Five Forces Model Multiple Choice Questions
Business Strategy 2 (Cape Peninsula University of Technology)
Five Forces Model Multiple Choice Questions
Business Strategy 2 (Cape Peninsula University of Technology)
Five Forces Model MULTIPLE CHOICE QUESTIONS-MCQ
FIVE FORCES MODELMULTIPLE CHOICE QUESTIONS
Indicate the correct answer for each question by
Q1 In the _____ developed by Michael Porter, competition is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes.
a. PESTEL framework b. VRIO framework c. five forces model d. value chain analysis
Q2 Which of the following is a primary feature of the five forces model?
a. It is concerned exclusively about the intensity of rivalry among direct competitors.
b. It takes into account a firm's internal resources, capabilities, and core competencies.
c. It helps managers determine the changing speed of an industry or the rate of innovation.
d. It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.
Q3 Which of the following is most likely an implication of new firms entering an industry?
a. The bargaining power of buyers will reduce.
b. The industry's overall profit potential and sales will increase.
c. The rivalry among existing competitors will reduce.
d. The incumbent firms will spend more to satisfy their existing customers.
Q4 In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because:
a. entering the aircraft manufacturing industry requires huge capital investments.
b. there is expected to be a huge return on investment within this industry.
c. there is no credible threat of retaliation from the incumbents.
d. entering the aircraft manufacturing industry means violating government policies. a
Q5 In an industry, the threat of entry is high when:
a. capital requirements are low.
b. expected returns are high.
c. technological know-how is industry specific.
d. switching costs are high.
Q6 The relative bargaining power of suppliers is high when:
a. suppliers provide products that are differentiated.
b. incumbent firms face low supplier switching costs.
c. incumbent firms can credibly threaten to backward integrate into the industry.
d. suppliers depend heavily on the industry for a large portion of their revenues
.
Q7 Which of the following features about a buyer indicates that the buyer has high bargaining power?
a. When the buyer cannot credibly threaten to backwardly integrate into the industry.
b. When the buyer cannot purchase specific products from other sellers.
c. When the buyer faces high switching costs.
d. When the buyer operates in an industry where products are undifferentiated.
Q8 Which of the following would most likely NOT indicate that sellers are a strong competitive force in an industry?
a. When the buyers' cost of switching to substitutes is low
b. When the products and services they provide can be differentiated
c. When the buyers of their products are customers who buy in small quantities
d. When the components they supply affect buyers' product quality.
a. When the buyers' cost of switching to substitutes is low
b. When the products and services they provide can be differentiated
c. When the buyers of their products are customers who buy in small quantities
d. When the components they supply affect buyers' product quality.
Q9 When fashion magazines face competition from fashion blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger?
a. The emergence of entry barriers b. The bargaining power of suppliers c. The availability of complements d. The threat of substitutes
Q10 Poter’s Five framework is based on the principle of:
a. Resources-based view
b. Conduct-structure-performance c. Structure-conduct-performance d. Econometrics
Q.11 Which of the following is NOT an entry barrier to an industry?
a. expected competitor retaliation b. economies of scale
c. customer product loyalty d. bargaining power of suppliers
Q12 New entrants to an industry are more likely when a. it is difficult to gain access to distribution channels.
b. economies of scale in the industry are high.
c. product differentiation in the industry is low.
d. capital requirements in the industry are high.
Q13 New entrants to an industry are more likely when a. it is difficult to gain access to distribution channels.
b. economies of scale in the industry are high.
c. product differentiation in the industry is low.
d. capital requirements in the industry are high.
Q14 The large amount of advertising by firms such as Procter & Gamble and Colgate-Palmolive is an example of what kind of barrier to entry?
a. access to distribution channels b. capital requirements
c. economies of scale d. product differentiation
Q15 Product differentiation refers to the
a. ability of the buyer of a product to negotiate a lower price.
b. response of incumbent firms to new entrants.
c. belief by customers that a product is unique.
d. fact that as more of a product is produced the cheaper it becomes per unit.
Q16 A certain marble quarry provides a unique type of marble that is richly colored and strikingly veined. It has been used for churches and public buildings throughout the world. The architect of a new headquarters for a prestigious Fortune 500 firm has specified the use of this marble, and this marble only, for this project. Which of the following statements is most likely to be true?
a. The cost of the marble will be expensive because of the bargaining power of the supplier.
b. The cost of the marble will be moderate because of the bargaining power of the buyer.
c. The cost of the marble will be moderate because of economies of scale.
d. The cost of the marble will be expensive because of the high strategic stakes involved.
Q17 Suppliers are powerful when
a. satisfactory substitutes are available.
b. they sell a commodity product.
c. they offer a credible threat of forward integration.
d. they are in a highly fragmented industry.
Q18 Blood banks are highly dependent on donors. In the terminology of industry analysis, which statement of donors is accurate?
a. Blood donors are suppliers and are powerful because of the critical nature of what they provide to the blood bank.
b. Blood donors are suppliers and are powerful because of their concentration relative to the blood bank.
c. Blood donors are buyers and are not powerful because switching costs to change to alternative inputs are low.
d. Blood donors are buyers and are powerful because of the volume of blood needed
Q19 The aircraft industry has long been dominated by two large aircraft manufacturers, Boeing and Airbus. The demand for major aircraft is low, and Boeing and Airbus aggressively compete for orders from airlines. What effect will these conditions have on the domestic airline industry?
a. It will make the airline industry more attractive because of decreased supplier power
b. It will make the airline industry less attractive because of decreased supplier power.
c. It will make the airline industry more attractive because of increased supplier power.
d. It will make the airline industry more attractive because of a new entrant.
Q20 Buyers are powerful when
a. there is a threat of forward integration.
b. they purchase a small proportion of the supplier's output.
c. switching costs are low.
d. the buyers' industry is fragmented.
Q21 The threat from substitutes is high when a. switching costs are high.
b. the substitute product's price is lower than the industry product's price.
c. the quality of the substitute product is lower than the quality of the industry's product.
d. the substitute product stimulates new process innovations within the industry.
Q22 From the perspective of the five forces model, which force is most relevant here?
a. buyers b. substitutes c. entry barriers d. suppliers
Q23 All of the following are forces that create high rivalry within an industry EXCEPT a. numerous or equally balanced competitors.
b. high fixed costs.
c. fast industry growth.
d. high storage costs.
Q24 When rival firms compete aggressively by trying to attract competitors' customers, this might be an indication of
a. an industry with low exit barriers.
b. increasing economies of scale.
c. slow industry growth.
d. high bargaining power among buyers.
Q25 According to the five forces model, an attractive industry would have all of the following characteristics EXCEPT
a. low barriers to entry.
b. suppliers and buyers with little bargaining power.
c. a moderate degree of rivalry among competitors.
d. few good product substitutes.
Q26 According to the five forces model, an unattractive industry would include all of the following characteristics,. EXCEPT
a. low economies of scale needed for new firms to enter.
b. low supplier power due to commodity inputs.
c. high threat of substitute products due to a large number of low-cost alternatives.
d. high bargaining power of buyers due to low switching costs.
Q27 Porter's 5 Forces model is intended to be:
a. Used as an alternative to the earlier PEST model b. Used primarily as an academic tool
c. Used in conjunction with PEST and other models d. Used to analyse industries in the 1980's and 1990's Q28 The idea with Porter's 5 Forces is to:
a. Quantify the 5 forces, to ideally produce a mathematical model of the industry
b. Identify which forces are relatively more powerful, and to assess their impact on competition and industry profitability
c. Work out how management can eliminate these forces d. Use it to construct a plan to achieve monopoly power Q29 A barrier to entry is:
a. Anything that facilitates the entry of would-be new entrants in a specific industry
b. Capital requirements, cost advantages, and product differentiation
c. A law restricting trade
d. Anything that makes entry into an industry as a new competitor more difficult, more costly, slower or even impossible
Q30 If an industry earns a return on capital in excess of its cost of capital:
a. Incumbents will earn abnormal profit, and build entry barriers b. The government needs to make sure that competition will increase
c. It is likely to attract the attention of firms looking to enter the industry, which may eventually lead to the return on capital falling
d. It will attract firms outside the industry, but the incumbents will have erected entry barriers
Q31 Industries such as pharmaceuticals earn very high returns on investment. Such industries:
a. Tend to be protected from competition by legal restrictions b. Can only maintain such high returns for short periods c. Always exist when intangible products are traded
d. Tend to have high entry barriers and differentiated products Q32 Economies of scale are a barrier to entry because:
a. New entrants do not know where they are positioned on their learning curve b. New entrants do not yet understand the scale economies so they cannot precisely determine their selling price
c. New entrants face a risk of price retaliation from the incumbents which could occur immediately on a large scale
d. New entrants face the cost and risk of creating large scale capacity to start with or a severe cost disadvantage if they enter on a smaller scale
Q33 Economies of scale are a barrier to entry because:
a. New entrants do not know where they are positioned on their learning curve
b. New entrants do not yet understand the scale economies so they cannot precisely determine their selling price
c. New entrants face a risk of price retaliation from the incumbents which could occur immediately on a large scale
d. New entrants face the cost and risk of creating large scale capacity to start with or a severe cost disadvantage if they enter on a smaller scale
Q34 Barriers to entry are effective:
a. Yes, because long-term empirical evidence shows that industries with high barriers to entry exhibit higher returns on investment on average
b. Yes, because once established they are irreversible
c. No, because firms can overcome these barriers by modifying their strategies d. No, because higher returns attract more new entrants who want to benefit from higher returns than in non-protected industries A
Q35 Barriers to exit are:
a. The non-recoverable costs of quitting or scaling down capacity in an industry
b. Legal restrictions which prevent a firm from leaving an industry c. The opposite of barriers to entry
d. Of no consequence if you don't plan to leave the industry Q36 The overall bargaining power of buyers depends on:
a. The buyer's price sensitivity
b. The intensity of rivalry among sellers and the willingness of the buyer to exploit this
c. The buyer's price sensitivity and the relative bargaining power between the seller and the buyer
d. The intensity of rivalry among buyers and the ability to vertically integrate Q37 Bargaining power rests, ultimately, on:
a. The negotiating skills of the buyer versus the seller b. Historic and accidental events
c. The respective effectiveness and cohesion of top management teams
d. The perceived or real threat for one party to refuse to deal with the other party
Q38 The relative bargaining power of buyers depends on:
a. The size and concentration of buyers relative to suppliers b. A buyer's access to information about products and costs c. The ability or threat to integrate vertically
d. All of the above
Q39 The bargaining power of suppliers is likely to be high:
a. When the suppliers' industry is concentrated
b. When suppliers are supplying differentiated products
c. When "our" (the customer's) industry is relatively fragmented d. All of the above
Q40 Understanding the competitive forces in an industry is:
a. A largely futile exercise for managers
b. Is of academic interest, but does not bring any value for strategic management
c. A way to enable managers to allocate their resources where competition is the strongest
d. A way to enable managers to position the firm where its particular capabilities can be deployed to best advantage
1 2 3 4 5 6 7 8 9 10 c d d a a a d a d c
11 12 13 14 15 16 17 18 19 20 d c c d c a c a a c
21 22 23 24 25 26 27 28 29 30 b b c c a b c b d d
32 32 33 34 35 36 37 38 39 40 d d a a a c d d d d
2016/01/20
