Chapter 2 – Strategy Analysis Statements

Industry profitability is a function of
1. Rivalry among existing firms
2. Competitive advantage of industry members
3. Bargaining power of customers
4. A, B, and other factors
5. A, C, and other factors
Which of the following industry factors does not affect the nature of rivalry among existing firms in the industry?
1. Ratio of fixed to variable costs
2. Concentration of competitors
3. Industry growth
4. First mover advantage
Which of the following industry factors does not affect the threat of new firms entering the industry?
1. Legal barriers
2. Ratio of fixed to variable costs
3. Price sensitivity of buyers
4. First mover advantage
Which of the following industry factors does not affect the bargaining power of buyers in the industry?
1. Concentration of buyers relative to the concentration of sellers
2. Ratio of fixed to variable costs
3. Price sensitivity of customers
4. None of the above
European airlines’ structural excess capacity (i.e., low load factors) negatively affected the average profitability in the European airline industry between 1995 and 2004. This is an example of how
1. The rivalry among existing firms affects industry profitability.
2. The threat of new entrants affects industry profitability.
3. The threat of substitute products affects industry profitability.
4. The bargaining power of buyers affects industry profitability.
5. The bargaining power of suppliers affects industry profitability.
The price sensitivity of customers in the hotel industry
1. Varies depending on what day of the week it is.
2. Is positively affected by the availability of web booking systems and the resulting price transparency in the industry.
3. Is negatively affected by the lack of hotels in a particular geographical area.
4. None of the above
Consider the following statement: “Discount retailers follow a cost leadership strategy.” This statement is
1. True
2. False
Consider the following statement: “In industries with high rivalry among existing firms, the optimal competitive strategy is to be a cost leader.” This statement is
1. True
2. False
Consider the following statement: “Very few firms are successful in combining a cost leadership strategy with a differentiation strategy because both strategies require different and typically irreconcilable core competences.” This statement is
1. True
2. False
Consider the following statement: “Firms following a cost leadership strategy tend to earn higher margins on their products or services than firms following a differentiation strategy.” This statement is
1. True
2. False
Managers’ choice whether or not to diversify activities across geographical areas or product segments is part of the
1. Corporate strategy decision
2. Competitive strategy decision
3. None of the above
Economic theory indicates that the optimal corporate strategy and structure minimizes the firm’s
1. Production costs
2. Service costs
3. Book value of assets
4. Transaction costs
5. None of the above
The existence of conglomerates in emerging markets is partly the result of
1. Low transaction costs in emerging labor markets
2. High transaction costs in emerging capital markets
3. High transaction costs in emerging production markets
4. Low transaction costs in emerging production markets
5. None of the above
Consider the following statement: “Single-segment businesses have lower transaction costs than multi-segment businesses.” This statement is
1. True
2. False
Consider the following statement: “A firm’s industry choice, competitive positioning and corporate strategy all influence the difference between the firm’s actual and required return on capital.” This statement is
1. True
2. False

Chapter 2 – Strategy Analysis Statements

Quiz