Question 1

Suppose you are a sales representative for Advanced Micro Devices (AMD)in Japan.You are trying to convince Toshiba to buy your company's superfast Opteron microprocessor for its new laptop computer.Toshiba's representative seems interested,but eventually does not actually place an order.Confidentially,the representative tells you that he is afraid that Intel will withhold shipments of its Pentium 4 if he does business with AMD.Thinking about Intel's role in this scenario,which of the following elements of the five forces model is evident here?

Accepted Answer

A

Question 2

Walmart refuses to stock CDs bearing parental advisory stickers for explicit lyrics or violent imagery.Recording artists who want their recordings available at Walmart have the option of altering lyrics and song titles or deleting offending tracks.Likewise,artists are sometimes asked to change album cover art if Walmart deems it offensive.Considering the elements of the five forces model this is an example of:

Accepted Answer

Walmart's refusal to stock certain CDs demonstrates buyer power, as they can influence the terms and conditions under which products are sold due to their large market presence.

Question 3

Microsoft's extensive base of Windows operating systems and applications presented a formidable entry barrier for many years.

Accepted Answer

Microsoft's dominance in the PC operating system market with its Windows series and its suite of applications, such as Microsoft Office, has made it challenging for competitors to enter and compete in this space, thus creating a significant entry barrier.

Question 4

In the tech world,about 90 percent of the world's nearly one billion PCs use Microsoft's operating systems and 80 percent use Intel's microprocessors.This represents which aspect of the Porter's five forces model?

Accepted Answer

The high percentage of PCs using Microsoft's operating systems and Intel's microprocessors indicates a strong bargaining power of suppliers, as these two companies dominate the market, limiting options for PC manufacturers.

Question 5

Which of the following is not identified by Porter as one of the five forces that explains competition in an industry?

Accepted Answer

Porter's Five Forces model includes the threat of new entrants, the threat of substitute products or services, the bargaining power of suppliers, the bargaining power of buyers, and the competitive rivalry among existing competitors. The bargaining power of competitors is not one of the forces; instead, the model focuses on how competitors within an industry shape strategy.

Question 6

Volkswagen Auto Group of America markets both the VW and Audi nameplates in the United States;in 2014,unit sales for the group totaled nearly 550,000 vehicles.However,the VW brand has been hampered by perceptions of hit-and-miss quality.

Accepted Answer

Volkswagen Auto Group, indeed, markets both VW and Audi brands in the United States, and while specific sales figures can vary, the group has seen substantial sales volumes. The VW brand has faced challenges in the U.S. market due to perceptions of inconsistent quality, which has affected its reputation among consumers.

Question 7

Established firms do not enjoy cost advantages independent of scale economies that present a barrier to entry.

Accepted Answer

Established firms can enjoy cost advantages independent of scale economies, such as proprietary technology, access to the best raw materials sources, favorable locations, and experienced workforce, which can all serve as barriers to entry for new competitors.

Question 8

Porter's four generic strategies for achieving competitive advantage are:

Accepted Answer

Porter's four generic strategies include cost leadership, product differentiation, cost focus, and focused differentiation. These strategies are designed to achieve competitive advantage by targeting broad or narrow markets and by focusing on lower costs or differentiation.

Question 9

Barnes & Noble entered the online book market as a response to the threat posed by Amazon.com.This approach represents which aspect of the Porter's five forces model?

Accepted Answer

The answer of Barnes & Noble entered the online book...

Question 10

Apple's success with the iPhone prompted Samsung and others to enter the market.This is an example of the "perfectly competitive."

Accepted Answer

The answer of Apple's success with the iPhone prompted Samsung...

Question 11

Factors which determine suppliers' ability to gain leverage over industry firms include all of the following except:

Accepted Answer

Suppliers with a large number of buyers and a small number of suppliers have less leverage over industry firms.

Question 12

Intel achieved success by using the "Intel Inside" advertising campaign and logo that appears on many brands of PCs.This is an example of a barrier to entry classified as:

Accepted Answer

The "Intel Inside" campaign is an example of product differentiation because it created a distinct brand identity for Intel's microprocessors, making it difficult for competitors to gain market share without a similar level of brand recognition.

Question 13

Which of the following is not identified by Porter as one of the possible types of barriers to entry in an industry?

Accepted Answer

"Loose bricks" is not identified by Michael Porter as one of the barriers to entry in an industry. Porter's model includes barriers such as economies of scale, product differentiation, capital requirements, switching costs, access to distribution channels, and cost disadvantages independent of scale.

Question 14

IKEA's founder Ingvar Kamprad's frugal ways also applied to the company's finances.To minimize tax liabilities,he split the company into two parts: Inter Ikea owns the brand and the concept,while Ikea Group runs the retailing operations.

Accepted Answer

Ingvar Kamprad did indeed structure IKEA to minimize tax liabilities by splitting it into two parts: Inter IKEA, which owns the brand and concept, and IKEA Group, which handles the retail operations. This structure also reflects Kamprad's frugal approach to both personal and business finances.

Question 15

"Switching costs" is one of the barriers to entry in Porter's five forces model.

Accepted Answer

Switching costs refer to the cost a consumer incurs as a result of changing from one supplier's product to another's, which can act as a barrier to entry by discouraging customers from switching to a new entrant's product or service.

Question 16

New entrants to an industry bring all of the following except:

Accepted Answer

A desire to compete is not something that new entrants to an industry bring.

Question 17

A useful way of gaining insight into competitors is through industry analysis.

Accepted Answer

Industry analysis helps in understanding the competitive landscape, identifying key players, their strategies, strengths, and weaknesses, which can provide valuable insights for benchmarking and strategic planning.

Question 18

Several factors can create intense rivalry among firms.These factors include all of the following factors except:

Accepted Answer

The correct answer is D) upward pressure on prices and profitability. Intense rivalry among firms is typically characterized by factors that increase competition and reduce profit margins, such as focusing on market share, high fixed costs leading to full capacity production, lack of differentiation, and low switching costs for customers. Upward pressure on prices and profitability would actually reduce rivalry, as firms would be less aggressive in their competitive strategies if they were experiencing higher profits and could increase prices without losing market share.

Question 19

Competition in an industry tends to drive rates of return on invested capital up towards what is described as "perfectly competitive."

Accepted Answer

Competition in an industry tends to drive rates of return on invested capital down towards the cost of capital, not up, as firms compete on price and other factors, reducing profit margins.

Question 20

According to Porter,the nature of the interaction between potential industry entrants,buyers,substitute products,suppliers,and rival firms determines:

Accepted Answer

Porter's Five Forces framework posits that the nature of the interaction between potential industry entrants, buyers, substitute products, suppliers, and rival firms influences the competitive environment of an industry, which in turn determines the industry's profit potential in terms of long-run return on invested capital.

Quiz 16: Strategic Elements of Competitive Advantage