Test Prep Test Prep Certifications BUSINESS-ENVIRONMENT-AND-CONCEPTS Questions & Answers

• Question 311:

  Which of the following statements regarding the existence of substitute products is correct?

  A. The impact of substitutes will have more of an effect on the competitive environment of a firm if the substitutes are difficult for customers to obtain.

  B. When the cost of buyers switching to new products is high, the effect of substitutes on the competitive environment of a firm is high.

  C. If few substitutes exist, buyers have little choice of products and may be willing to pay a higher price for the products that are available.

  D. If few substitutes exist, buyers may have a limit on the maximum price that they are willing to pay and may choose to not purchase the firm's product if the price is too high.

  Correct Answer: C

  Choice "c" is correct. If few substitutes exist, buyers have little choice of products and may be willing to pay a higher price for the products that are available. Choice "a" is incorrect. 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 (not difficult to obtain). 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 "d" is incorrect. If many (not few) substitutes exist, buyers may have a limit on the maximum price that they are willing to pay and may choose to not purchase the firm's product if the price is too high.

• Question 312:

  When does competition not become an even stronger force impacting the profitability of a firm?

  A. The market consists of several equal-sized firms.

  B. Customers do not have strong brand preferences.

  C. The market is fast-growing.

  D. The costs of exiting the market exceed the costs of continuing to operate.

  Correct Answer: C

  Choice "c" is correct, as it is not a factor that would cause market competitiveness to be even stronger.

  Choices "a", "b", and "d" are incorrect because they are all reasons that competition becomes an even

  stronger force that impacts the firm's profitability. The 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.

• Question 313:

  Factors internal to the organization that impact strategy and are sources of strengths and weaknesses include all of the following, except:

  A. Marketing effectiveness.

  B. Competence of management.

  C. Innovation of product lines.

  D. Regulations and laws.

  Correct Answer: D

  Choice "d" is correct. Regulations and laws are external factors of opportunities and threats that affect the

  overall industry.

  Choices "a", "b", and "c" are incorrect, as all of these factors are examples of internal factors of an

  organization.

• Question 314:

  If a nation has superior conditions in which to grow coffee beans and firms are able to grow them at very low costs, which of the four major factors that Michael Porter has indicated impact the global competitive environment would allow this nation to fare better with respect to global competitive advantage?

  A. Conditions of the factors of production.

  B. Conditions of domestic demand.

  C. Related and supporting industries.

  D. Firm strategy, structure, and rivalry.

  Correct Answer: A

  Choice "a" is correct. If a nation has a strong set of factors of production (such as low cost, high quality raw material inputs), that are required in a given industry, it will fare better with regard to competitive advantage. Choice "b" is incorrect. Conditions of domestic demand relate to the nation's domestic demand for the product, which is directly related to the ability of the nation to fare better with regard to competitive advantage. Choice "c" is incorrect. The factor of related and supporting industries deals with whether there are suppliers of material inputs that exist within a nation or whether there are rival firms who are competitive in the international environment, both of which would increase the nation's competitive advantage. Choice "d" is incorrect. The factor of firm strategy, structure, and rivalry relates to the practices of a nation with respect to how the companies are managed and organized, long with the laws of the nation that regulate the formation of the companies, and how intense the rivalry is with respect to competing firms in the nation.

• Question 315:

  Jordan Industries is the leader in its market for producing high-quality cat food for cats that require special diets. While it has been able to sustain competitive advantage for years, Jordan's management has implemented a strategic framework that focuses on why the firm has been so successful in its market. Jordan Industries has implemented which type of strategic framework?

  A. Industry structure analysis.

  B. Core competencies analysis.

  C. Segmentation analysis.

  D. None of the above.

  Correct Answer: B

  Choice "b" is correct. Analysis of the core competencies of a firm help it to determine why it is able to create, attain, and sustain new types of competitive advantage and profits and reveal what it is within the firm that enables it to obtain competitive advantage. Choice "a" is incorrect. Industry structure analysis assists in determining what it is that makes a firm more profitable compared to another firm, and it looks at five forces that influence profitability of an industry or market and, thus, the competitive environment. Choice "c" is incorrect. Segmentation analysis is a possibility when a firm is vertically integrated and when the industry structure and core competencies vary among activities in the value chain. Choice "d" is incorrect, as choice "b" is the answer to the question.

• Question 316:

  Which of the following is not a type of major strategic framework that has proven useful for value chain analysis?

  A. Core competencies analysis.

  B. Customer preference analysis.

  C. Industry structure analysis.

  D. Segmentation analysis.

  Correct Answer: B

  Choice "b" is correct. Customer preference analysis is not a major strategic framework that has been proven to be useful for value chain analysis. Choices "a", "c", and "d" are incorrect, as the three major types of strategic frameworks that have been proven to be useful for value chain analysis are industry structure analysis, core competencies analysis, and segmentation analysis.

• Question 317:

  When applying value chain analysis, a firm sends its production manager to visit the operations of its major supplier in an attempt to determine if there are cost-savings capabilities that could be implemented at the supplier's warehouse. The firm is performing which form of value chain analysis?

  A. Internal differentiation analysis.

  B. Internal costs analysis.

  C. Vertical linkage analysis.

  D. None of the above.

  Correct Answer: C

  Choice "c" is correct. Analyzing the vertical linkage of a firm means understanding the activities of the

  suppliers and buyers of the product and determining where value can be created external to the firm's

  operations.

  Choices "a", "b", and "d" are incorrect, per the above Explanation.

• Question 318:

  Which of the following activities is considered a support activity?

  A. Delivery of products.

  B. Procurement of materials.

  C. Product advertising.

  D. In-home warranty service.

  Correct Answer: B

  Choice "b" is correct. Support activities are those activities that are performed by the support staff of an

  organization (e.g., purchasing of materials and supplies, development of the technology used,

  management of employees, accounting, finance, strategic planning, etc.).

  Choices "a", "c", and "d" are incorrect, as these are all considered primary activities. Primary activities are

  those that are involved with the direct manufacture of products, the delivery of products through distribution

  channels, and the support of the product that exists after the sale is made (e.g., handling the raw materials,

  the manufacturing process, taking orders for the product, advertising the product, and servicing the product

  after it is sold).

• Question 319:

  According to Michael Porter, which of the following are the two major categories of business activities?

  A. Demand activities and supply activities.

  B. Firm activities and customer activities.

  C. Primary activities and support activities.

  D. Internal activities and external activities.

  Correct Answer: C

  Choice "c" is correct. According to Michael Porter, the two major categories of business activities are

  primary activities and support activities.

  Choices "a", "b", and "d" are incorrect, per the above statement.

• Question 320:

  Which of the following is incorrect with regard to value chain analysis?

  A. Value chain analysis must be used in conjunction with the strategic plan of the organization.

  B. Value chain analysis is critical to assessing the competitive advantage of a firm.

  C. Value chain analysis is a strategic tool that assists the firm in determining how important the perceived value of the buyers is with respect to the market the firm operates in.

  D. The value chain starts with the firm and goes all the way through to the end users of the product.

  Correct Answer: D

  Choice "d" is an incorrect statement and the correct choice. The best description of a value chain is that value starts with the suppliers who provide the raw materials for a production process, continues with the firm and its strategic plan, continues with the value created by the customers, and then ends with the disposal and recycling of the materials. Choices "a", "b", and "c" are incorrect, as all are correct statements with regard to value chain analysis.