When does competition not become an even stronger force impacting the profitability of a firm?
Answer(s): D
Choice "d" is the proper choice, as it is not a factor that would cause market competitiveness to be even stronger.Choices "a", "b", and "c" are incorrect because they are all reasons that competition becomes an even stronger force that impacts the firm's profitability. Following are situations that would cause competition to be an even stronger force impacting the profitability of a firm:•The market is not growing fast.•There are several equal-sized firms in the market.•Customers do not have strong brand preferences.•The costs of exiting the market exceed the costs of continuing to operate.•Some firms profit from making certain moves to increase market share.•The various firms in the market use different types of strategic plans.
Which of the following statements regarding the existence of substitute products is true?
Answer(s): A
Choice "a" is correct. The impact of substitutes will have more of an effect on the competitive environment of a firm if the substitutes are readily available to consumers.Choice "b" is incorrect. When the cost of buyers switching to new products is low (not high), the effect of substitutes on the competitive environment of a firm is high.Choice "c" is incorrect. If few (not many close) substitutes exist, buyers have little choice of products and may be willing to pay a higher price for the products that are available.Choice "d" is incorrect. If substitutes have equal performance and are priced at or below the firm's product, the competitive force of substitutes with respect to the firm is strong (not weak).
Which of the following is not considered a factor that increases the bargaining power of the customer?
Answer(s): C
Choice "c" is correct. When strategic alliances exist between a supplier and other firms that is a situation, which increases the bargaining power of the suppliers.Choices "a", "b", and "d" are incorrect because they all are factors that increase the bargaining power of the customer, which are:•Customers make up a large volume of a firm's business.•There is much information available to customers.•The buyers have low switching costs.•There are a high number of alternate suppliers (sellers) of the product.
Which of the following statements regarding competitive advantage is not true?
Answer(s): B
Choice "b" is the proper choice, as it is not a true statement. Simply because the manufacturing costs of a firm are less than those of close rivals, this does not necessarily mean that the firm has a competitive market advantage. Only if TOTAL costs to a firm are less than those of close rivals will a firm have a competitive market advantage.Choices "a", "c", and "d" are incorrect, as they are all true statements.
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