lack economies of scale.
D)capital requirements to enter the industry are high.
E)expected retaliation from existing competitors is high.

Accepted Answer

The answer of New entrants are more likely to join...

Question 2

_____ is one of the five forces of Michael Porter's five forces analysis.
A)Competitors in an industry
B)Governmental regulations
C)Economic elements
D)Geographic origin of an industry
E)Cultural and social trends affecting an industry

Accepted Answer

Competitors in an industry is one of the five forces in Michael Porter's five forces analysis. The other four forces are the threat of new entrants, bargaining power of suppliers, bargaining power of customers, and the threat of substitute products or services.

Question 3

Rivalry in _____ industries tends to become bitter and fierce.
A)fragmented
B)regulated
C)rapidly expanding
D)concentrated
E)unregulated

Accepted Answer

The answer of Rivalry in _____ industries tends to become...

Question 4

Suppliers are more likely to be powerful relative to the firms to which they sell their goods and services if:
A)differentiation among existing suppliers is high.
B)the suppliers' industry is highly fragmented.
C)existing suppliers lack economies of scale.
D)the suppliers' industry is dominated by a few companies.
E)cost advantages independent of size are negligible.

Accepted Answer

If the suppliers' industry is dominated by a few companies, these companies have more power to set prices and terms of sale, as there are limited alternatives for the firms to buy from. This makes the suppliers more powerful relative to the firms they sell to.

Question 5

A strategy that involves a supplier entering the industry that it supplies inputs to is referred to as:
A)forward horizontal integration.
B)backward vertical integration.
C)horizontal diversification.
D)backward horizontal integration.
E)forward vertical integration.

Accepted Answer

The strategy described in the question is known as forward vertical integration, which involves a supplier entering the industry that it supplies inputs to. This type of integration can provide the supplier with greater control over its supply chain and ensure a steady demand for its products.

Question 6

A farmer realizes that he is not getting fair price from the agents who buy produce from him and sell it to the markets.As such, he decides to sell produce directly to the local market.This is an example of:
A)forward horizontal integration
B)backward vertical integration
C)horizontal diversification
D)backward horizontal integration
E)forward vertical integration

Accepted Answer

The farmer's decision to sell produce directly to the local market involves taking over a function that was previously performed by an intermediary, which is an example of forward integration. By selling directly to the market, the farmer is vertically integrating forward into the distribution channel.

Question 7

Which of the following conditions is most likely to cause fierce rivalry between competitors of an industry?
A)Exit barriers in the industry are low
B)Fixed costs in the industry are low
C)Competitors are differentiated from each other
D)Competition is based on the uniqueness of the industry's offerings
E)The growth rate of demand for the industry's offerings is low

Accepted Answer

The answer of Which of the following conditions is most...

Question 8

Suppliers are more likely to be powerful relative to the firms to which they sell their goods and services if:
A)differentiation among existing suppliers is high.
B)the suppliers' industry is highly fragmented.
C)existing suppliers lack economies of scale.
D)suppliers' goods or services cannot be substituted effectively.
E)cost advantages independent of size are negligible.

Accepted Answer

Suppliers are more powerful when their goods or services cannot be easily substituted by competitors. If a firm is highly dependent on a particular supplier and there are no substitute goods or services available, the supplier has more bargaining power over the firm.

Question 9

The likelihood of new entrants joining an industry is low if access to distribution channels is limited because:
A)new entrants struggle to match incumbents' prices.
B)this discourages customers from buying a new entrant's offerings.
C)new entrants struggle to gather enough cash to get started.
D)each incumbent has a group of loyal customers that enjoy its unique features.
E)new entrants struggle to get their offerings to customers.

Accepted Answer

If access to distribution channels is limited, it becomes difficult for new entrants to get their products/services to customers. This can lead to a lack of visibility and awareness among potential customers, making it harder to gain traction in the market. As a result, the likelihood of new entrants joining the industry decreases.

Question 10

Michael Porter's five forces analysis is an important tool:
A)that considers a firm's strengths and weaknesses along with the opportunities and threats that exist in the firm's environment.
B)for executives to analyze strategic groups in order to understand gaps in the industry that represent untapped opportunities.
C)for analyzing how much profit potential exists in an industry.
D)for evaluating profit potential of an organization's various business units or product lines.
E)for organizing factors within the general environment and identifying how these factors influence industries and the firms within them.

Accepted Answer

Michael Porter's five forces analysis is a tool used to analyze the competitive forces within an industry and determine the profit potential of that industry. It evaluates the bargaining power of suppliers and customers, the threat of new entrants and substitutes, and the intensity of competitive rivalry. Thus, option C is the correct answer as it accurately describes the purpose of this tool.

Question 11

Piracy of intellectual property poses a threat to businesses that create such properties in order to profit from them.This example represents the _____ segment of PESTEL analysis.
A)political
B)economic
C)social
D)legal
E)environmental

Accepted Answer

The issue of piracy is a legal concern, as it involves the unauthorized use and distribution of intellectual property, which is protected by laws and regulations. Therefore, it falls under the legal segment of PESTEL analysis.

Question 12

Concentrated industries differ from fragmented industries in that in concentrated industries:
A)exit barriers for businesses are unusually high.
B)growth rate of demand for the industry's offerings is usually low.
C)competitors are well-differentiated from each other.
D)fixed costs of managing a business are very high.
E)businesses tend to keep their competition rather polite.

Accepted Answer

The answer of Concentrated industries differ from fragmented industries in...

Question 13

Which of the following is one of the five forces of Michael Porter's five forces analysis?
A)Economic elements
B)Governmental regulations
C)Cultural and social trends affecting an industry
D)Geographic origin of an industry
E)Suppliers to an industry

Accepted Answer

Suppliers to an industry is one of the five forces of Michael Porter's five forces analysis. The other forces include threat of new entrants, threat of substitutes, bargaining power of buyers, and rivalry among existing competitors.

Question 14

Which of the following is an example of forward vertical integration?
A)A start-up company created by an entrepreneur enters an industry
B)A supplier firm chooses to enter its customers' business
C)A foreign firm plans to enter a new geographic area
D)A buyer firm decides to enter its suppliers' business
E)A local firm diversifies itself by entering a new industry

Accepted Answer

The answer of Which of the following is an example...

Question 15

The likelihood of new entrants joining an industry is low if capital requirements to enter the industry are high because:
A)new entrants struggle to match incumbents' prices.
B)this discourages customers from buying a new entrant's offerings.
C)new entrants struggle to gather enough cash to get started.
D)each incumbent has a group of loyal customers that enjoy its unique features.
E)new entrants struggle to get their offerings to customers.

Accepted Answer

The answer of The likelihood of new entrants joining an...

Question 16

The likelihood of new entrants joining an industry is low if switching costs are high because:
A)new entrants struggle to match incumbents' prices.
B)this discourages customers from buying a new entrant's offerings.
C)new entrants struggle to gather enough cash to get started.
D)each incumbent has a group of loyal customers that enjoy its unique features.
E)new entrants struggle to get their offerings to customers.

Accepted Answer

High switching costs discourage customers from trying out new entrants' offerings, making it difficult for them to gain market share. As a result, new entrants may struggle to survive in the industry.

Question 17

New entrants are more likely to join an industry if:
A)differentiation among existing competitors is low.
B)access to distribution channels is limited.
C)switching costs for consumers are high.
D)capital requirements to enter the industry are high.
E)expected retaliation from existing competitors is high.

Accepted Answer

The answer of New entrants are more likely to join...

Question 18

Suppliers are more likely to be powerful relative to the firms to which they sell their goods and services if:
A)differentiation among existing suppliers is high.
B)access to distribution channels is limited.
C)existing suppliers lack economies of scale.
D)the suppliers' industry is highly concentrated.
E)cost advantages independent of size are negligible.

Accepted Answer

If the suppliers' industry is highly concentrated, there are fewer suppliers to choose from, giving them more bargaining power over their customers. This means that they may also be able to charge higher prices for their goods and services.

Question 19

Rivalry between competitors of an industry tends to be fierce when:
A)exit barriers in the industry are low.
B)fixed costs in the industry are low.
C)competitors are not differentiated from each other.
D)competition is based on the uniqueness of the industry's offerings.
E)the growth rate of demand for the industry's offerings is high.

Accepted Answer

When competitors are not differentiated from each other, they are essentially offering the same product or service. This leads to more fierce competition and rivalry as each company fights for market share. Additionally, if competitors are offering similar products, it becomes more difficult for any one company to stand out as unique or superior, further increasing the intensity of rivalry.

Question 20

The likelihood of new entrants joining an industry is low if existing competitors enjoy economies of scale because:
A)new entrants struggle to match incumbents' prices.
B)this discourages customers from buying a new entrant's offerings.
C)new entrants struggle to gather enough cash to get started.
D)each incumbent has a group of loyal customers that enjoy its unique features.
E)new entrants struggle to get their offerings to customers.

Accepted Answer

Existing competitors with economies of scale can produce goods at a lower cost, which allows them to lower their prices and sell products at a lower margin. New entrants will struggle to match these low prices and may find it difficult to gain market share.

Quiz 3: Evaluating the External Environment

New entrants are more likely to join an industry if:

_____ is one of the five forces of Michael Porter's five forces analysis.

Rivalry in _____ industries tends to become bitter and fierce.

Suppliers are more likely to be powerful relative to the firms to which they sell their goods and services if:

A strategy that involves a supplier entering the industry that it supplies inputs to is referred to as:

A farmer realizes that he is not getting fair price from the agents who buy produce from him and sell it to the markets.As such, he decides to sell produce directly to the local market.This is an example of:

Which of the following conditions is most likely to cause fierce rivalry between competitors of an industry?

Suppliers are more likely to be powerful relative to the firms to which they sell their goods and services if:

The likelihood of new entrants joining an industry is low if access to distribution channels is limited because:

Michael Porter's five forces analysis is an important tool:

Piracy of intellectual property poses a threat to businesses that create such properties in order to profit from them.This example represents the _____ segment of PESTEL analysis.

Concentrated industries differ from fragmented industries in that in concentrated industries:

Which of the following is one of the five forces of Michael Porter's five forces analysis?

Which of the following is an example of forward vertical integration?

The likelihood of new entrants joining an industry is low if capital requirements to enter the industry are high because:

The likelihood of new entrants joining an industry is low if switching costs are high because:

New entrants are more likely to join an industry if:

Suppliers are more likely to be powerful relative to the firms to which they sell their goods and services if:

Rivalry between competitors of an industry tends to be fierce when:

The likelihood of new entrants joining an industry is low if existing competitors enjoy economies of scale because: