Chap003 Fred David Test Bank

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Chap003 - Fred David test bank
Strategic Management (Universidad Carlos III de Madrid)
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Chapter 03 - Evaluating a Company's External Environment
Chapter 03
Evaluating a Company's External Environment
Multiple Choice Questions
The Strategically Relevant Components of a Company’s Macro-Environment
1. A company's "macro-environment" refers to

A. the industry and competitive arena in which the company operates.
B. general economic conditions plus the factors driving change in the markets where a
company operates.
C. all the relevant forces and factors outside a company's boundaries—general economic
conditions, population demographics, societal values and lifestyles, technological factors,
governmental legislation and regulation, and closer to home, the industry and competitive
arena in which it operates.
D. the competitive market environment that exists between a company and its competitors.
E. the dominant economic features of a company's industry.
2. Which one of the following is not part of a company's macroenvironment?

A. Conditions in the economy at large
B. Population demographics and societal values and lifestyles
C. Technological factors and governmental regulations and legislation
D. The industry and competitive environment arena in which the company operates
E. The company's resource strengths, resource weaknesses, and competitive capabilities
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3. Which of the following is not a major question to ask in thinking strategically about
industry and competitive conditions in a given industry?
A. How many companies in the industry have good track records for revenue growth and
profitability?
B. What strategic moves are rivals likely to make next?
C. What are the key factors for future competitive success?
D. Does the outlook for the industry present the company with sufficiently attractive
prospects for profitability?
E. What forces are driving changes in the industry, and what impact will these changes have
on competitive intensity and industry profitability?
4. Thinking strategically about industry and competitive conditions in a given industry

involves evaluating such considerations as
A. the forces driving change in the industry.
B. the dominant economic features of the industry in which the company operates.
C. the kinds of competitive forces industry members are facing and the strength of each
competitive force.
D. the key factors influencing future competitive success in the industry.
E. All of these.
Question 1: Does the Industry Offer Attractive Opportunities for Growth?
5. Which of the following is not a factor to consider in identifying an industry's dominant

economic features?
A. Market size and growth rate
B. The extent of backward integration of buyer needs and requirements
C. Whether the products or services of rival firms are becoming more or less differentiated
D. Strength of driving forces and competitive forces
E. The pace of technological change, scale economies and experience curve effects, and
product innovation
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6. Which of the following is not a relevant consideration in identifying an industry's dominant

economic features?
A. Market size and growth rate, the geographic scope of competitive rivalry, and demand-
supply conditions
B. The extent to which economies of scale and learning/experience curve effects are present
C. How many strategic groups the industry has and which ones are most profitable and least
profitable
D. The number and sizes of buyers, the number of rivals, and the pace of product innovation
E. The prevalence of technological change
Question 2: What Kinds of Competitive Forces are Industry Members Facing, and How
Strong are They?
7. The state of competition in an industry is a function of

A. the competitive pressures associated with the market maneuvering and jockeying for buyer
patronage that goes on among rival firms in the industry.
B. competitive pressures coming from the attempts of companies in other industries
attempting to win buyers over to their substitute products.
C. competitive pressures associated with the threat of new entrants into the marketplace.
D. competitive pressures associated with the bargaining power of suppliers and customers.
E. All of these.
8. The nature and strength of the competitive forces that prevail in an industry is generally a
joint product of
A. the pressures induced by the market maneuvering and jockeying for buyer patronage that
goes on among rival sellers in the industry.
B. the threat that firms outside the industry will decide to enter the market.
C. the attempts of companies in other industries to win buyers over to their own substitute
products.
D. competitive pressures stemming from the bargaining power of both suppliers and buyers.
E. All of these.
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9. Which of the following is not one of the five typical sources of competitive pressures?
A. The power and influence of industry driving forces
B. The bargaining power of suppliers and seller-supplier collaboration
C. The threat of new entrants into the market
D. The attempts of companies in other industries to win customers over to their own substitute
products
E. The market maneuvering and jockeying for buyer patronage that goes on among rival
sellers in the industry
10. The most powerful of the five competitive forces is usually

A. the competitive pressures that stem from the ready availability of attractively-priced
substitute products.
B. the competitive pressures associated with the market maneuvering and jockeying for buyer
patronage that goes on among rival sellers in the industry.
C. the benefits that emerge from close collaboration with suppliers and the competitive
pressures that such collaboration creates.
D. the competitive pressures associated with the potential entry of new competitors.
E. the bargaining power and leverage that large customers are able to exercise.
11. Typically, the weakest of the five competitive forces in an industry is/are:
A. the threat posed by potential new entrants.
B. the bargaining power and leverage that suppliers are able to exercise.
C. the competitive pressures that stem from the ready availability of attractively-priced
D. the bargaining power and leverage that buyers are able to exercise.
E. None of these is typically weakest.
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12. Using the five-forces model of competition to determine what competition is like in a
given industry involves
A. building the picture of competition in three steps: (1) identifying the specific competitive
pressures associated with each of the five competitive forces; (2) evaluating how strong the
pressures comprising each competitive force are; and (3) determining whether the collective
impact of all five competitive forces is conducive to earning attractive profits.
B. building the picture of competition in two steps: (1) determining which rival has the
biggest competitive advantage and (2) assessing whether the competitive advantages
possessed by various industry members allow most industry members to earn above-average
profits.
C. evaluating whether competition is being intensified or weakened by the industry's driving
forces and key success factors.
D. assessing whether the collective impact of all five forces is weak enough to allow industry
members to go on the offensive or use a defensive strategy to insulate against fierce
competitive pressures.
E. gauging the overall strength of competition based on how many industry rivals are
operating with a competitive advantage and how many are operating at a competitive
disadvantage.
13. What makes the marketplace a competitive battlefield is

A. the race of industry members to build strong defenses against the industry's driving forces.
B. the constant jockeying of industry members to strengthen their standing with buyers and
win a competitive edge over rivals.
C. the ongoing race among rival sellers to have the highest quality product.
D. the ongoing efforts of industry members to introduce new and improved products/services
at a faster rate than their rivals.
E. the ongoing race among rivals to achieve the fastest rate of growth in revenues and profits.
14. Competitive jockeying and market maneuvering among industry rivals

A. determines whether the industry's strategic group map will be static or dynamic.
B. centers around collaborative efforts to overcome the bargaining power of powerful
suppliers and powerful buyers.
C. is usually an industry's strongest driving force.
D. is usually one of the two or three weakest competitive forces because of the close
familiarity that rivals have for one another's likely next moves.
E. is ever-changing as fresh offensive and defensive moves are initiated and as rivals
emphasize first one mix of competitive weapons and tactics and then another.
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15. Which one of the following does not cause the rivalry among competing sellers to be
weak?
A. High buyer switching costs
B. Rapid growth in buyer demand
C. Industry conditions that tempt rivals to use price cuts or other competitive weapons to
boost unit sales
D. Low barriers to entry
E. Strongly differentiated products among rival sellers
16. Factors that tend to result in weak rivalry among competing sellers include
A. low buyer switching costs and low barriers to entry.
B. rapid growth in buyer demand, high buyer costs to switch brands, and so many industry
rivals that any one company's actions have little impact on rivals' businesses.
C. weakly differentiated products among rival sellers.
D. rivals that are quite diverse in terms of their strategies, objectives, and countries of origin.
E. conditions where outsiders have recently acquired weak competitors and are trying to turn
them into major contenders.
17. The rivalry among competing sellers tends to be less intense when
A. industry conditions tempt competitors to use price cuts or other competitive weapons to
boost unit sales.
B. buyer demand is weak and many sellers have excess capacity and/or inventory.
C. industry rivals are not particularly aggressive or active in making fresh moves to improve
their market standing and business performance.
D. rivals have diverse strategies and objectives and are located in different countries.
E. rival sellers have weakly differentiated products.
18. Rivalry among competing sellers is generally more intense when

A. there are relatively few industry key success factors and rivals have highly differentiated
products.
B. the industry's driving forces are strong and rivals have strongly differentiated products.
C. barriers to entry are moderately high and the pool of likely entry candidates is small.
D. rivals are active in making fresh moves to lower prices, introduce new products, increase
promotional efforts and advertising, and otherwise gain sales and market share.
E. barriers to entry are high and buyer switching costs are high.
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19. Rivalry among competing sellers grows in intensity when

A. rivals' products/services are sold at widely varying prices and there are only 2-4 rivals.
B. rivals have highly differentiated products and buyer demand is growing rapidly.
C. there are so many industry rivals that the impact of any one company's actions is spread
thinly across all industry members.
D. the products/services of rivals are strongly differentiated and buyers have high switching
costs.
E. buyer demand is growing slowly and the industry is composed of 6 to 10 competitors that
are fairly equal in size and competitive capability.
20. The rivalry among competing firms tends to be more intense

A. when demand for the product is growing slowly, buyers have low switching costs, and the
actions of any one company to attract more customers and boost market share have strong
direct impact on their rivals.
B. when the products/services of rival sellers are strongly differentiated and buyer demand is
strong.
C. when rivals are relatively content with their market position.
D. when there are so many industry rivals that the impact of any one company's actions is
spread thinly across all industry members.
E. the smaller the number of firms in the industry and the more unequal their market shares.
21. Which of the following is not among the factors that affect whether competitive rivalry
among participating firms is strong, moderate, or weak?
A. Whether the products of rival sellers are strongly or weakly differentiated
B. Whether demand for the industry's product is growing rapidly or slowly
C. The degree to which rivals are satisfied with their current market position
D. Whether industry driving forces are strong or weak
E. Whether industry conditions tempt competitors to use price cuts or other competitive
weapons to boost unit sales and whether one or two rivals have particularly powerful
strategies
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22. Rivalry among competing sellers tends to be more intense when

A. competitors are very unequal in size and capability, such that small competitors must really
scramble to even survive.
B. buyer switching costs are high and market demand is growing rapidly.
C. several competitors are under pressure to improve their market share or profitability and
launch fresh strategic initiatives to attract more buyers and bolster their business position.
D. the products of rival sellers are strongly differentiated.
E. there are fewer than 5 competitors and their products are strongly differentiated.
23. The competitive force of rival firms' jockeying for better market positions, higher sales
and market shares, and competitive advantage
A. is stronger when firms strive to be low-cost producers than when they use differentiation
and focus strategies.
B. is typically a weaker competitive force than is the threat of entry of new rivals.
C. is largely unaffected by whether industry conditions tempt rivals to use price cuts or other
competitive weapons to boost unit sales.
D. tends to intensify when strong companies outside the industry acquire weak firms in the
industry and launch aggressive, well-funded moves to transform the acquired companies into
strong market contenders.
E. is weaker when more firms have weakly differentiated products, buyer demand is growing
slowly, and buyers have moderate switching costs.
24. In analyzing the strength of competition among rival firms, an important consideration is
A. the potential for buyers to exercise strong bargaining power.
B. the diversity of competitors in terms of visions, strategic intents, objectives, strategies,
resources and countries of origin.
C. the number of firms pursuing differentiation strategies versus the number pursuing low-
cost leadership strategies and focus strategies.
D. the extent to which some rivals have more than two competitively valuable competencies
or capabilities.
E. whether the industry is characterized by a strong learning/experience curve and whether the
industry is composed of many or few strategic groups.
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25. In which one of the following instances is rivalry among competing sellers not more
intense?
A. When certain competitors are dissatisfied with their market position and make moves to
bolster their standing
B. When strong companies outside the industry acquire weak firms in the industry and launch
aggressive moves to transform their newly-acquired competitors into stronger market
contenders
C. When competitors are fairly equal in size and capability
D. When the products of rivals are weakly differentiated, buyer switching costs are low, and
market demand is growing slowly
E. When there are vast numbers of small rivals so the impact of any one company's actions is
spread thinly across all industry members
26. Which of the following is generally not considered as a barrier to entry?

A. Rapid market growth
B. Sizable capital requirements and an array of regulatory requirements
C. Strong buyer loyalty to existing brands
D. Sizable economies of scale in production
E. Difficulties in gaining access to technological know-how
27. Potential entrants are more likely to be deterred from actually entering an industry when
A. incumbent firms have previously been aggressive in defending their market positions
against entry.
B. incumbent firms are complacent.
C. buyers are not particularly price sensitive and the industry already contains a dozen or
more rivals.
D. the relative cost positions of incumbent firms are about the same, such that no one
incumbent has a meaningful cost advantage.
E. buyer switching costs are moderately low because of strong product differentiation among
incumbent firms.
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28. Competitive pressures associated with the threat of entry are greater when
A. incumbent firms are unable or unwilling to strongly contest the entry of newcomers.
B. newcomers can expect to earn attractive profits and a number of outsiders have the
expertise and resources to hurdle whatever entry barriers exist.
C. entry barriers are relatively low and buyer demand for the product is growing fairly rapidly.
D. existing industry members are looking to expand their market reach by entering product
segments or geographic areas where they currently do not have a presence.
E. All of these conditions heighten the competitive pressures associated with fresh entry into
the industry.
29. Which one of the following does not intensify the competitive pressures associated with
the threat of entry?
A. When incumbent firms are unable or unwilling to launch competitive initiatives to strongly
contest the entry of newcomers
B. When industry members are struggling to earn good profits
C. When entry barriers are relatively low and buyer demand for the product is growing fairly
rapidly
D. When existing industry members are looking to expand their market reach by entering
product segments or geographic areas where they currently do not have a presence
E. When newcomers can expect to earn attractive profits and a number of outsiders have the
expertise and resources to hurdle whatever entry barriers exist
30. Which one of the following increases the competitive pressures associated with the threat
of entry?
A. When incumbent firms are likely to launch competitive initiatives to strongly contest the
entry of newcomers
B. When buyers have a high degree of loyalty to the brands and product offerings of existing
industry members
C. When buyer demand for the product is growing fairly slowly
D. When few outsiders have the expertise and resources to hurdle whatever entry barriers
exist
E. When newcomers can expect to earn attractive profits
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31. The competitive threat that outsiders will enter a market is weaker when
A. financially strong industry members send strong signals that they will launch strategic
initiatives to combat the entry of newcomers.
B. the industry is characterized by the lack of sizable scale economies and learning/experience
curve effects.
C. the industry's market growth is rapid.
D. there are more than 2 entry barriers.
E. buyers have little loyalty to the brands and product offerings of existing industry members.
32. Competitive pressures stemming from the threat of entry are weaker when
A. there are fewer than 20 potential entry candidates and more than 10 firms already in the
industry.
B. there are more than 3 entry barriers.
C. the industry outlook is risky or uncertain.
D. incumbent firms have little ability to leverage distributors, dealers, and/or retailers to retain
their business.
E. the nature of the industry entails few scale economies.
33. The best test of whether potential entry is a strong or weak competitive force is
A. the strength of buyer loyalty to existing brands.
B. whether the industry's driving forces make it harder or easier for new entrants to be
successful.
C. whether the strategies of industry members are well-matched to the industry's key success
factors.
D. whether there are any vacant spaces on the industry's strategic group map.
E. to ask if the industry's growth and profit prospects are strongly attractive to potential entry
candidates.
34. Which of the following is not a good example of a substitute product that triggers stronger
competitive pressures?
A. A salad as a substitute for French fries
B. Wireless phones as a substitute for wired telephones
C. Coca-Cola as a substitute for Pepsi
D. Snowboards as a substitute for snow skis
E. Video-on-demand services from a cable TV company as a substitute for going to the
movies
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35. The competitive pressures from substitute products tend to be stronger when
A. buyers are relatively comfortable with using substitutes and the costs to buyers of
switching over to the substitutes are low.
B. there are more than 10 sellers of substitute products.
C. the quality and performance of the substitutes is well above what buyers need to meet their
requirements.
D. buyers have high psychic costs in severing existing brand relationships and establishing
new ones.
E. demand for the industry's product is not very price sensitive.
36. Industry rivals tend to experience weak competitive pressures from substitute products
when
A. the available substitute products are weakly differentiated from one another.
B. the buyers of the industry's products are few in number and they have substantial amounts
of leverage with sellers.
C. rival sellers experience strong bargaining power from both suppliers and influential
customers.
D. buyers incur high costs in switching to substitutes and substitutes are higher priced relative
to the performance they deliver.
E. the producers of substitute products are all pursuing strategies to strongly differentiate their
products on the basis of quality and product performance.
37. Whether supplier-seller relationships in an industry represent a strong or weak source of

competitive pressure is a function of
A. whether the profits of suppliers are relatively high or low.
B. the number of suppliers that each seller/industry member purchases from on average.
C. how aggressively rival industry members are trying to differentiate their products.
D. whether suppliers can exercise sufficient bargaining power to influence the terms and
conditions of supply in their favor and the extent of seller-supplier collaboration in the
industry.
E. whether the prices of the items being furnished by the suppliers are rising or falling.
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38. The strength of competitive pressures that suppliers can exert on industry members is
mainly a function of
A. whether needed inputs are in short supply or whether ample supplies are readily available
from several different suppliers.
B. whether suppliers self-manufacture what they supply or source their items from other
manufacturers.
C. the industry's position in the growth cycle.
D. whether technological change in the businesses of suppliers is rapid or slow.
E. whether the needs and expectations of buyers of the industry product are changing slowly
or rapidly.
39. The bargaining leverage of suppliers is greater when

A. there are no good substitutes for the items being furnished by the suppliers and the number
of suppliers is relatively small.
B. industry members incur low costs in switching their purchases from one supplier to
another.
C. industry members purchase in large quantities and thus are important customers of the
suppliers.
D. there is extensive seller-supplier collaboration.
E. the supplier industry is composed of a large number of relatively small suppliers.
40. In which one of the following instances are the competitive pressures that industry
members experience in their dealings with suppliers not weakened?
A. When industry members pose a credible threat of backward integration into the business of
suppliers
B. When the cost of switching from one supplier to another is low
C. When the buying firms purchase in large quantities and thus are important customers of the
suppliers
D. When the item being supplied is a commodity
E. When the items purchased from suppliers are in short supply
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41. Supplier bargaining power is weaker when

A. good substitute inputs exist or new ones emerge.
B. the cost of switching from one supplier to another is high.
C. suppliers furnish a critical part or component.
D. buying firms are looking for suppliers with good just-in-time supply capabilities.
E. a few large suppliers are the primary sources of a particular item.
42. Which one of the following is not a factor that affects the strength of supplier bargaining
power?
A. Whether needed inputs are in ample supply and are readily available from several different
suppliers
B. Whether industry members are a strong threat to integrate backward into the business of
suppliers and self-manufacture their own requirements
C. Whether industry members are struggling to make good profits because of slow-growing
market demand
D. Whether the costs of industry members to switch their purchases to alternative suppliers
are high or low
E. Whether the item being supplied is a commodity or is highly differentiated from supplier to
supplier
43. Which one of the following is not a factor in causing supplier bargaining power to be
relatively strong?
A. The inputs needed from suppliers are in short supply.
B. Suppliers are a strong threat to integrate forward into the business of industry members.
C. The input being supplied is a commodity.
D. The input being supplied significantly enhances the quality or performance of the products
of industry members.
E. There are only a few suppliers of the input.
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44. When one or more industry members have unusually effective and mutually advantageous
partnerships with their suppliers,
A. it is rare for such partnerships to have much competitive impact on those industry members
not having such partnerships.
B. one unfortunate outcome is that it tends to give the supply partners much enhanced
bargaining power in their dealings with these industry members.
C. there is a strong likelihood such partnerships will put increased competitive pressure on
those industry members who lack productive collaborative relationships with their suppliers.
D. there is a high likelihood of such partnerships reducing competitive pressures on all
industry members, provided technological change in the suppliers' business is rapid and the
item being supplied is a commodity.
E. the usual result is to reduce competitive pressures on all industry members, provided the
costs of the items furnished by supply chain partners amount to 50% or more of total cost.
45. Which one of the following is not a reason why industry members are often motivated to
enter into collaborative partnerships with key suppliers?
A. To reduce the costs of switching suppliers
B. To speed the availability of next-generation components
C. To enhance the quality of parts and components being supplied and reduce defect rates
D. To squeeze out important cost savings for both themselves and their suppliers
E. To reduce inventory and logistics costs
46. Whether buyer-seller relationships in an industry represent a strong or weak source of

A. the speed with which general economic conditions and interest rates are changing.
B. the extent to which buyers can exercise enough bargaining power to influence the
conditions of sale in their favor and whether strategic partnerships between certain industry
members can adversely affect other industry members.
C. how many buyers purchase all of their requirements from a single seller versus how many
purchase from several sellers.
D. the number of buyers versus the number of sellers.
E. whether industry members are spending more or less on advertising.
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47. Whether buyer bargaining power poses a strong or weak source of competitive pressure
on industry members depends in part on
A. whether most buyers possess roughly equal or varying degrees of bargaining power and
leverage.
B. how many buyers are engaged in collaborative partnerships with sellers.
C. whether entry barriers are high or low and the size of the pool of likely entry candidates.
D. whether the overall quality of the items being furnished by industry members is rising or
falling.
E. whether demand-supply conditions represent a buyer's market or a seller's market.
48. Which of the following is not a factor that causes buyer bargaining power to be stronger?
A. Some buyers are a threat to integrate backward into the business of sellers and become an
important competitor.
B. The industry is composed of a few large sellers and the customer group consists of
numerous buyers that purchase in fairly small quantities.
C. Buyers have considerable discretion over whether and when they purchase the product.
D. Buyers purchase the item frequently and are well-informed about sellers' products, prices,
and costs.
E. The costs incurred by buyers in switching to competing brands or to substitute products are
relatively low.
49. Which of the following factors does not affect whether buyer bargaining power and seller-
buyer collaboration are an important source of competitive pressure in an industry?
A. Whether winning the business of certain customers, offer a seller important market
exposure or prestige
B. The extent and importance of collaborative partnerships and alliances between particular
sellers and buyers
C. Whether buyers pose a major threat to integrate backward into the product market of
sellers
D. Whether sellers' products are weakly differentiated, making it easy and inexpensive for
buyers to switch to competing brands
E. Whether buyers have a strong preference for products of superior quality or just average
quality
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50. Which of the following factors is not a relevant consideration in determining the strength
of buyer bargaining power?
A. Whether winning the business of prestigious customers gives a seller important market
exposure and heightens its brand name
B. Whether the seller is a manufacturer.
sellers
D. Whether sellers' products are weakly differentiated, making it easy for buyers to switch to
competing brands
E. Whether collaborative partnerships and alliances between particular sellers and buyers put
rivals lacking such collaborative relationships at a competitive disadvantage
51. Collaborative relationships between particular sellers and buyers in an industry can
represent a source of strong competitive pressure when
A. virtually all buyers have strong brand attachments and are highly brand loyal.
B. demand for the product is growing rapidly.
C. sales are made to buyer groups with either strong bargaining power or high sensitivity.
D. sellers are racing to add the latest and greatest performance features so as to attract the
patronage of important or prestigious buyers.
E. buyers are very quality conscious.
52. In which of the following circumstances are competitive pressures associated with the
bargaining power of buyers not relatively strong?
A. When buyer demand is growing rapidly
B. When buyers are relatively well informed about sellers' products, prices, and costs
C. When buyers pose a major threat to integrate backward into the product market of sellers
D. When sellers' products are weakly differentiated, making it easy for buyers to switch to
competing brands
E. When buyers have considerable discretion over whether and when they purchase the
product
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53. Competitive pressures stemming from buyer bargaining power tend to be weaker when
A. the number of buyers is small, such that each customer's business tends to be particularly
important to a seller.
B. buyer demand is growing slowly or maybe even declining.
C. the costs incurred by buyers in switching to competing brands or to substitute products are
relatively high.
D. buyers purchase the item frequently and are well-informed about sellers' products, prices,
and costs.
E. the buyer group consists a few large buyers and the seller group consists of numerous small
firms.
54. Which of the following conditions acts to weaken buyer bargaining power?
A. When buyers are unlikely to integrate backward into the business of sellers
B. When buyers purchase the item frequently and are well-informed about sellers' products,
prices, and costs
C. When the costs incurred by buyers in switching to competing brands or to substitute
products are relatively low
D. When the products of rival sellers are weakly differentiated and buyers have considerable
discretion over whether and when they purchase the product
E. When buyers are few in number and/or often purchase in large quantities
55. Buyers are in position to exert strong bargaining power in dealing with sellers when
A. their costs to switch to competing brands or to substitute products are relatively high.
B. a particular seller's product delivers quality or performance that is very important to the
buyer and is not matched by other brands.
C. they buy the product infrequently or in small quantities and are not particularly well-
informed about sellers' products, prices, and costs.
D. buyer demand is growing rapidly.
E. the number of buyers is small or when a customer is particularly important to a seller.
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56. Which of the following factors is not a relevant consideration in judging whether buyer
bargaining power is relatively strong or relatively weak?
A. Whether certain customers offer sellers important market exposure or prestige
B. Whether customers are relatively well informed about sellers' products, prices, and costs
C. Whether buyer needs and expectations are changing rapidly or slowly
D. Whether sellers' products are highly differentiated, making it troublesome or costly for
buyers to switch to competing brands or to substitute products
E. Whether sellers pose little threat of forward integration into the product market of their
customers and whether buyers pose a major threat to integrate backward into the product
market of sellers
57. A competitive environment where there is weak to moderate rivalry among sellers, high
entry barriers, weak competition from substitute products, and little bargaining leverage on
the part of both suppliers and customers
A. lacks powerful driving forces.
B. gives each industry competitor the best potential for building sustainable competitive
advantage over rival firms.
C. makes it hard for industry members to compete successfully unless they can strongly
differentiate their products.
D. is conducive to industry members earning attractive profits.
E. requires that industry members have low costs in order to be competitively successful.
58. A competitive environment where there is strong rivalry among sellers, low entry barriers,
strong competition from substitute products, and considerable bargaining leverage on the part
of both suppliers and customers
A. is competitively unattractive from the standpoint of earning good profits.
B. offers little ability to build a sustainable competitive advantage.
C. is highly conducive to achieving strong product differentiation and high customer loyalty
to the company's brand.
D. offers moderate to good prospects for making a reasonable profit and building a
sustainable competitive advantage.
E. requires that industry members have a strongly differentiated product offering in order to
be profitable.
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59. As a rule, the stronger the collective impact of competitive pressures associated with the
five competitive forces,
A. the stronger are the industry's driving forces.
B. the lower the combined profitability of industry members.
C. the fewer companies that can achieve a competitive advantage via anything other than
being the industry's low-cost leader.
D. the larger the number of competitive advantage opportunities for industry members.
E. the greater the number of industry key success factors.
60. Factors that cause the rivalry among competing sellers to be weak include
A. low buyer switching costs and rival sellers that are relatively equal is size and capability.
B. rapid growth in buyer demand and high buyer switching costs.
C. few industry rivals that any one company's actions can easily be anticipated and countered
by its rivals.
D. low barriers to entry and weakly differentiated products among rival sellers.
E. slow growth in buyer demand and strongly differentiated products.
61. The intensity of rivalry among competing sellers does not depend on whether
A. the industry has more than two strong driving forces and whether the industry has more
than 2 strategic groups.
B. competitors are diverse in terms of visions, strategic intents, objectives, strategies,
C. strong companies outside the industry have acquired weak firms in the industry and are
launching aggressive moves to transform the acquired companies into strong market
contenders.
D. one or two rivals have particularly powerful and successful strategies.
E. industry conditions tempt industry members to use price cuts or other competitive weapons
to boost unit sales.
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62. In which of the following instances are industry members not subject to stronger
competitive pressures from substitute products?
A. The costs to buyers of switching over to the substitutes are low.
B. Buyers are dubious about using substitutes.
C. The quality and performance of the substitutes is well matched to what buyers need to meet
their requirements.
D. Buyer brand loyalty is weak.
E. Substitutes are readily available at competitive prices.
63. Just how strong the competitive pressures are from substitute products depends on
A. whether the available substitutes are strongly or weakly differentiated and whether buyers
make purchases frequently or infrequently.
B. whether attractively priced substitutes are readily available and the ease with which buyers
can switch to substitutes.
C. whether the available substitutes are products or services.
D. whether the producers of substitutes have ample budgets for new product R&D.
E. the speed with which buyer needs and expectations are changing.
Question 3: What Forces Are Driving Industry Change and What Impacts Will They
Have?
64. Industry conditions change

A. because of such powerful driving forces as swings in buyer demand, changing interest
rates, ups and downs in the economy, and higher/lower entry barriers.
B. because of newly-emerging industry threats and industry opportunities that alter the
composition of the industry's strategic groups.
C. because new industry key success factors emerge.
D. because important forces create pressures or incentives for industry participants
(competitors, customers, suppliers) to alter their actions.
E. chiefly because of changes in the barriers to entry and the degree of competition from
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65. The "driving forces" in an industry

A. are usually triggered by changing technology or stronger learning/experience curve effects.
B. usually are spawned by growing demand for the product, the outbreak of price-cutting, and
big reductions in entry barriers.
C. are major underlying causes of changing industry and competitive conditions and have the
biggest influences in reshaping the industry landscape and altering competitive conditions.
D. appear when an industry begins to mature but are seldom present during early stages of the
industry life-cycle.
E. are usually triggered by shifting buyer needs and expectations or by the appearance of new
66. The task of driving forces analysis is to

A. develop a comprehensive list of all the potential causes of changing industry conditions.
B. predict which new driving forces will emerge next.
C. determine which of the five competitive forces is the biggest driver of industry change.
D. identify the driving forces, assess whether their impact will make the industry more or less
attractive, and determine what strategy changes are needed to prepare for the impacts of the
driving forces.
E. learn what the industry key success factors are and how they might change in the future.
67. Driving forces analysis

A. involves identifying the driving forces, assessing whether their impact will make the
industry more or less attractive, and determining what strategy changes a company may need
to make to prepare for the impacts of the driving forces.
B. identifies which strategic group is the most powerful.
C. helps managers identify which industry member is likely to become (or remain) the
industry leader and why.
D. helps managers identify which key success factors are most likely to help their company
gain a competitive advantage.
E. helps managers identify which of the five competitive forces will be the strongest driver of
industry change.
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68. Which of the following is not generally a "driving force" capable of producing
fundamental changes in industry and competitive conditions?
A. Changes in the long-term industry growth rate
B. Increasing globalization of the industry
C. Product innovation and technological change
D. Ups and downs in the economy and in interest rates
E. New government regulations or significant changes in government policy toward the
industry
69. Which of the following are most unlikely to qualify as driving forces?
A. Changes in the long-term industry growth rate, the entry or exit of major firms, and
changes in cost and efficiency
B. Increasing globalization of the industry and product innovation
C. New Internet technology applications, new government regulations, and significant
changes in government policy toward the industry
D. Mounting competition from substitutes and increasing efforts to collaborate with suppliers
via strategic alliances
E. Marketing innovations and changes in who buys the industry's product and how they use it
70. Which of the following do not qualify as potential driving forces capable of inducing
A. Changes in who buys the product and how they use it and changes in the long-term
industry growth rate
B. Entry or exit of major firms, product innovation, and marketing innovation
C. Increases in the economic power and bargaining leverage of customers and suppliers,
growing supplier-seller collaboration, and growing buyer-seller collaboration
D. Growing buyer preferences for differentiated products instead of mostly standardized or
identical products
E. Changes in economies of scale and experience curve effects brought on by changes in
manufacturing technology and new Internet capabilities
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71. Which of the following is most likely to qualify as a driving force?

A. Increases in price-cutting by rival sellers and the launch of major new advertising
campaigns by one or more rivals
B. Wildly successful introduction of innovative new products by one or more industry rivals
that force other rivals to respond quickly or lose a major share of their customers to the
innovating rival(s)
C. An increase in the prices of substitute products
D. Decisions on the part the industry's three biggest competitors not to pursue a strategy of
striving to be the industry's low-cost leader
E. Decisions by one or more outsiders not to attempt to enter the industry
72. Which one of the following is not a common type of driving force?
A. Reductions in uncertainty and business risk
B. Changing societal concerns, attitudes, and lifestyles
C. Diffusion of technical know-how across more companies and more countries
D. Increasing efforts on the part of industry members to collaborate closely with their
suppliers
E. Technological change and manufacturing process innovation
73. Increasing globalization of the industry can be a driving force because

A. the products of foreign competitors are nearly always cheaper or of better quality than
those of domestic companies.
B. foreign producers typically have lower costs, greater technological expertise, and more
product innovation capabilities than domestic firms.
C. it tends to increase rivalry among industry members and often shifts the pattern of
competition among an industry's major players, favoring some and disadvantaging others.
D. it results in companies having fewer competitors and a strategic group map with fewer
circles.
E. market growth rates go up, product innovation speeds up, and new firms are likely to enter
the industry.
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74. Driving forces analysis helps managers identify whether

A. the combined impacts of the driving forces will act to increase/decrease market demand,
increase/decrease competition, and raise/lower industry profitability in the years ahead.
B. it will become more or less important to aim the company's strategy at being the industry's
low-cost producer.
C. the driving forces will have a bigger impact on company profitability than competitive
forces.
D. the industry is likely to become more or less vertically integrated and why.
E. competitive advantages are likely to grow or diminish in importance.
75. An industry's driving forces

A. are generally determined by the sizes of strategic groups and the power of rival firms'
competitive strategies.
B. generally act in ways which will strengthen or weaken market demand, competition, and
industry profitability in future years.
C. frequently cause a reduction in the bargaining power of buyers.
D. are normally triggered by ups and downs in the economy, higher or lower interest rates, or
important new strategic alliances.
E. can be triggered by such factors as growing competitive pressures from substitute products,
and the efforts of rival firms to employ new or different offensive strategies.
76. In analyzing driving forces, the strategist's role is to

A. identify the driving forces and evaluate their impact on (1) demand for the industry's
product, (2) the intensity of competition, and (3) industry profitability.
B. predict future marketing innovations and how fast the industry is likely to globalize.
C. evaluate what stage of the life cycle the industry is in and when it is likely to move to the
next stage.
D. determine who is likely to exit the industry and what changes can be expected in the
industry's strategic group map.
E. forecast fluctuations in product demand and how buyer needs will most likely change.
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77. Which one of the following is not an integral part of driving forces analysis?
A. Identifying the specific factors causing fundamental changes in industry conditions and/or
the industry's competitive structure
B. Determining whether the driving forces are acting to cause one or more industry rivals to
shift to a different strategic group
C. Determining whether the driving forces are acting to strengthen or weaken market demand
D. Determining whether the driving forces are acting to make competition more or less
intense
E. Determining whether the driving forces are acting to raise or lower industry profitability
78. The real payoff for strategy making comes when managers draw conclusions about
A. what strategy adjustments are needed to deal with the changes in conditions.
B. determining the overall strength of the five competitive forces.
C. determining whether the industry's strategic group map will be static or dynamic.
D. conditions in the economy at large.
E. the extent to which rivals have more than two competitively valuable competencies or
capabilities
Question 4: How Are Industry Rivals Positioned—Who Is Strongly Positioned and Who
Is Not?
79. What is the best technique for revealing the market position of industry competitors?
A. Strategic group mapping.
B. Global industry change.
C. Dynamic mapping analysis.
D. Distribution analysis.
E. None of these.
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80. A strategic group

A. consists of those industry members that are growing at about the same rate and have
similar product line breadth.
B. includes all rival firms having comparable profitability.
C. is a cluster of industry rivals that have similar competitive approaches and market
positions.
D. consists of those firms whose market shares are about the same size.
E. is made up of those firms having comparable profit margins.
81. A strategic group consists of those firms in an industry that

A. are subject to the same driving forces.
B. are placing about the same emphasis on each distribution channel.
C. use the same key success factors to differentiate their products.
D. employ similar competitive approaches and occupy similar positions in the market.
E. have similar size market shares.
82. Strategic group mapping is a technique for displaying

A. how many rivals are pursuing each type of strategy.
B. which companies have the biggest market share and who the industry leader really is.
C. the different market or competitive positions that rival firms occupy in an industry and
identifying each rival's closest competitors.
D. which companies have the highest degrees of brand loyalty.
E. which companies have failing business models.
83. Which one of the following pairs of variables is least likely to be useful in drawing a
strategic group map?
A. Geographic coverage and degree of vertical integration
B. Brand name reputation and distribution channel emphasis
C. Product quality and product line breadth
D. Level of profitability and size of market share
E. Price/quality range and whether the company's product appeals to many or few types of
buyers
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84. The concept of strategic groups is relevant to industry and competitive analysis because
A. firms in the same strategic groups are rarely close competitors—a firm's closest
competitors are usually in distant strategic groups.
B. strategic group maps help identify each company's market position and its closest
competitors.
C. competition grows in intensity as the number and diversity of the strategic groups in an
industry increases.
D. the profit potential of firms in the same strategic group is usually very similar.
E. competitive pressures tend to be weaker within strategic groups than across strategic
groups.
85. In mapping strategic groups

A. one strategic variable and one financial variable should be used as axes for the map.
B. it is important for the variables used as axes to be highly correlated.
C. the best variables to use as axes for the map are those that differentiate how rivals have
positioned themselves in the marketplace.
D. it is important to use price as the variable for the vertical axis.
E. the primary objective is to determine which strategic groups are profitable and which are
not.
86. Which of the following is not an appropriate guideline for developing a strategic group
map for a given industry?
A. The variables chosen as axes for the map should indicate big differences in how rivals have
positioned themselves to compete in the marketplace.
B. The variables chosen as axes for the map can be either quantitative or qualitative.
C. The variables chosen as axes for the map should be highly correlated.
D. Several maps should be drawn if more than one pair of variables help illuminate
differences in the competitive positioning of industry members.
E. The sizes of the circles on the map should be drawn proportional to the combined sales of
the firms in each strategic group.
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87. With the aid of a strategic group map, one can

A. readily identify the entry and exit barriers for each strategic group.
B. pinpoint precisely which firms are in profitable strategic groups and which are not.
C. identify which competitive forces are strong and which are weak.
D. measure accurately whether across-group rivalry is stronger than within-group rivalry or
vice versa.
E. often learn to what extent industry driving forces and competitive pressures favor some
companies or groups and hurt others.
88. One of the things that can be gleaned from a strategic group map of industry rivals is
A. which rivals have been in business longer and thus have greater access to experience curve
effects.
B. which rivals have newer manufacturing facilities.
C. which strategic groups have the highest profit margins and the highest customer switching
costs.
D. whether profit prospects vary among strategic groups due to strengths and weaknesses in
their respective market positions on the map (perhaps because competitive pressures are
acting to favor some strategic groups and to disadvantage other groups).
E. which strategic groups are currently viewed as the most prestigious by customers and
which companies are being shunned by customers because of high prices and relatively low
product quality.
Question 5: What Strategic Moves Are Rivals Likely to Make Next?
89. The payoff of good scouting reports on rivals is improved ability to

A. anticipate what moves rivals are likely to make next, thereby providing a valuable assist in
outmaneuvering them in the marketplace.
B. determine which rivals are in the best strategic group.
C. figure out how many key success factors a rival has.
D. determine whether a rival is gaining or losing market share.
E. determine whether a rival has the best strategy and is the industry leader.
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90. Having good competitive intelligence about rivals' strategies and moves to improve their
situation is important because
A. it identifies who the industry's current market share leaders are.
B. it helps a company to anticipate what moves rivals are likely to make next and to craft its
own strategic moves with some confidence about what market maneuvers to expect from its
rivals.
C. good scouting reports help identify which rival is in which strategic group.
D. it enables company managers to determine which rival has the worst strategy and how to
avoid making the same strategy mistakes.
E. it enables more accurate predictions about how long it will take a particular rival to copy
most of what the strategy leader is doing.
91. Good competitive intelligence about the strategies and competitive strengths and
weaknesses of rival companies helps management determine
A. which competitor has the best strategy and which competitors have flawed or weak
strategies.
B. which rivals are poised to gain market share and which seem destined to lose market share.
C. which rivals are likely to rank among the industry leaders on the road ahead.
D. which rivals are likely to initiate what kinds of fresh strategic moves and why.
E. All of these.
92. In seeking to predict the next moves of close or key rivals, it is useful to consider such
questions as:
A. Which rivals badly need to increase their unit sales and market share and what new
offensive initiatives are they likely to employ?
B. Which rivals are poised to gain market share and which seem destined to lose market
share?
C. Which rivals are good candidates to be acquired?
D. Which rivals are likely to enter new geographic markets or expand their product offerings
(so as to enter new market segments where they currently do not have a presence)?
E. All of these.
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Question 6: What Are the Key Factors for Future Competitive Success?
93. The key success factors in an industry

A. are those competitive aspects that most affect industry members' abilities to prosper in the
marketplace—specific strategy elements, product attributes, competencies, competitive
capabilities, and market achievements that spell the difference between being a strong
competitor and a weak competitor.
B. are determined by the industry's driving forces.
C. hinge on how many different strategic groups the industry has.
D. depend on how many rivals are trying to move from one strategic group to another.
E. are a function of such considerations as how many firms are in the industry, how many
have market shares above 5%, and whether the business models being used are similar or
diverse.
94. An industry's key success factors

A. are a function of market share, entry barriers, economies of scale, degree of vertical
integration, and industry profitability.
B. vary according to whether an industry has high or low long-term attractiveness.
C. can be determined from an analysis of an industry's dominant economic characteristics,
what competition is like, the impacts of the driving forces, the comparative market positions
of industry members, and the likely next moves of industry rivals.
D. can be determined from studying the "winning" strategies of the industry leaders and ruling
out as potential key success factors the strategy elements of those firms considered to have
"losing" strategies.
E. depend on the relative competitive strengths of the industry leaders and how vulnerable
they are to competitive attack.
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95. In identifying an industry's key success factors, strategists should

A. try to single out all factors which play a major role in shaping whether buyer demand
grows rapidly or slowly.
B. consider on what basis customers choose between competing brands, what resources and
competitive capabilities firms need to be competitively successful, and what shortcomings are
almost certain to put a company at a significant competitive disadvantage.
C. consider whether the number of strategic groups is increasing or decreasing and whether
the five competitive forces are powerful or relatively weak.
D. consider what it will take to overtake the company with the industry's overall best strategy.
E. focus their attention on what it will take to capitalize on impacts of the industry's driving
forces.
96. Which of the following is not a question asked to deduce a marketing-related key success
factor?
A. What are the industry product R & D capabilities and expertise in product design?
B. What basis do buyers choose between the competing brands of sellers?
C. What product attributes and service characteristics are crucial?
D. What resources must a company have to be competitive?
E. What shortcomings are almost certain to put a company at a significant disadvantage?
97. Which of the following can aid industries in identifying key success factors?
A. Global distribution capabilities
B. Crucial product attributes and service characteristics
C. Low distribution costs
D. Accurate filling of buyer orders
E. Short delivery time capability
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Question 7: Does the Industry Offer Good Prospects for Attractive Profits?
98. Which of the following is particularly pertinent in evaluating whether an industry presents
a sufficiently attractive business opportunity?
A. The industry's growth potential, whether competition appears destined to become stronger
or weaker, and whether the industry's overall profit prospects are above average, average, or
below average
B. An assessment of which firms in the industry have the best and worst competitive
strategies, whether the number of strategic groups in the industry is increasing or decreasing,
and whether economies of scale and experience curve effects are a key success factor
C. Whether there are more than 5 key success factors and more than 5 barriers to entry
D. Constructing a strategic group map and assessing the attractiveness of the competitive
position of each strategic group
E. Whether the market leaders enjoy competitive advantages and how hard it is to develop a
strongly differentiated product
99. Evaluating whether an industry presents a sufficiently attractive business opportunity

usually does not involve a consideration of which of the following factors?
A. The industry's growth potential, whether competitive pressures will likely grow stronger or
weaker, and whether the industry's future profit prospects are above average, average, or
below average
B. An assessment of the degrees of business risk and uncertainty in the industry's future
C. Whether the industry's future profitability will be favorably or unfavorably affected by the
prevailing driving forces
D. The severity of the problems confronting the industry as a whole
E. Whether the industry's product is strongly or weakly differentiated
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100. Evaluating whether an industry's environment presents a company with a sufficiently

attractive business opportunity involves
A. sizing up overall industry and competitive conditions to determine whether the industry's
overall profit prospects are above average, average, or below average.
B. determining which firms in the industry have a competitive advantage and how they got
their advantage.
C. determining the overall strength of the five competitive forces.
D. constructing a strategic group map and assessing the attractiveness of the competitive
position of each strategic group to determine the overall attractiveness of all the strategic
groups.
E. using value chain analysis to determine the relative cost positions of rival firms and to learn
who the industry's low-cost producer is.
Short Answer Questions
101. What are the seven key questions which form the framework of thinking strategically
about a company's industry and competitive environment?
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102. Draw the five-forces model of competition and briefly describe the relevance of each of
the five forces in determining the overall strength of competitive pressures a company faces.
Which of the five competitive forces is typically the strongest?
103. What are the five competitive forces that comprise the five-forces model of
competition?
104. Competitive markets are economic battlefields. True or false? Explain.
105. Identify and briefly explain any four of the factors that influence the strength or intensity
of competitive rivalry among an industry's member firms.
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106. Identify five factors that tend to intensify competitive rivalry among an industry's
member firms.
107. Identify five factors that tend to weaken the intensity of competitive rivalry among an
industry's member firms.
108. Identify and briefly describe five common barriers to entering an industry.
109. Identify and briefly explain any three factors that intensify competitive pressures
stemming from the threat that new firms will enter the industry.
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110. Identify three conditions that tend to make potential entry a strong competitive force.
111. Identify and briefly explain any three factors that weaken the competitive pressures
112. Identify and briefly explain any two of the factors that influence the strength of
competition from substitute products.
113. Identify and briefly explain any three of the factors that influence the bargaining strength
and leverage of suppliers.
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114. Identify and briefly explain any three factors that lead to strong bargaining power on the
part of suppliers.
115. Identify and briefly explain any three factors that lead to weak bargaining power on the
part of suppliers.
116. Explain why low switching costs and weakly differentiated products tend to give buyers
a high degree of bargaining power.
117. Not all buyers of an industry's product are likely to possess the same degree of
bargaining power or leverage over the terms and conditions under which they purchase the
product. True or false? Explain.
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118. Identify and briefly discuss any three of the factors that influence the bargaining strength
and leverage of buyers.
119. Identify and briefly explain any three factors that lead to strong bargaining power on the
part of buyers.
120. Identify and briefly explain any three factors that lead to weak bargaining power on the
part of buyers.
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121. Explain the meaning and significance of each of the following:
a.) bargaining power of suppliers

b.) driving forces
c.) strategic group mapping
d.) key success factors
122. In doing driving forces analysis, is it sufficient to simply identify the driving forces that
are operating to alter industry and competitive conditions? Why or why not? If not, then
explain what else is required for a complete driving forces assessment.
123. Identify at least five common driving forces and briefly explain how each one can
produce important changes in industry and competitive conditions.
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124. Identify at least three benefits of constructing a strategic group map.
125. What is the analytical value of studying competitors and trying to predict what moves
rivals will make next?
126. What is the strategy-making value of identifying an industry's key success factors?
127. Identify four factors that affect whether an industry does or does not present a company
with a good business opportunity?
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128. Can an industry be attractive to one company and unattractive to another company? Why
or why not?
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Chapter 03 Evaluating a Company's External Environment Answer Key
Multiple Choice Questions
The Strategically Relevant Components of a Company’s Macro-Environment
1. (p. 50) A company's "macro-environment" refers to

A. the industry and competitive arena in which the company operates.
B. general economic conditions plus the factors driving change in the markets where a
company operates.
C. all the relevant forces and factors outside a company's boundaries—general economic
conditions, population demographics, societal values and lifestyles, technological factors,
governmental legislation and regulation, and closer to home, the industry and competitive
arena in which it operates.
D. the competitive market environment that exists between a company and its competitors.
E. the dominant economic features of a company's industry.
AACSB: Diversity
Bloom's: Remember
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Company Macro-Environment
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2. (p. 50) Which one of the following is not part of a company's macroenvironment?
A. Conditions in the economy at large
B. Population demographics and societal values and lifestyles
C. Technological factors and governmental regulations and legislation
D. The industry and competitive environment arena in which the company operates
E. The company's resource strengths, resource weaknesses, and competitive capabilities
AACSB: Diversity
Bloom's: Remember
Difficulty: Easy
company's industry.
Topic: Company Macro-Environment
3. (p. 53) Which of the following is not a major question to ask in thinking strategically about
industry and competitive conditions in a given industry?
A. How many companies in the industry have good track records for revenue growth and
profitability?
B. What strategic moves are rivals likely to make next?
C. What are the key factors for future competitive success?
D. Does the outlook for the industry present the company with sufficiently attractive
prospects for profitability?
E. What forces are driving changes in the industry, and what impact will these changes have
on competitive intensity and industry profitability?
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
Topic: Strategic Thinking
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4. (p. 53) Thinking strategically about industry and competitive conditions in a given industry
involves evaluating such considerations as
A. the forces driving change in the industry.
B. the dominant economic features of the industry in which the company operates.
C. the kinds of competitive forces industry members are facing and the strength of each
competitive force.
D. the key factors influencing future competitive success in the industry.
E. All of these.
AACSB: Diversity
Bloom's: Understand
Difficulty: Medium
company's industry.
Question 1: Does the Industry Offer Attractive Opportunities for Growth?
5. (p. 53) Which of the following is not a factor to consider in identifying an industry's dominant
economic features?
A. Market size and growth rate
B. The extent of backward integration of buyer needs and requirements
C. Whether the products or services of rival firms are becoming more or less differentiated
D. Strength of driving forces and competitive forces
E. The pace of technological change, scale economies and experience curve effects, and
product innovation
AACSB: Diversity
Bloom's: Understand
Difficulty: Medium
company's industry.
Topic: Industry Growth Opportunities
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6. (p. 53) Which of the following is not a relevant consideration in identifying an industry's
dominant economic features?
A. Market size and growth rate, the geographic scope of competitive rivalry, and demand-
supply conditions
B. The extent to which economies of scale and learning/experience curve effects are present
C. How many strategic groups the industry has and which ones are most profitable and least
profitable
D. The number and sizes of buyers, the number of rivals, and the pace of product innovation
E. The prevalence of technological change
AACSB: Diversity
Bloom's: Understand
Difficulty: Medium
company's industry.
Topic: Industry Growth Opportunities
Question 2: What Kinds of Competitive Forces are Industry Members Facing, and How
Strong are They?
7. (p. 54) The state of competition in an industry is a function of

A. the competitive pressures associated with the market maneuvering and jockeying for buyer
patronage that goes on among rival firms in the industry.
B. competitive pressures coming from the attempts of companies in other industries
attempting to win buyers over to their substitute products.
C. competitive pressures associated with the threat of new entrants into the marketplace.
D. competitive pressures associated with the bargaining power of suppliers and customers.
E. All of these.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
Topic: Competitive Forces
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8. (p. 54) The nature and strength of the competitive forces that prevail in an industry is
generally a joint product of
A. the pressures induced by the market maneuvering and jockeying for buyer patronage that
goes on among rival sellers in the industry.
B. the threat that firms outside the industry will decide to enter the market.
C. the attempts of companies in other industries to win buyers over to their own substitute
products.
D. competitive pressures stemming from the bargaining power of both suppliers and buyers.
E. All of these.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
9. (p. 54) Which of the following is not one of the five typical sources of competitive pressures?
A. The power and influence of industry driving forces
B. The bargaining power of suppliers and seller-supplier collaboration
C. The threat of new entrants into the market
D. The attempts of companies in other industries to win customers over to their own substitute
products
E. The market maneuvering and jockeying for buyer patronage that goes on among rival
sellers in the industry
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
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10. (p. 54) The most powerful of the five competitive forces is usually
A. the competitive pressures that stem from the ready availability of attractively-priced
B. the competitive pressures associated with the market maneuvering and jockeying for buyer
patronage that goes on among rival sellers in the industry.
C. the benefits that emerge from close collaboration with suppliers and the competitive
pressures that such collaboration creates.
D. the competitive pressures associated with the potential entry of new competitors.
E. the bargaining power and leverage that large customers are able to exercise.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
11. (p. 54) Typically, the weakest of the five competitive forces in an industry is/are:
A. the threat posed by potential new entrants.
B. the bargaining power and leverage that suppliers are able to exercise.
C. the competitive pressures that stem from the ready availability of attractively-priced
D. the bargaining power and leverage that buyers are able to exercise.
E. None of these is typically weakest.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
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lOMoARcPSD|9678292
12. (p. 54) Using the five-forces model of competition to determine what competition is like in a
given industry involves
A. building the picture of competition in three steps: (1) identifying the specific competitive
pressures associated with each of the five competitive forces; (2) evaluating how strong the
pressures comprising each competitive force are; and (3) determining whether the collective
impact of all five competitive forces is conducive to earning attractive profits.
B. building the picture of competition in two steps: (1) determining which rival has the
biggest competitive advantage and (2) assessing whether the competitive advantages
possessed by various industry members allow most industry members to earn above-average
profits.
C. evaluating whether competition is being intensified or weakened by the industry's driving
forces and key success factors.
D. assessing whether the collective impact of all five forces is weak enough to allow industry
members to go on the offensive or use a defensive strategy to insulate against fierce
competitive pressures.
E. gauging the overall strength of competition based on how many industry rivals are
operating with a competitive advantage and how many are operating at a competitive
disadvantage.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
13. (p. 54) What makes the marketplace a competitive battlefield is

A. the race of industry members to build strong defenses against the industry's driving forces.
B. the constant jockeying of industry members to strengthen their standing with buyers and
win a competitive edge over rivals.
C. the ongoing race among rival sellers to have the highest quality product.
D. the ongoing efforts of industry members to introduce new and improved products/services
at a faster rate than their rivals.
E. the ongoing race among rivals to achieve the fastest rate of growth in revenues and profits.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
Topic: Competitive Pressures and Rivalry
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lOMoARcPSD|9678292
14. (p. 54) Competitive jockeying and market maneuvering among industry rivals
A. determines whether the industry's strategic group map will be static or dynamic.
B. centers around collaborative efforts to overcome the bargaining power of powerful
suppliers and powerful buyers.
C. is usually an industry's strongest driving force.
D. is usually one of the two or three weakest competitive forces because of the close
familiarity that rivals have for one another's likely next moves.
E. is ever-changing as fresh offensive and defensive moves are initiated and as rivals
emphasize first one mix of competitive weapons and tactics and then another.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
15. (p. 57) Which one of the following does not cause the rivalry among competing sellers to be
weak?
A. High buyer switching costs
B. Rapid growth in buyer demand
C. Industry conditions that tempt rivals to use price cuts or other competitive weapons to
boost unit sales
D. Low barriers to entry
E. Strongly differentiated products among rival sellers
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
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lOMoARcPSD|9678292
16. (p. 57-58) Factors that tend to result in weak rivalry among competing sellers include
A. low buyer switching costs and low barriers to entry.
B. rapid growth in buyer demand, high buyer costs to switch brands, and so many industry
rivals that any one company's actions have little impact on rivals' businesses.
C. weakly differentiated products among rival sellers.
D. rivals that are quite diverse in terms of their strategies, objectives, and countries of origin.
E. conditions where outsiders have recently acquired weak competitors and are trying to turn
them into major contenders.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
17. (p. 57-58) The rivalry among competing sellers tends to be less intense when
A. industry conditions tempt competitors to use price cuts or other competitive weapons to
boost unit sales.
B. buyer demand is weak and many sellers have excess capacity and/or inventory.
C. industry rivals are not particularly aggressive or active in making fresh moves to improve
their market standing and business performance.
D. rivals have diverse strategies and objectives and are located in different countries.
E. rival sellers have weakly differentiated products.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
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lOMoARcPSD|9678292
18. (p. 57-59) Rivalry among competing sellers is generally more intense when
A. there are relatively few industry key success factors and rivals have highly differentiated
products.
B. the industry's driving forces are strong and rivals have strongly differentiated products.
C. barriers to entry are moderately high and the pool of likely entry candidates is small.
D. rivals are active in making fresh moves to lower prices, introduce new products, increase
promotional efforts and advertising, and otherwise gain sales and market share.
E. barriers to entry are high and buyer switching costs are high.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
19. (p. 57-59) Rivalry among competing sellers grows in intensity when
A. rivals' products/services are sold at widely varying prices and there are only 2-4 rivals.
B. rivals have highly differentiated products and buyer demand is growing rapidly.
C. there are so many industry rivals that the impact of any one company's actions is spread
thinly across all industry members.
D. the products/services of rivals are strongly differentiated and buyers have high switching
costs.
E. buyer demand is growing slowly and the industry is composed of 6 to 10 competitors that
are fairly equal in size and competitive capability.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
3-52

lOMoARcPSD|9678292
20. (p. 57-58) The rivalry among competing firms tends to be more intense
A. when demand for the product is growing slowly, buyers have low switching costs, and the
actions of any one company to attract more customers and boost market share have strong
direct impact on their rivals.
B. when the products/services of rival sellers are strongly differentiated and buyer demand is
strong.
C. when rivals are relatively content with their market position.
D. when there are so many industry rivals that the impact of any one company's actions is
spread thinly across all industry members.
E. the smaller the number of firms in the industry and the more unequal their market shares.
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
company's industry.
21. (p. 57-59) Which of the following is not among the factors that affect whether competitive
rivalry among participating firms is strong, moderate, or weak?
A. Whether the products of rival sellers are strongly or weakly differentiated
B. Whether demand for the industry's product is growing rapidly or slowly
C. The degree to which rivals are satisfied with their current market position
D. Whether industry driving forces are strong or weak
E. Whether industry conditions tempt competitors to use price cuts or other competitive
weapons to boost unit sales and whether one or two rivals have particularly powerful
strategies
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
company's industry.
3-53

lOMoARcPSD|9678292
22. (p. 57-58) Rivalry among competing sellers tends to be more intense when
A. competitors are very unequal in size and capability, such that small competitors must really
scramble to even survive.
B. buyer switching costs are high and market demand is growing rapidly.
C. several competitors are under pressure to improve their market share or profitability and
launch fresh strategic initiatives to attract more buyers and bolster their business position.
D. the products of rival sellers are strongly differentiated.
E. there are fewer than 5 competitors and their products are strongly differentiated.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
23. (p. 57-59) The competitive force of rival firms' jockeying for better market positions, higher
sales and market shares, and competitive advantage
A. is stronger when firms strive to be low-cost producers than when they use differentiation
and focus strategies.
B. is typically a weaker competitive force than is the threat of entry of new rivals.
C. is largely unaffected by whether industry conditions tempt rivals to use price cuts or other
competitive weapons to boost unit sales.
D. tends to intensify when strong companies outside the industry acquire weak firms in the
industry and launch aggressive, well-funded moves to transform the acquired companies into
strong market contenders.
E. is weaker when more firms have weakly differentiated products, buyer demand is growing
slowly, and buyers have moderate switching costs.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
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lOMoARcPSD|9678292
24. (p. 58) In analyzing the strength of competition among rival firms, an important
consideration is
A. the potential for buyers to exercise strong bargaining power.
B. the diversity of competitors in terms of visions, strategic intents, objectives, strategies,
C. the number of firms pursuing differentiation strategies versus the number pursuing low-
cost leadership strategies and focus strategies.
D. the extent to which some rivals have more than two competitively valuable competencies
or capabilities.
E. whether the industry is characterized by a strong learning/experience curve and whether the
industry is composed of many or few strategic groups.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
25. (p. 58) In which one of the following instances is rivalry among competing sellers not more
intense?
A. When certain competitors are dissatisfied with their market position and make moves to
bolster their standing
B. When strong companies outside the industry acquire weak firms in the industry and launch
aggressive moves to transform their newly-acquired competitors into stronger market
contenders
C. When competitors are fairly equal in size and capability
D. When the products of rivals are weakly differentiated, buyer switching costs are low, and
market demand is growing slowly
E. When there are vast numbers of small rivals so the impact of any one company's actions is
spread thinly across all industry members
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
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lOMoARcPSD|9678292
26. (p. 59-60) Which of the following is generally not considered as a barrier to entry?
A. Rapid market growth
B. Sizable capital requirements and an array of regulatory requirements
C. Strong buyer loyalty to existing brands
D. Sizable economies of scale in production
E. Difficulties in gaining access to technological know-how
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
Topic: Competitive Pressures and Threat of New Entry
27. (p. 60) Potential entrants are more likely to be deterred from actually entering an industry
when
A. incumbent firms have previously been aggressive in defending their market positions
against entry.
B. incumbent firms are complacent.
C. buyers are not particularly price sensitive and the industry already contains a dozen or
more rivals.
D. the relative cost positions of incumbent firms are about the same, such that no one
incumbent has a meaningful cost advantage.
E. buyer switching costs are moderately low because of strong product differentiation among
incumbent firms.
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
company's industry.
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lOMoARcPSD|9678292
28. (p. 62) Competitive pressures associated with the threat of entry are greater when
A. incumbent firms are unable or unwilling to strongly contest the entry of newcomers.
B. newcomers can expect to earn attractive profits and a number of outsiders have the
expertise and resources to hurdle whatever entry barriers exist.
C. entry barriers are relatively low and buyer demand for the product is growing fairly rapidly.
D. existing industry members are looking to expand their market reach by entering product
segments or geographic areas where they currently do not have a presence.
E. All of these conditions heighten the competitive pressures associated with fresh entry into
the industry.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
29. (p. 62) Which one of the following does not intensify the competitive pressures associated
with the threat of entry?
A. When incumbent firms are unable or unwilling to launch competitive initiatives to strongly
contest the entry of newcomers
B. When industry members are struggling to earn good profits
C. When entry barriers are relatively low and buyer demand for the product is growing fairly
rapidly
D. When existing industry members are looking to expand their market reach by entering
product segments or geographic areas where they currently do not have a presence
E. When newcomers can expect to earn attractive profits and a number of outsiders have the
expertise and resources to hurdle whatever entry barriers exist
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
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lOMoARcPSD|9678292
30. (p. 62) Which one of the following increases the competitive pressures associated with the
threat of entry?
A. When incumbent firms are likely to launch competitive initiatives to strongly contest the
entry of newcomers
B. When buyers have a high degree of loyalty to the brands and product offerings of existing
industry members
C. When buyer demand for the product is growing fairly slowly
D. When few outsiders have the expertise and resources to hurdle whatever entry barriers
exist
E. When newcomers can expect to earn attractive profits
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
31. (p. 62) The competitive threat that outsiders will enter a market is weaker when
A. financially strong industry members send strong signals that they will launch strategic
initiatives to combat the entry of newcomers.
B. the industry is characterized by the lack of sizable scale economies and learning/experience
curve effects.
C. the industry's market growth is rapid.
D. there are more than 2 entry barriers.
E. buyers have little loyalty to the brands and product offerings of existing industry members.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
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lOMoARcPSD|9678292
32. (p. 62) Competitive pressures stemming from the threat of entry are weaker when
A. there are fewer than 20 potential entry candidates and more than 10 firms already in the
industry.
B. there are more than 3 entry barriers.
C. the industry outlook is risky or uncertain.
D. incumbent firms have little ability to leverage distributors, dealers, and/or retailers to retain
their business.
E. the nature of the industry entails few scale economies.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
33. (p. 61) The best test of whether potential entry is a strong or weak competitive force is
A. the strength of buyer loyalty to existing brands.
B. whether the industry's driving forces make it harder or easier for new entrants to be
successful.
C. whether the strategies of industry members are well-matched to the industry's key success
factors.
D. whether there are any vacant spaces on the industry's strategic group map.
E. to ask if the industry's growth and profit prospects are strongly attractive to potential entry
candidates.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
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lOMoARcPSD|9678292
34. (p. 63) Which of the following is not a good example of a substitute product that triggers
stronger competitive pressures?
A. A salad as a substitute for French fries
B. Wireless phones as a substitute for wired telephones
C. Coca-Cola as a substitute for Pepsi
D. Snowboards as a substitute for snow skis
E. Video-on-demand services from a cable TV company as a substitute for going to the
movies
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
company's industry.
Topic: Competitive Pressures from Substitute Product Sellers
35. (p. 63-64) The competitive pressures from substitute products tend to be stronger when
A. buyers are relatively comfortable with using substitutes and the costs to buyers of
switching over to the substitutes are low.
B. there are more than 10 sellers of substitute products.
C. the quality and performance of the substitutes is well above what buyers need to meet their
requirements.
D. buyers have high psychic costs in severing existing brand relationships and establishing
new ones.
E. demand for the industry's product is not very price sensitive.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
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lOMoARcPSD|9678292
36. (p. 63) Industry rivals tend to experience weak competitive pressures from substitute
products when
A. the available substitute products are weakly differentiated from one another.
B. the buyers of the industry's products are few in number and they have substantial amounts
of leverage with sellers.
C. rival sellers experience strong bargaining power from both suppliers and influential
customers.
D. buyers incur high costs in switching to substitutes and substitutes are higher priced relative
to the performance they deliver.
E. the producers of substitute products are all pursuing strategies to strongly differentiate their
products on the basis of quality and product performance.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
37. (p. 64) Whether supplier-seller relationships in an industry represent a strong or weak source
of competitive pressure is a function of
A. whether the profits of suppliers are relatively high or low.
B. the number of suppliers that each seller/industry member purchases from on average.
C. how aggressively rival industry members are trying to differentiate their products.
D. whether suppliers can exercise sufficient bargaining power to influence the terms and
conditions of supply in their favor and the extent of seller-supplier collaboration in the
industry.
E. whether the prices of the items being furnished by the suppliers are rising or falling.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
Topic: Competitive Pressures from Supplier Bargaining Power
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lOMoARcPSD|9678292
38. (p. 65) The strength of competitive pressures that suppliers can exert on industry members is
mainly a function of
A. whether needed inputs are in short supply or whether ample supplies are readily available
from several different suppliers.
B. whether suppliers self-manufacture what they supply or source their items from other
manufacturers.
C. the industry's position in the growth cycle.
D. whether technological change in the businesses of suppliers is rapid or slow.
E. whether the needs and expectations of buyers of the industry product are changing slowly
or rapidly.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
39. (p. 65-66) The bargaining leverage of suppliers is greater when

A. there are no good substitutes for the items being furnished by the suppliers and the number
of suppliers is relatively small.
B. industry members incur low costs in switching their purchases from one supplier to
another.
C. industry members purchase in large quantities and thus are important customers of the
suppliers.
D. there is extensive seller-supplier collaboration.
E. the supplier industry is composed of a large number of relatively small suppliers.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
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lOMoARcPSD|9678292
40. (p. 65-67) In which one of the following instances are the competitive pressures that industry
members experience in their dealings with suppliers not weakened?
A. When industry members pose a credible threat of backward integration into the business of
suppliers
B. When the cost of switching from one supplier to another is low
C. When the buying firms purchase in large quantities and thus are important customers of the
suppliers
D. When the item being supplied is a commodity
E. When the items purchased from suppliers are in short supply
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
41. (p. 65-66) Supplier bargaining power is weaker when

A. good substitute inputs exist or new ones emerge.
B. the cost of switching from one supplier to another is high.
C. suppliers furnish a critical part or component.
D. buying firms are looking for suppliers with good just-in-time supply capabilities.
E. a few large suppliers are the primary sources of a particular item.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
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lOMoARcPSD|9678292
42. (p. 65-67) Which one of the following is not a factor that affects the strength of supplier
bargaining power?
A. Whether needed inputs are in ample supply and are readily available from several different
suppliers
B. Whether industry members are a strong threat to integrate backward into the business of
suppliers and self-manufacture their own requirements
C. Whether industry members are struggling to make good profits because of slow-growing
market demand
D. Whether the costs of industry members to switch their purchases to alternative suppliers
are high or low
E. Whether the item being supplied is a commodity or is highly differentiated from supplier to
supplier
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
43. (p. 65) Which one of the following is not a factor in causing supplier bargaining power to be
relatively strong?
A. The inputs needed from suppliers are in short supply.
B. Suppliers are a strong threat to integrate forward into the business of industry members.
C. The input being supplied is a commodity.
D. The input being supplied significantly enhances the quality or performance of the products
of industry members.
E. There are only a few suppliers of the input.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
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lOMoARcPSD|9678292
44. (p. 66-67) When one or more industry members have unusually effective and mutually
advantageous partnerships with their suppliers,
A. it is rare for such partnerships to have much competitive impact on those industry members
not having such partnerships.
B. one unfortunate outcome is that it tends to give the supply partners much enhanced
bargaining power in their dealings with these industry members.
C. there is a strong likelihood such partnerships will put increased competitive pressure on
those industry members who lack productive collaborative relationships with their suppliers.
D. there is a high likelihood of such partnerships reducing competitive pressures on all
industry members, provided technological change in the suppliers' business is rapid and the
item being supplied is a commodity.
E. the usual result is to reduce competitive pressures on all industry members, provided the
costs of the items furnished by supply chain partners amount to 50% or more of total cost.
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
company's industry.
45. (p. 65-66) Which one of the following is not a reason why industry members are often
motivated to enter into collaborative partnerships with key suppliers?
A. To reduce the costs of switching suppliers
B. To speed the availability of next-generation components
C. To enhance the quality of parts and components being supplied and reduce defect rates
D. To squeeze out important cost savings for both themselves and their suppliers
E. To reduce inventory and logistics costs
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
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lOMoARcPSD|9678292
46. (p. 67) Whether buyer-seller relationships in an industry represent a strong or weak source of
A. the speed with which general economic conditions and interest rates are changing.
B. the extent to which buyers can exercise enough bargaining power to influence the
conditions of sale in their favor and whether strategic partnerships between certain industry
members can adversely affect other industry members.
C. how many buyers purchase all of their requirements from a single seller versus how many
purchase from several sellers.
D. the number of buyers versus the number of sellers.
E. whether industry members are spending more or less on advertising.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
Topic: Competitive Pressures from Buyer Bargaining Power
47. (p. 68-69) Whether buyer bargaining power poses a strong or weak source of competitive
pressure on industry members depends in part on
A. whether most buyers possess roughly equal or varying degrees of bargaining power and
leverage.
B. how many buyers are engaged in collaborative partnerships with sellers.
C. whether entry barriers are high or low and the size of the pool of likely entry candidates.
D. whether the overall quality of the items being furnished by industry members is rising or
falling.
E. whether demand-supply conditions represent a buyer's market or a seller's market.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
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lOMoARcPSD|9678292
48. (p. 69) Which of the following is not a factor that causes buyer bargaining power to be
stronger?
A. Some buyers are a threat to integrate backward into the business of sellers and become an
important competitor.
B. The industry is composed of a few large sellers and the customer group consists of
numerous buyers that purchase in fairly small quantities.
C. Buyers have considerable discretion over whether and when they purchase the product.
D. Buyers purchase the item frequently and are well-informed about sellers' products, prices,
and costs.
E. The costs incurred by buyers in switching to competing brands or to substitute products are
relatively low.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
49. (p. 68-70) Which of the following factors does not affect whether buyer bargaining power and
seller-buyer collaboration are an important source of competitive pressure in an industry?
A. Whether winning the business of certain customers, offer a seller important market
exposure or prestige
B. The extent and importance of collaborative partnerships and alliances between particular
sellers and buyers
sellers
D. Whether sellers' products are weakly differentiated, making it easy and inexpensive for
buyers to switch to competing brands
E. Whether buyers have a strong preference for products of superior quality or just average
quality
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
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lOMoARcPSD|9678292
50. (p. 67-68) Which of the following factors is not a relevant consideration in determining the
strength of buyer bargaining power?
A. Whether winning the business of prestigious customers gives a seller important market
exposure and heightens its brand name
B. Whether the seller is a manufacturer.
sellers
D. Whether sellers' products are weakly differentiated, making it easy for buyers to switch to
competing brands
E. Whether collaborative partnerships and alliances between particular sellers and buyers put
rivals lacking such collaborative relationships at a competitive disadvantage
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
51. (p. 70) Collaborative relationships between particular sellers and buyers in an industry can
represent a source of strong competitive pressure when
A. virtually all buyers have strong brand attachments and are highly brand loyal.
B. demand for the product is growing rapidly.
C. sales are made to buyer groups with either strong bargaining power or high sensitivity.
D. sellers are racing to add the latest and greatest performance features so as to attract the
patronage of important or prestigious buyers.
E. buyers are very quality conscious.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
3-68

lOMoARcPSD|9678292
52. (p. 69) In which of the following circumstances are competitive pressures associated with
the bargaining power of buyers not relatively strong?
A. When buyer demand is growing rapidly
B. When buyers are relatively well informed about sellers' products, prices, and costs
C. When buyers pose a major threat to integrate backward into the product market of sellers
D. When sellers' products are weakly differentiated, making it easy for buyers to switch to
competing brands
E. When buyers have considerable discretion over whether and when they purchase the
product
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
53. (p. 69) Competitive pressures stemming from buyer bargaining power tend to be weaker
when
A. the number of buyers is small, such that each customer's business tends to be particularly
important to a seller.
B. buyer demand is growing slowly or maybe even declining.
C. the costs incurred by buyers in switching to competing brands or to substitute products are
relatively high.
D. buyers purchase the item frequently and are well-informed about sellers' products, prices,
and costs.
E. the buyer group consists a few large buyers and the seller group consists of numerous small
firms.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
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54. (p. 69) Which of the following conditions acts to weaken buyer bargaining power?
A. When buyers are unlikely to integrate backward into the business of sellers
B. When buyers purchase the item frequently and are well-informed about sellers' products,
prices, and costs
C. When the costs incurred by buyers in switching to competing brands or to substitute
products are relatively low
D. When the products of rival sellers are weakly differentiated and buyers have considerable
discretion over whether and when they purchase the product
E. When buyers are few in number and/or often purchase in large quantities
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
55. (p. 69) Buyers are in position to exert strong bargaining power in dealing with sellers when
A. their costs to switch to competing brands or to substitute products are relatively high.
B. a particular seller's product delivers quality or performance that is very important to the
buyer and is not matched by other brands.
C. they buy the product infrequently or in small quantities and are not particularly well-
informed about sellers' products, prices, and costs.
D. buyer demand is growing rapidly.
E. the number of buyers is small or when a customer is particularly important to a seller.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
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56. (p. 69) Which of the following factors is not a relevant consideration in judging whether
buyer bargaining power is relatively strong or relatively weak?
A. Whether certain customers offer sellers important market exposure or prestige
B. Whether customers are relatively well informed about sellers' products, prices, and costs
C. Whether buyer needs and expectations are changing rapidly or slowly
D. Whether sellers' products are highly differentiated, making it troublesome or costly for
buyers to switch to competing brands or to substitute products
E. Whether sellers pose little threat of forward integration into the product market of their
customers and whether buyers pose a major threat to integrate backward into the product
market of sellers
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
57. (p. 70-71) A competitive environment where there is weak to moderate rivalry among sellers,
high entry barriers, weak competition from substitute products, and little bargaining leverage
on the part of both suppliers and customers
A. lacks powerful driving forces.
B. gives each industry competitor the best potential for building sustainable competitive
advantage over rival firms.
C. makes it hard for industry members to compete successfully unless they can strongly
differentiate their products.
D. is conducive to industry members earning attractive profits.
E. requires that industry members have low costs in order to be competitively successful.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
Topic: Competitive Forces and Collective Strength
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58. (p. 70) A competitive environment where there is strong rivalry among sellers, low entry
barriers, strong competition from substitute products, and considerable bargaining leverage on
the part of both suppliers and customers
A. is competitively unattractive from the standpoint of earning good profits.
B. offers little ability to build a sustainable competitive advantage.
C. is highly conducive to achieving strong product differentiation and high customer loyalty
to the company's brand.
D. offers moderate to good prospects for making a reasonable profit and building a
sustainable competitive advantage.
E. requires that industry members have a strongly differentiated product offering in order to
be profitable.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
59. (p. 71) As a rule, the stronger the collective impact of competitive pressures associated with
the five competitive forces,
A. the stronger are the industry's driving forces.
B. the lower the combined profitability of industry members.
C. the fewer companies that can achieve a competitive advantage via anything other than
being the industry's low-cost leader.
D. the larger the number of competitive advantage opportunities for industry members.
E. the greater the number of industry key success factors.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
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60. (p. 57) Factors that cause the rivalry among competing sellers to be weak include
A. low buyer switching costs and rival sellers that are relatively equal is size and capability.
B. rapid growth in buyer demand and high buyer switching costs.
C. few industry rivals that any one company's actions can easily be anticipated and countered
by its rivals.
D. low barriers to entry and weakly differentiated products among rival sellers.
E. slow growth in buyer demand and strongly differentiated products.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
61. (p. 58) The intensity of rivalry among competing sellers does not depend on whether
A. the industry has more than two strong driving forces and whether the industry has more
than 2 strategic groups.
B. competitors are diverse in terms of visions, strategic intents, objectives, strategies,
C. strong companies outside the industry have acquired weak firms in the industry and are
launching aggressive moves to transform the acquired companies into strong market
contenders.
D. one or two rivals have particularly powerful and successful strategies.
E. industry conditions tempt industry members to use price cuts or other competitive weapons
to boost unit sales.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
profitability.
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62. (p. 63) In which of the following instances are industry members not subject to stronger
competitive pressures from substitute products?
A. The costs to buyers of switching over to the substitutes are low.
B. Buyers are dubious about using substitutes.
C. The quality and performance of the substitutes is well matched to what buyers need to meet
their requirements.
D. Buyer brand loyalty is weak.
E. Substitutes are readily available at competitive prices.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
profitability.
63. (p. 63) Just how strong the competitive pressures are from substitute products depends on
A. whether the available substitutes are strongly or weakly differentiated and whether buyers
make purchases frequently or infrequently.
B. whether attractively priced substitutes are readily available and the ease with which buyers
can switch to substitutes.
C. whether the available substitutes are products or services.
D. whether the producers of substitutes have ample budgets for new product R&D.
E. the speed with which buyer needs and expectations are changing.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
profitability.
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Question 3: What Forces Are Driving Industry Change and What Impacts Will They
Have?
64. (p. 70-71) Industry conditions change

A. because of such powerful driving forces as swings in buyer demand, changing interest
rates, ups and downs in the economy, and higher/lower entry barriers.
B. because of newly-emerging industry threats and industry opportunities that alter the
composition of the industry's strategic groups.
C. because new industry key success factors emerge.
D. because important forces create pressures or incentives for industry participants
(competitors, customers, suppliers) to alter their actions.
E. chiefly because of changes in the barriers to entry and the degree of competition from
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
company's industry.
Topic: Driving Forces
65. (p. 3-72) The "driving forces" in an industry

A. are usually triggered by changing technology or stronger learning/experience curve effects.
B. usually are spawned by growing demand for the product, the outbreak of price-cutting, and
big reductions in entry barriers.
C. are major underlying causes of changing industry and competitive conditions and have the
biggest influences in reshaping the industry landscape and altering competitive conditions.
D. appear when an industry begins to mature but are seldom present during early stages of the
industry life-cycle.
E. are usually triggered by shifting buyer needs and expectations or by the appearance of new
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
profitability.
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66. (p. 72) The task of driving forces analysis is to

A. develop a comprehensive list of all the potential causes of changing industry conditions.
B. predict which new driving forces will emerge next.
C. determine which of the five competitive forces is the biggest driver of industry change.
D. identify the driving forces, assess whether their impact will make the industry more or less
attractive, and determine what strategy changes are needed to prepare for the impacts of the
driving forces.
E. learn what the industry key success factors are and how they might change in the future.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
profitability.
67. (p. 72) Driving forces analysis

A. involves identifying the driving forces, assessing whether their impact will make the
industry more or less attractive, and determining what strategy changes a company may need
to make to prepare for the impacts of the driving forces.
B. identifies which strategic group is the most powerful.
C. helps managers identify which industry member is likely to become (or remain) the
industry leader and why.
D. helps managers identify which key success factors are most likely to help their company
gain a competitive advantage.
E. helps managers identify which of the five competitive forces will be the strongest driver of
industry change.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
profitability.
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68. (p. 73-75) Which of the following is not generally a "driving force" capable of producing
A. Changes in the long-term industry growth rate
B. Increasing globalization of the industry
C. Product innovation and technological change
D. Ups and downs in the economy and in interest rates
E. New government regulations or significant changes in government policy toward the
industry
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
profitability.
69. (p. 73-75) Which of the following are most unlikely to qualify as driving forces?
A. Changes in the long-term industry growth rate, the entry or exit of major firms, and
changes in cost and efficiency
B. Increasing globalization of the industry and product innovation
C. New Internet technology applications, new government regulations, and significant
changes in government policy toward the industry
D. Mounting competition from substitutes and increasing efforts to collaborate with suppliers
via strategic alliances
E. Marketing innovations and changes in who buys the industry's product and how they use it
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
profitability.
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70. (p. 73-75) Which of the following do not qualify as potential driving forces capable of
inducing fundamental changes in industry and competitive conditions?
A. Changes in who buys the product and how they use it and changes in the long-term
industry growth rate
B. Entry or exit of major firms, product innovation, and marketing innovation
C. Increases in the economic power and bargaining leverage of customers and suppliers,
growing supplier-seller collaboration, and growing buyer-seller collaboration
D. Growing buyer preferences for differentiated products instead of mostly standardized or
identical products
E. Changes in economies of scale and experience curve effects brought on by changes in
manufacturing technology and new Internet capabilities
AACSB: Analytic
Bloom's: Remember
Difficulty: Hard
profitability.
71. (p. 74) Which of the following is most likely to qualify as a driving force?
A. Increases in price-cutting by rival sellers and the launch of major new advertising
campaigns by one or more rivals
B. Wildly successful introduction of innovative new products by one or more industry rivals
that force other rivals to respond quickly or lose a major share of their customers to the
innovating rival(s)
C. An increase in the prices of substitute products
D. Decisions on the part the industry's three biggest competitors not to pursue a strategy of
striving to be the industry's low-cost leader
E. Decisions by one or more outsiders not to attempt to enter the industry
AACSB: Analytic
Bloom's: Apply
Difficulty: Easy
profitability.
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72. (p. 73-75) Which one of the following is not a common type of driving force?
A. Reductions in uncertainty and business risk
B. Changing societal concerns, attitudes, and lifestyles
C. Diffusion of technical know-how across more companies and more countries
D. Increasing efforts on the part of industry members to collaborate closely with their
suppliers
E. Technological change and manufacturing process innovation
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
profitability.
73. (p. 73) Increasing globalization of the industry can be a driving force because
A. the products of foreign competitors are nearly always cheaper or of better quality than
those of domestic companies.
B. foreign producers typically have lower costs, greater technological expertise, and more
product innovation capabilities than domestic firms.
C. it tends to increase rivalry among industry members and often shifts the pattern of
competition among an industry's major players, favoring some and disadvantaging others.
D. it results in companies having fewer competitors and a strategic group map with fewer
circles.
E. market growth rates go up, product innovation speeds up, and new firms are likely to enter
the industry.
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
profitability.
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74. (p. 76) Driving forces analysis helps managers identify whether
A. the combined impacts of the driving forces will act to increase/decrease market demand,
increase/decrease competition, and raise/lower industry profitability in the years ahead.
B. it will become more or less important to aim the company's strategy at being the industry's
low-cost producer.
C. the driving forces will have a bigger impact on company profitability than competitive
forces.
D. the industry is likely to become more or less vertically integrated and why.
E. competitive advantages are likely to grow or diminish in importance.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
profitability.
Topic: Driving Forces Impact
75. (p. 77) An industry's driving forces

A. are generally determined by the sizes of strategic groups and the power of rival firms'
competitive strategies.
B. generally act in ways which will strengthen or weaken market demand, competition, and
industry profitability in future years.
C. frequently cause a reduction in the bargaining power of buyers.
D. are normally triggered by ups and downs in the economy, higher or lower interest rates, or
important new strategic alliances.
E. can be triggered by such factors as growing competitive pressures from substitute products,
and the efforts of rival firms to employ new or different offensive strategies.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
profitability.
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76. (p. 76) In analyzing driving forces, the strategist's role is to

A. identify the driving forces and evaluate their impact on (1) demand for the industry's
product, (2) the intensity of competition, and (3) industry profitability.
B. predict future marketing innovations and how fast the industry is likely to globalize.
C. evaluate what stage of the life cycle the industry is in and when it is likely to move to the
next stage.
D. determine who is likely to exit the industry and what changes can be expected in the
industry's strategic group map.
E. forecast fluctuations in product demand and how buyer needs will most likely change.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
profitability.
77. (p. 76) Which one of the following is not an integral part of driving forces analysis?
A. Identifying the specific factors causing fundamental changes in industry conditions and/or
the industry's competitive structure
B. Determining whether the driving forces are acting to cause one or more industry rivals to
shift to a different strategic group
C. Determining whether the driving forces are acting to strengthen or weaken market demand
D. Determining whether the driving forces are acting to make competition more or less
intense
E. Determining whether the driving forces are acting to raise or lower industry profitability
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
profitability.
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78. (p. 77) The real payoff for strategy making comes when managers draw conclusions about
A. what strategy adjustments are needed to deal with the changes in conditions.
B. determining the overall strength of the five competitive forces.
C. determining whether the industry's strategic group map will be static or dynamic.
D. conditions in the economy at large.
E. the extent to which rivals have more than two competitively valuable competencies or
capabilities
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
profitability.
Topic: Strategy for Changing Industry Conditions
Question 4: How Are Industry Rivals Positioned—Who Is Strongly Positioned and Who
Is Not?
79. (p. 77) What is the best technique for revealing the market position of industry competitors?
A. Strategic group mapping.
B. Global industry change.
C. Dynamic mapping analysis.
D. Distribution analysis.
E. None of these.
AACSB: Reflective Thinking

Bloom's: Remember
Difficulty: Easy
Learning Objective: 03-03 Become adept at mapping the market positions of key groups of industry rivals.
Topic: Strategic Group
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80. (p. 78) A strategic group

A. consists of those industry members that are growing at about the same rate and have
similar product line breadth.
B. includes all rival firms having comparable profitability.
C. is a cluster of industry rivals that have similar competitive approaches and market
positions.
D. consists of those firms whose market shares are about the same size.
E. is made up of those firms having comparable profit margins.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
81. (p. 78) A strategic group consists of those firms in an industry that
A. are subject to the same driving forces.
B. are placing about the same emphasis on each distribution channel.
C. use the same key success factors to differentiate their products.
D. employ similar competitive approaches and occupy similar positions in the market.
E. have similar size market shares.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
82. (p. 78) Strategic group mapping is a technique for displaying

A. how many rivals are pursuing each type of strategy.
B. which companies have the biggest market share and who the industry leader really is.
C. the different market or competitive positions that rival firms occupy in an industry and
identifying each rival's closest competitors.
D. which companies have the highest degrees of brand loyalty.
E. which companies have failing business models.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
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83. (p. 78) Which one of the following pairs of variables is least likely to be useful in drawing a
strategic group map?
A. Geographic coverage and degree of vertical integration
B. Brand name reputation and distribution channel emphasis
C. Product quality and product line breadth
D. Level of profitability and size of market share
E. Price/quality range and whether the company's product appeals to many or few types of
buyers
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
84. (p. 78) The concept of strategic groups is relevant to industry and competitive analysis
because
A. firms in the same strategic groups are rarely close competitors—a firm's closest
competitors are usually in distant strategic groups.
B. strategic group maps help identify each company's market position and its closest
competitors.
C. competition grows in intensity as the number and diversity of the strategic groups in an
industry increases.
D. the profit potential of firms in the same strategic group is usually very similar.
E. competitive pressures tend to be weaker within strategic groups than across strategic
groups.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
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85. (p. 78) In mapping strategic groups

A. one strategic variable and one financial variable should be used as axes for the map.
B. it is important for the variables used as axes to be highly correlated.
C. the best variables to use as axes for the map are those that differentiate how rivals have
positioned themselves in the marketplace.
D. it is important to use price as the variable for the vertical axis.
E. the primary objective is to determine which strategic groups are profitable and which are
not.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
86. (p. 78) Which of the following is not an appropriate guideline for developing a strategic
group map for a given industry?
A. The variables chosen as axes for the map should indicate big differences in how rivals have
positioned themselves to compete in the marketplace.
B. The variables chosen as axes for the map can be either quantitative or qualitative.
C. The variables chosen as axes for the map should be highly correlated.
D. Several maps should be drawn if more than one pair of variables help illuminate
differences in the competitive positioning of industry members.
E. The sizes of the circles on the map should be drawn proportional to the combined sales of
the firms in each strategic group.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
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87. (p. 80) With the aid of a strategic group map, one can
A. readily identify the entry and exit barriers for each strategic group.
B. pinpoint precisely which firms are in profitable strategic groups and which are not.
C. identify which competitive forces are strong and which are weak.
D. measure accurately whether across-group rivalry is stronger than within-group rivalry or
vice versa.
E. often learn to what extent industry driving forces and competitive pressures favor some
companies or groups and hurt others.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Topic: Strategic Group Maps
88. (p. 80) One of the things that can be gleaned from a strategic group map of industry rivals is
A. which rivals have been in business longer and thus have greater access to experience curve
effects.
B. which rivals have newer manufacturing facilities.
C. which strategic groups have the highest profit margins and the highest customer switching
costs.
D. whether profit prospects vary among strategic groups due to strengths and weaknesses in
their respective market positions on the map (perhaps because competitive pressures are
acting to favor some strategic groups and to disadvantage other groups).
E. which strategic groups are currently viewed as the most prestigious by customers and
which companies are being shunned by customers because of high prices and relatively low
product quality.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Topic: Strategic Group Maps
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Question 5: What Strategic Moves Are Rivals Likely to Make Next?
89. (p. 81) The payoff of good scouting reports on rivals is improved ability to
A. anticipate what moves rivals are likely to make next, thereby providing a valuable assist in
outmaneuvering them in the marketplace.
B. determine which rivals are in the best strategic group.
C. figure out how many key success factors a rival has.
D. determine whether a rival is gaining or losing market share.
E. determine whether a rival has the best strategy and is the industry leader.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Topic: Competitive Strategy
90. (p. 81) Having good competitive intelligence about rivals' strategies and moves to improve
their situation is important because
A. it identifies who the industry's current market share leaders are.
B. it helps a company to anticipate what moves rivals are likely to make next and to craft its
own strategic moves with some confidence about what market maneuvers to expect from its
rivals.
C. good scouting reports help identify which rival is in which strategic group.
D. it enables company managers to determine which rival has the worst strategy and how to
avoid making the same strategy mistakes.
E. it enables more accurate predictions about how long it will take a particular rival to copy
most of what the strategy leader is doing.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
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91. (p. 81) Good competitive intelligence about the strategies and competitive strengths and
weaknesses of rival companies helps management determine
A. which competitor has the best strategy and which competitors have flawed or weak
strategies.
B. which rivals are poised to gain market share and which seem destined to lose market share.
C. which rivals are likely to rank among the industry leaders on the road ahead.
D. which rivals are likely to initiate what kinds of fresh strategic moves and why.
E. All of these.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
92. (p. 81-82) In seeking to predict the next moves of close or key rivals, it is useful to consider
such questions as:
A. Which rivals badly need to increase their unit sales and market share and what new
offensive initiatives are they likely to employ?
B. Which rivals are poised to gain market share and which seem destined to lose market
share?
C. Which rivals are good candidates to be acquired?
D. Which rivals are likely to enter new geographic markets or expand their product offerings
(so as to enter new market segments where they currently do not have a presence)?
E. All of these.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
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Question 6: What Are the Key Factors for Future Competitive Success?
93. (p. 82) The key success factors in an industry

A. are those competitive aspects that most affect industry members' abilities to prosper in the
marketplace—specific strategy elements, product attributes, competencies, competitive
capabilities, and market achievements that spell the difference between being a strong
competitor and a weak competitor.
B. are determined by the industry's driving forces.
C. hinge on how many different strategic groups the industry has.
D. depend on how many rivals are trying to move from one strategic group to another.
E. are a function of such considerations as how many firms are in the industry, how many
have market shares above 5%, and whether the business models being used are similar or
diverse.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 03-04 Understand why in-depth evaluation of a business's strengths and weaknesses in relation to the specific industry
conditions it confronts is an essential prerequisite to crafting a strategy that is well-matched to its external situation.
Topic: Key Factors for Competitive Success
94. (p. 82) An industry's key success factors

A. are a function of market share, entry barriers, economies of scale, degree of vertical
integration, and industry profitability.
B. vary according to whether an industry has high or low long-term attractiveness.
C. can be determined from an analysis of an industry's dominant economic characteristics,
what competition is like, the impacts of the driving forces, the comparative market positions
of industry members, and the likely next moves of industry rivals.
D. can be determined from studying the "winning" strategies of the industry leaders and ruling
out as potential key success factors the strategy elements of those firms considered to have
"losing" strategies.
E. depend on the relative competitive strengths of the industry leaders and how vulnerable
they are to competitive attack.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
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95. (p. 83) In identifying an industry's key success factors, strategists should
A. try to single out all factors which play a major role in shaping whether buyer demand
grows rapidly or slowly.
B. consider on what basis customers choose between competing brands, what resources and
competitive capabilities firms need to be competitively successful, and what shortcomings are
almost certain to put a company at a significant competitive disadvantage.
C. consider whether the number of strategic groups is increasing or decreasing and whether
the five competitive forces are powerful or relatively weak.
D. consider what it will take to overtake the company with the industry's overall best strategy.
E. focus their attention on what it will take to capitalize on impacts of the industry's driving
forces.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
96. (p. 83) Which of the following is not a question asked to deduce a marketing-related key
success factor?
A. What are the industry product R & D capabilities and expertise in product design?
B. What basis do buyers choose between the competing brands of sellers?
C. What product attributes and service characteristics are crucial?
D. What resources must a company have to be competitive?
E. What shortcomings are almost certain to put a company at a significant disadvantage?
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
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97. (p. 83) Which of the following can aid industries in identifying key success factors?
A. Global distribution capabilities
B. Crucial product attributes and service characteristics
C. Low distribution costs
D. Accurate filling of buyer orders
E. Short delivery time capability
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Question 7: Does the Industry Offer Good Prospects for Attractive Profits?
98. (p. 84) Which of the following is particularly pertinent in evaluating whether an industry
presents a sufficiently attractive business opportunity?
A. The industry's growth potential, whether competition appears destined to become stronger
or weaker, and whether the industry's overall profit prospects are above average, average, or
below average
B. An assessment of which firms in the industry have the best and worst competitive
strategies, whether the number of strategic groups in the industry is increasing or decreasing,
and whether economies of scale and experience curve effects are a key success factor
C. Whether there are more than 5 key success factors and more than 5 barriers to entry
D. Constructing a strategic group map and assessing the attractiveness of the competitive
position of each strategic group
E. Whether the market leaders enjoy competitive advantages and how hard it is to develop a
strongly differentiated product
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Topic: Industry Prospects and Profits
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99. (p. 84) Evaluating whether an industry presents a sufficiently attractive business opportunity
usually does not involve a consideration of which of the following factors?
A. The industry's growth potential, whether competitive pressures will likely grow stronger or
weaker, and whether the industry's future profit prospects are above average, average, or
below average
B. An assessment of the degrees of business risk and uncertainty in the industry's future
C. Whether the industry's future profitability will be favorably or unfavorably affected by the
prevailing driving forces
D. The severity of the problems confronting the industry as a whole
E. Whether the industry's product is strongly or weakly differentiated
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
100. (p. 84) Evaluating whether an industry's environment presents a company with a
sufficiently attractive business opportunity involves
A. sizing up overall industry and competitive conditions to determine whether the industry's
overall profit prospects are above average, average, or below average.
B. determining which firms in the industry have a competitive advantage and how they got
their advantage.
C. determining the overall strength of the five competitive forces.
D. constructing a strategic group map and assessing the attractiveness of the competitive
position of each strategic group to determine the overall attractiveness of all the strategic
groups.
E. using value chain analysis to determine the relative cost positions of rival firms and to learn
who the industry's low-cost producer is.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
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Short Answer Questions
101. (p. 53) What are the seven key questions which form the framework of thinking
strategically about a company's industry and competitive environment?
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
company's industry.
102. (p. 55-70) Draw the five-forces model of competition and briefly describe the relevance of
each of the five forces in determining the overall strength of competitive pressures a company
faces. Which of the five competitive forces is typically the strongest?
Answer will vary
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
Topic: Competitive Pressures
103. (p. 55) What are the five competitive forces that comprise the five-forces model of
competition?
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
company's industry.
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104. (p. 54) Competitive markets are economic battlefields. True or false? Explain.
Answer will vary
AACSB: Analytic
Bloom's: Apply
Difficulty: Easy
company's industry.
Topic: Competitive Pressures
105. (p. 56-58) Identify and briefly explain any four of the factors that influence the strength or
intensity of competitive rivalry among an industry's member firms.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
106. (p. 57) Identify five factors that tend to intensify competitive rivalry among an industry's
member firms.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
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107. (p. 57) Identify five factors that tend to weaken the intensity of competitive rivalry among
an industry's member firms.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
108. (p. 59-60) Identify and briefly describe five common barriers to entering an industry.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
109. (p. 59-61) Identify and briefly explain any three factors that intensify competitive pressures
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
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110. (p. 59-61) Identify three conditions that tend to make potential entry a strong competitive
force.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
111. (p. 59-61) Identify and briefly explain any three factors that weaken the competitive
pressures stemming from the threat that new firms will enter the industry.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
112. (p. 63) Identify and briefly explain any two of the factors that influence the strength of
competition from substitute products.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
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113. (p. 63) Identify and briefly explain any three of the factors that influence the bargaining
strength and leverage of suppliers.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
114. (p. 65-67) Identify and briefly explain any three factors that lead to strong bargaining power
on the part of suppliers.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
115. (p. 28-31) Identify and briefly explain any three factors that lead to weak bargaining power
on the part of suppliers.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
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116. (p. 3-68) Explain why low switching costs and weakly differentiated products tend to give
buyers a high degree of bargaining power.
Answer will vary
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
company's industry.
117. (p. 68-70) Not all buyers of an industry's product are likely to possess the same degree of
bargaining power or leverage over the terms and conditions under which they purchase the
product. True or false? Explain.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
118. (p. 68-70) Identify and briefly discuss any three of the factors that influence the bargaining
strength and leverage of buyers.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
3-98

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119. (p. 68-70) Identify and briefly explain any three factors that lead to strong bargaining power
on the part of buyers.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
120. (p. 68-70) Identify and briefly explain any three factors that lead to weak bargaining power
on the part of buyers.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
121. (p. 67-69, 72, 77, 82) Explain the meaning and significance of each of the following:
a.) bargaining power of suppliers

b.) driving forces
c.) strategic group mapping
d.) key success factors
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
company's industry.
profitability.
Topic: Competitive Strategy, Strategic Mapping
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122. (p. 76) In doing driving forces analysis, is it sufficient to simply identify the driving forces
that are operating to alter industry and competitive conditions? Why or why not? If not, then
explain what else is required for a complete driving forces assessment.
Answer will vary
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
profitability.
123. (p. 72-75) Identify at least five common driving forces and briefly explain how each one can
produce important changes in industry and competitive conditions.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
profitability.
124. (p. 79-80) Identify at least three benefits of constructing a strategic group map.
Answer will vary
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Topic: Strategy Group
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125. (p. 81-82) What is the analytical value of studying competitors and trying to predict what
moves rivals will make next?
Answer will vary
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
126. (p. 82-83) What is the strategy-making value of identifying an industry's key success
factors?
Answer will vary
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
127. (p. 84) Identify four factors that affect whether an industry does or does not present a
company with a good business opportunity?
Answer will vary
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
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128. (p. 84) Can an industry be attractive to one company and unattractive to another company?
Why or why not?
Answer will vary
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
3-102

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Strategic Management (Universidad Carlos III de Madrid)

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Chapter 03 - Evaluating a Company's External Environment

Multiple Choice Questions

The Strategically Relevant Components of a Company’s Macro-Environment

1. A company's "macro-environment" refers to

2. Which one of the following is not part of a company's macroenvironment?

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Chapter 03 - Evaluating a Company's External Environment

4. Thinking strategically about industry and competitive conditions in a given industry

Question 1: Does the Industry Offer Attractive Opportunities for Growth?

5. Which of the following is not a factor to consider in identifying an industry's dominant

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Chapter 03 - Evaluating a Company's External Environment

6. Which of the following is not a relevant consideration in identifying an industry's dominant

7. The state of competition in an industry is a function of

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Chapter 03 - Evaluating a Company's External Environment

10. The most powerful of the five competitive forces is usually

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Chapter 03 - Evaluating a Company's External Environment

13. What makes the marketplace a competitive battlefield is

14. Competitive jockeying and market maneuvering among industry rivals

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Chapter 03 - Evaluating a Company's External Environment

18. Rivalry among competing sellers is generally more intense when

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Chapter 03 - Evaluating a Company's External Environment

19. Rivalry among competing sellers grows in intensity when

20. The rivalry among competing firms tends to be more intense

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Chapter 03 - Evaluating a Company's External Environment

22. Rivalry among competing sellers tends to be more intense when

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Chapter 03 - Evaluating a Company's External Environment

26. Which of the following is generally not considered as a barrier to entry?

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Chapter 03 - Evaluating a Company's External Environment

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Chapter 03 - Evaluating a Company's External Environment

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Chapter 03 - Evaluating a Company's External Environment

37. Whether supplier-seller relationships in an industry represent a strong or weak source of

Downloaded by Armenay Shehzad ([email protected])

Chapter 03 - Evaluating a Company's External Environment

39. The bargaining leverage of suppliers is greater when

Downloaded by Armenay Shehzad ([email protected])

Chapter 03 - Evaluating a Company's External Environment

41. Supplier bargaining power is weaker when

Downloaded by Armenay Shehzad ([email protected])

Chapter 03 - Evaluating a Company's External Environment

46. Whether buyer-seller relationships in an industry represent a strong or weak source of

Downloaded by Armenay Shehzad ([email protected])

Chapter 03 - Evaluating a Company's External Environment

Downloaded by Armenay Shehzad ([email protected])

Chapter 03 - Evaluating a Company's External Environment