Question 1

The basic premise of industry analysis is that

Accepted Answer

A)  competition can be assessed between monopoly and perfect competition within the spectrum of industry structures.
B)  the level of profitability within an industry is largely determined by the industry structure.
C)  the internal variables of the firm determine a firm's performance within the industry.
D)  profits are squeezed by powerful suppliers.

Question 2

The value to managers of understanding key success factors is

Accepted Answer

A)  self-evident.
B)  legitimate because it is accepted by the academic world.
C)  that it generates "generic strategies" which guarantee success.
D)  to help maintain a strategic perspective of what needs to be done to survive, and help them avoid degenerating into a fire fighting approach.

Question 3

Barriers to exit are

Accepted Answer

A)  the non-recoverable costs of quitting or scaling down capacity in an industry.
B)  legal restrictions which prevent a firm from leaving an industry.
C)  the opposite of barriers to entry.
D)  of no consequence if you don't plan to leave the industry.

Question 4

Porter's 5 Forces model arguably has some deficiencies and does NOT answer all possible questions. But this is true of all models.

Accepted Answer

A) True 
 B)False

Question 5

If an industry earns a return on capital in excess of its cost of capital,

Accepted Answer

A)  incumbents will earn abnormal profit, and build entry barriers.
B)  the government needs to make sure that competition will increase.
C)  it is likely to attract the attention of firms looking to enter the industry, which may eventually lead to the return on capital falling.
D)  it will attract firms outside the industry, but the incumbents will have erected entry barriers.

Question 6

For a specific product or service, the existence of close substitutes means that customers could switch to these substitutes if prices, service levels, or other factors make it in their interests to do so.

Accepted Answer

A) True 
 B)False

Question 7

One can view the connection between the general environment and the industry environment as

Accepted Answer

A)  the general environment is diffuse, whereas the industry environment consists of a small number of close competitors.
B)  the industry environment consists of customers, suppliers, rivals, and new entrants, whereas the general environment comprises everything else.
C)  the industry environment includes customers, competitors and suppliers, whereas the general environment matters to the extent that it affects the industry environment.
D)  the critical influence of the industry environment on the wider social environment.

Question 8

Given the plethora of external influences, understanding the external environment requires managers to

Accepted Answer

A)  use a framework or a system that allows them to organize information and rank factors.
B)  monitor their rivals closely to detect signals of change in their strategies.
C)  use all existing techniques to gather and analyze information.
D)  work on the matter full-time.

Question 9

Bargaining power rests, ultimately, on

Accepted Answer

A)  the negotiating skills of the buyer versus the seller.
B)  historic and accidental events.
C)  the respective effectiveness and cohesion of top management teams.
D)  the perceived or real threat for one party to refuse to deal with the other party.

Question 10

The question "What do customers want?"

Accepted Answer

A)  is not relevant because customers will show their preferences through their behaviour.
B)  must be asked by managers, and an accurate answer obtained and understood, since it's the driving force behind generating profit.
C)  can be outsourced to a market research company.
D)  is best answered by ensuring that certain managers are educated in Marketing. B

Question 11

Economies of scale are a barrier to entry because

Accepted Answer

A)  new entrants do not know where they are positioned on their learning curve.
B)  new entrants do not yet understand the scale economies so they cannot precisely determine their selling price.
C)  new entrants face a risk of price retaliation from the incumbents which could occur immediately on a large scale.
D)  new entrants face the cost and risk of creating large scale capacity to start with or a severe cost disadvantage if they enter on a smaller scale.

Question 12

Retaliation against a new entrant may take the form of aggressive price-cutting, increased advertising, sales promotion, or vexatious litigation.

Accepted Answer

A) True 
 B)False

Question 13

Analyzing key success factors leads one to ask the following two questions:

Accepted Answer

A)  What do customers want which we could supply profitably and what should the firm do to survive competition?
B)  What do customers want and what type of operational changes should a firm implement to survive competition?
C)  Which of the five forces of competition are critical for a firm's survival and how could the firm deal with them?
D)  How should managers analyse information collected from the market and what should they do about it? A

Question 14

For a manufacturer, access to distribution is a barrier to entry because

Accepted Answer

A)  new entrants face a disadvantage from retailers who are reluctant to carry their new products.
B)  retailers have limited capacity of distribution to offer to new entrants.
C)  retailers are risk-averse.
D)  carrying new products induces fixed costs.

Question 15

Value is created when

Accepted Answer

A)  the price that the customer is willing to pay for a product exceeds the firm's direct cost of production.
B)  the surplus of value is distributed between customers and producers in the industry by the forces of competition.
C)  the value of a product to consumers is more than they paid for it.
D)  the price that the customer is willing to pay for a product exceeds the firm's cost.

Question 16

The bargaining power of suppliers is likely to be high

Accepted Answer

A)  when the suppliers' industry is concentrated.
B)  when suppliers are supplying differentiated products.
C)  when "our" (the customer's) industry is relatively fragmented.
D)  all of the above.

Question 17

Having high fixed costs makes it hard to make a profit in a recession.

Accepted Answer

A) True 
 B)False

Question 18

The core of a firm's business environment is determined by

Accepted Answer

A)  its relationships with customers, competitors, and suppliers.
B)  its relationships with customers, rivals, government, and suppliers.
C)  its relationships with its major stakeholders.
D)  its vision and mission.

Question 19

In a contestable market there does not always need to be actual competition to keep prices relatively low - just the threat of competitors entering the market.

Accepted Answer

A) True 
 B)False  True

Question 20

Industries such as pharmaceuticals earn very high returns on investment. Such industries

Accepted Answer

A)  tend to be protected from competition by legal restrictions.
B)  can only maintain such high returns for short periods.
C)  always exist when intangible products are traded.
D)  tend to have high entry barriers and differentiated products.

Exam 2: Industry Analysis

The basic premise of industry analysis is that

Correct AnswerverifiedShow Answer

The value to managers of understanding key success factors is

Correct AnswerverifiedShow Answer

Barriers to exit are

Correct AnswerverifiedShow Answer

Porter's 5 Forces model arguably has some deficiencies and does NOT answer all possible questions. But this is true of all models.

Correct AnswerverifiedShow Answer

If an industry earns a return on capital in excess of its cost of capital,

Correct AnswerverifiedShow Answer

For a specific product or service, the existence of close substitutes means that customers could switch to these substitutes if prices, service levels, or other factors make it in their interests to do so.

Correct AnswerverifiedShow Answer

One can view the connection between the general environment and the industry environment as

Correct AnswerverifiedShow Answer

Given the plethora of external influences, understanding the external environment requires managers to

Correct AnswerverifiedShow Answer

Bargaining power rests, ultimately, on

Correct AnswerverifiedShow Answer

The question "What do customers want?"

Correct AnswerverifiedB

Economies of scale are a barrier to entry because

Correct AnswerverifiedShow Answer

Retaliation against a new entrant may take the form of aggressive price-cutting, increased advertising, sales promotion, or vexatious litigation.

Correct AnswerverifiedShow Answer

Analyzing key success factors leads one to ask the following two questions:

Correct AnswerverifiedA

For a manufacturer, access to distribution is a barrier to entry because

Correct AnswerverifiedShow Answer

Value is created when

Correct AnswerverifiedShow Answer

The bargaining power of suppliers is likely to be high

Correct AnswerverifiedShow Answer

Having high fixed costs makes it hard to make a profit in a recession.

Correct AnswerverifiedShow Answer

The core of a firm's business environment is determined by

Correct AnswerverifiedShow Answer

In a contestable market there does not always need to be actual competition to keep prices relatively low - just the threat of competitors entering the market.

Correct AnswerverifiedTrue

Industries such as pharmaceuticals earn very high returns on investment. Such industries

Correct AnswerverifiedShow Answer

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