Question 1

Threats of retaliation by incumbents against a new entrant (e.g.threatening to make aggressive price-cuts),cannot be regarded as a source of entry barriers.

Accepted Answer

A) True 
 B)False

Question 2

Lower levels of capacity utilization impose higher costs on firms (as fixed costs are spread over a smaller volume of business).This encourages firms to raise prices.

Accepted Answer

A) True 
 B)False

Question 3

In identifying key success factors in an industry,it is sufficient to concentrate upon the factors which determine how customers choose between alternative suppliers.

Accepted Answer

A) True 
 B)False

Question 4

Batteries represented about 45% of the cost of electric vehicles in 2018.Because battery prices are expected to decline at the rate of about 5% per year for the next six years,electric vehicles will become increasingly profitable for automobile manufacturers

Accepted Answer

A) True 
 B)False

Question 5

Bargaining power rests,ultimately,on:

Accepted Answer

A)  The negotiating skills of the buyer versus the seller
B)  Tradition
C)  The respective effectiveness and cohesion of top management teams
D)  The relative costs that each party would incur from walking away from the dealE) All of the above
F) A) and D)

Question 6

Economic value is created when:

Accepted Answer

A)  The price that customers pay for a product exceeds the costs of producing it
B)  Competition causes surplus value to be transferred from producers to consumers
C)  The price that customers are willing to pay for a product exceeds the price they actually pay
D)  The price that customers are willing to pay for a product exceeds the cost producing itE) A) and D)
F) A) and C)

Question 7

Michael Porter's five forces of competition framework links the structure of an industry to its overall level of profitability.

Accepted Answer

A) True 
 B)False

Question 8

Formal,broad-based scanning of the external environment is an essential activity for all business enterprises.

Accepted Answer

A) True 
 B)False

Question 9

The greater the value of a product to its customers,the more profitable will it be to supply that product.

Accepted Answer

A) True 
 B)False

Question 10

The more similar are the firms in an industry in terms of costs,strategies,and locations,the more intensely will they compete.

Accepted Answer

A) True 
 B)False  False

Question 11

Identifying key success factors within an industry requires answers to the following questions:

Accepted Answer

A)  What do customers want and what should the firm do to survive competition?
B)  What is a firm's unique selling proposition?
C)  Which of the five forces of competition most threaten a firm's survival and how could the firm deal with them?
D)  What are the main sources of a company's cost efficiency?E) A) and B)
F) None of the above A

Question 12

In practice,drawing industry boundaries is:

Accepted Answer

A)  A subjective exercise that depends upon the personal preferences of top managers
B)  An objective exercise that requires estimating cross-elasticities of demand for the industry's products
C)  A matter of judgment that depends upon the purpose of the analysis
D)  Critical to the output of the analysis and therefore should only be undertaken with the help of an academic or consultantE) All of the above
F) A) and D)

Question 13

The most useful approach to forecasting industry profitability in the future is:

Accepted Answer

A)  To estimate the industry's revenues and costs in future years
B)  To use an industry's probability at similar stages of the business cycle in the past as an indicator of future profitability
C)  To extrapolate the trend of industry profitability into the future
D)  To understand how the industry's structure has determined competitive intensity and profitability in the past,then to use information on an industry's changing structure to predict how profitability is likely to change in the futureE) A) and D)
F) All of the above D

Question 14

Economies of scale are a barrier to entry because:

Accepted Answer

A)  New entrants are positioned at the top of their learning curve
B)  New entrants are uncertain about their future costs which discourages then from making investments
C)  New entrants face a risk of retaliation from the incumbents whose large scale of operation allows them to flood the market
D)  New entrants face high unit costs either because they enter at sub-optimal scale,or they make a large-scale entry that initially operates with substantial excess capacityE) B) and C)
F) A) and C)

Question 15

The restrictions that governments place on the advertising of tobacco products:

Accepted Answer

A)  Reduce the demand for tobacco thereby depressing profitability
B)  Reduce the marketing costs of tobacco companies and impede the entry of newcomers to the market,boosting the profitability
C)  Cause both (a) and (b) 
D)  Cause neither (a) nor (b) E) A) and B)
F) A) and C)

Question 16

The core of a firm's business environment is comprised by:

Accepted Answer

A)  Its relationships with customers,competitors and suppliers
B)  Its technological environment
C)  Its relationships with all stakeholders
D)  The nation stateE) C) and D)
F) None of the above

Question 17

Concentration in an industry is measured by its concentration ratio-a common measure of which is the combined market share of the leading firms.

Accepted Answer

A) True 
 B)False

Question 18

The effectiveness of barriers to entry depends upon:

Accepted Answer

A)  How quickly new technologies emerge
B)  How fiercely incumbents retaliate against new entrants
C)  The resources and capabilities that potential entrants possess
D)  How vigorously governments enforce competition lawE) A) and B)
F) A) and D)

Question 19

An exit barrier is anything that is an impediment to excess capacity leaving an industry.

Accepted Answer

A) True 
 B)False

Question 20

As the competitors in an industry become more diverse in terms of their goals,cost structures,and strategies,it is likely that:

Accepted Answer

A)  Their incentives to collude on price increase
B)  They will compete more fiercely on price
C)  Their products will become increasingly differentiated
D)  Mergers,acquisitions and alliances among them will increaseE) B) and D)
F) B) and C)

Exam 3: Industry Analysis: the Fundamentals

Threats of retaliation by incumbents against a new entrant (e.g.threatening to make aggressive price-cuts),cannot be regarded as a source of entry barriers.

Correct AnswerverifiedShow Answer

Lower levels of capacity utilization impose higher costs on firms (as fixed costs are spread over a smaller volume of business).This encourages firms to raise prices.

Correct AnswerverifiedShow Answer

In identifying key success factors in an industry,it is sufficient to concentrate upon the factors which determine how customers choose between alternative suppliers.

Correct AnswerverifiedShow Answer

Batteries represented about 45% of the cost of electric vehicles in 2018.Because battery prices are expected to decline at the rate of about 5% per year for the next six years,electric vehicles will become increasingly profitable for automobile manufacturers

Correct AnswerverifiedShow Answer

Bargaining power rests,ultimately,on:

Correct AnswerverifiedShow Answer

Economic value is created when:

Correct AnswerverifiedShow Answer

Michael Porter's five forces of competition framework links the structure of an industry to its overall level of profitability.

Correct AnswerverifiedShow Answer

Formal,broad-based scanning of the external environment is an essential activity for all business enterprises.

Correct AnswerverifiedShow Answer

The greater the value of a product to its customers,the more profitable will it be to supply that product.

Correct AnswerverifiedShow Answer

The more similar are the firms in an industry in terms of costs,strategies,and locations,the more intensely will they compete.

Correct AnswerverifiedFalse

Identifying key success factors within an industry requires answers to the following questions:

Correct AnswerverifiedA

In practice,drawing industry boundaries is:

Correct AnswerverifiedShow Answer

The most useful approach to forecasting industry profitability in the future is:

Correct AnswerverifiedD

Economies of scale are a barrier to entry because:

Correct AnswerverifiedShow Answer

The restrictions that governments place on the advertising of tobacco products:

Correct AnswerverifiedShow Answer

The core of a firm's business environment is comprised by:

Correct AnswerverifiedShow Answer

Concentration in an industry is measured by its concentration ratio-a common measure of which is the combined market share of the leading firms.

Correct AnswerverifiedShow Answer

The effectiveness of barriers to entry depends upon:

Correct AnswerverifiedShow Answer

An exit barrier is anything that is an impediment to excess capacity leaving an industry.

Correct AnswerverifiedShow Answer

As the competitors in an industry become more diverse in terms of their goals,cost structures,and strategies,it is likely that:

Correct AnswerverifiedShow Answer

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False

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A

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D

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