Question 1

According to the textbook, which of the following statements is accurate regarding the importance of industry versus firm-specific factors as it pertains to firm profitability?

Accepted Answer

The textbook states that "virtually all the studies have concluded that firm-specific factors matter more than industry-specific factors as determinants of firm profitability." Therefore, option B is the correct answer.

Question 2

Element Bars, the company profiled in the opening feature for Chapter 5, has a unique position in its industry. It has positioned itself as:

Accepted Answer

Element Bars has positioned itself as a customizable energy bar company that sells to individuals online and also to companies who want to create their own branded energy bars. This unique position sets it apart from other energy bar companies and allows for greater customer engagement and personalization.

Question 3

In general, industries are more attractive when:

Accepted Answer

E

Question 4

Industries that sell products to seniors, such as the eyeglass industry and the hearing aid industry, are benefiting from the aging of the population, which is an important:

Accepted Answer

The aging of the population is an environmental trend as it relates to demographic changes in society that affect market demand.

Question 5

Each quarter, Cindy Anderson, who owns a chain of card and gift shops, does a detailed analysis of her firm's competitors. This analysis is called:

Accepted Answer

Competitor analysis involves assessing and analyzing the strengths and weaknesses of current and potential competitors, which is what Cindy Anderson is doing with her detailed analysis of her firm's competitors.

Question 6

Once a firm decides to enter an industry and chooses a market in which to compete, it must gain an understanding of its competitive environment. This challenge can be undertaken by completing a(n):

Accepted Answer

The answer of Once a firm decides to enter an...

Question 7

The price of prescription medicine is high, partly because when someone is sick there is no real alternative to buying medicine if they want to get better. Which of Porter's five forces explains how this aspect of the prescription medicine industry helps keep profitability high?

Accepted Answer

The threat of substitutes explains how the lack of alternatives for prescription medicine keeps profitability high as customers have no other options and are willing to pay high prices for the medication they need to get better.

Question 8

Some industries, like the athletic shoe industry, are dominated by a small number of firms with strong brands. These industries are difficult to break into without spending heavily on advertising. The barrier to entry that the firms in these types of industries have erected is referred to as:

Accepted Answer

The barrier to entry in the athletic shoe industry referenced in the question is product differentiation, as the dominance of a small number of firms with strong brands makes it difficult for new entrants to differentiate their products and gain market share without significant advertising costs.

Question 9

Which of Porter's five forces is most directly influenced by the following factors: number and balance of competitors, degree of difference between products, growth rate of an industry, and level of fixed costs?

Accepted Answer

The number and balance of competitors, degree of difference between products, growth rate of an industry, and level of fixed costs are all factors that directly influence the intensity of rivalry among existing firms. This is because these factors determine the level of competition in the market and the degree of pressure that firms face to compete on price, quality, and other factors. The other forces are influenced by different factors, such as the threat of new entrants being influenced by barriers to entry and the bargaining power of suppliers being influenced by the concentration of suppliers in the market.

Question 10

Jeremy Banks recently started a new firm in the financial services industry. Prior to starting his firm, he spent considerable time doing research on the potential of the industry. The research that Jeremy was doing is called:

Accepted Answer

The research that Jeremy was doing is called industry analysis, which involves gathering and analyzing data on the market, competitors, trends, and other factors that affect the industry as a whole. This type of analysis is often done to identify opportunities and risks for a new business entering the industry.

Question 11

The Partnering for Success feature in Chapter 5 focuses on three things that are important for startups to become active in to learn the ins and outs of their industries. The three items focused on in the feature are?

Accepted Answer

The Partnering for Success feature in Chapter 5 focuses on the importance of participating in trade associations, trade shows, and trade journals to learn about the industry and make connections.

Question 12

Which of the following is not one of the major sources of barriers to entry?

Accepted Answer

Buyer group concentration is not a barrier to entry; it refers to the power of buyers in the market, not a barrier preventing new competitors from entering the market.

Question 13

Which of the following is an example of an industry-level factor as opposed to a firm-level factor?

Accepted Answer

The threat of substitutes is an industry-level factor that affects all firms within that industry, rather than being specific to any one firm. Factors like a firm's assets, culture, and teamwork are all specific to that individual firm and not necessarily reflective of the broader industry.

Question 14

According to the textbook, the five competitive forces included in the five-forces model determine:

Accepted Answer

The five competitive forces included in the five-forces model determine the average rate of return for the firms in an industry, as they assess the level of competition and bargaining power in the industry, which ultimately affects the profitability of the firms. The other options (A, B, D, and E) are not directly related to the five competitive forces model.

Question 15

Shelly Brunner owns a sports themed restaurant which is located in an upscale business district in Chicago. One advantage that Shelly has is that she bought the lot she built her restaurant on 25 years ago when lots in the area were selling for $50,000. Shelly knows that several potential competitors have looked at bare lots near his business but haven't been willing to pay the asking prices, which are as high as $500,000. Which of the six major sources of barriers to entry is causing a disincentive for new firms to enter Shelly's industry?

Accepted Answer

Shelly's cost advantage comes from owning the lot at a much lower price than current market rates, which is a barrier for new entrants who would face significantly higher costs.

Question 16

If a startup pioneers an industry or a new concept within an industry, the name recognition the startup establishes may create a formidable nontraditional barrier to entry referred to as a(n):

Accepted Answer

The term for creating a barrier to entry by being the first in a market or industry is called a first-mover advantage. It is not referred to as a unique business model, aggressive supremacy, competitive superiority, or aggressive tactical advantage.

Question 17

According to the textbook, how do well-managed firms respond to the five-forces that determine industry profitability?

Accepted Answer

Well-managed firms try to position their firms in a way that avoids or diminishes the forces that determine industry profitability. By doing so, they are able to maintain a competitive advantage in their industry and increase their profitability. This can be achieved through strategies such as differentiation, cost leadership, and focus on niche markets.

Question 18

A(n) ________ is a group of firms producing a similar product or service, such as soft drinks, electronic games, or computers.

Accepted Answer

An industry encompasses all the firms producing a similar product or service. Clusters refer to a geographical concentration of firms in a particular industry or related industries. A division typically refers to a segment or sub-unit of a larger company. A sector refers to a broader category of the economy, such as the automotive sector or the healthcare sector. A network refers to a group of interconnected individuals or organizations.

Question 19

In various studies, researchers have found that from ________ of the variation in firm profitability is directly attributable to the industry in which a firm competes.

Accepted Answer

Research indicates that industry factors account for 8 to 30 percent of the variation in firm profitability, highlighting the significant but not overwhelming influence of industry conditions on firm performance.

Question 20

Which of Porter's five forces is most closely associated with the concept "barrier to entry"?

Accepted Answer

The concept of "barrier to entry" refers to the difficulty that potential new entrants face in entering a particular market. This is closely associated with the threat of new entrants, which is one of Porter's five forces. The stronger the barriers to entry, the lower the threat of new entrants, and the more attractive the market is to existing players.

Quiz 5: Industry and Competitor Analysis