14.4 The Five Competitive Forces Model
1) Which of the following is not among Porter’s competitive forces?
A) power of buyers
B) power of suppliers
C) threat of new entrants
D) changing consumer tastes
2) Which of the following is most likely to exert the bargaining power of a buyer?
A) Barnes and Noble purchases books from publishers for sale in its online stores.
B) Wal-Mart, the world’s largest discount store, seeks vendors to supply products made exclusively for its stores.
C) Ground beef producers seek to purchase cattle from ranchers.
D) Cowgirl Creamery, a small cheese producer, seeks a dairy farm for its organic milk supplies.
3) As word processing on personal computers expanded, sales of typewriters began to disappear. Which of Porter’s competitive forces does this event demonstrate?
A) the threat of competition from new entrants
B) bargaining power of suppliers
C) bargaining power of buyers
D) competition from substitute goods or services
4) According to an article the Wall Street Journal, “The big car makers are pushing a wide array of new technology into production, responding to relentless competitive pressure, rising energy prices and consumer demand for better safety.
Source: Joseph B. White, “Ford, GM Eye Shift in Buying Habits,” Wall Street Journal, May 22, 2006.
Which of Porter’s competitive forces does this statement allude to?
A) the threat of competition from new entrants
B) competition from foreign auto manufacturers
C) competition from existing firms within the industry
D) competition from substitute products from outside the industry
5) The larger the number of firms in an industry,
A) the easier it is to implicitly collude to fix prices.
B) the more intense the rivalry among firms.
C) the greater the need for a price enforcement mechanism.
D) the larger the potential number of market segments.
6) According to Porter’s Five Competitive Forces Model, which kinds of products are most likely to limit the ability of firms in an industry to raise prices?
A) differentiated products that target a small subsegment of the industry
B) substitutable products produced by firms in different industries
C) similar products produced by similar industries in low-cost countries
D) complementary products produced by different firms in the same industry
7) In Porter’s Five Competitive Forces model, “competition from substitute goods or services” refers to
A) substitute products that come from outside the industry.
B) substitute products that come from domestic competitors in the same industry.
C) substitute products that come from foreign competitors in the same industry.
D) competition from producers of substitutes who outsource their production.
8) The bargaining power of suppliers increases if
A) the cost of switching suppliers is relatively low.
B) there are only a few competitors to the supplier.
C) the input in question is not a critical component of production.
D) the input supplied is relatively standardized.
9) The bargaining power of buyers increases if
A) there are many large buyers.
B) the input in question has few substitutes.
C) the input in question is not a critical component of production.
D) there are wide variations in the quality of inputs from supplier to supplier.
10) For years economists believed that market structure explained the ability of some firms to earn economic profits. Today, economists and business strategists put greater emphasis on
A) the number of years a firm has been in business and the average price of the products sold by the firm.
B) the number of countries in which a firm conducts business and the number of employees the firm has in each country.
C) the characteristics of individual firms and the strategies their managements use to continue to earn economic profits.
D) the size of a firm relative to the industry average and the number of firms in the domestic industry.
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