Is a group of firms producing a similar product or service such as soft drinks airlines or smartphone apps?

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Entrepreneurship: Successfully Launching New Ventures, 4e (Barringer/Ireland)
Chapter 5 Industry and Competitor Analysis
1) Element Bars, the company profiled in the opening feature for Chapter 5, has a unique
position in its industry. It has positioned itself as:
A) a generic energy bar company that resells energy bars to companies who want to create their
own branded energy bars
B) a niche energy bar company that sells in high-end outlets, like 5 star hotels and spas
C) a premium energy bar company that only uses the most wholesome and healthy ingredients,
and makes special bars for vegetarians and vegans
D) a low-cost energy bar company that makes energy bars more accessible to people in all
income brackets and still offers healthy ingredients
E) a customizable energy bar company that sells to individuals online and also to companies who
want to create their own branded energy bars
Answer: E
Diff: 2
Page Ref: 147
Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
2) Jeremy Banks recently started a new firm in the financial services industry. Prior to starting
his firm, he spent considerable time doing research on the potential of the industry. The research
that Jeremy was doing is called:
A) industry analysis
B) sector analysis
C) commercial analysis
D) business analysis
E) target market analysis
Answer: A
Diff: 1
Page Ref: 148
Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
3) A(n) ________ is a group of firms producing a similar product or service, such as soft drinks,
electronic games, or computers.
A) cluster
B) division
C) sector
D) industry
E) network
Answer: D
Diff: 1
Page Ref: 148
Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
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4) Once a firm decides to enter an industry and chooses a market in which to compete, it must
gain an understanding of its competitive environment. This challenge can be undertaken by
completing a(n):
A) business analysis
B) industry analysis
C) competitor analysis
D) strategic analysis
E) market analysis
Answer: C
Diff: 1
Page Ref: 149
Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
5) Each quarter, Cindy Anderson, who owns a chain of card and gift shops, does a detailed
analysis of her firm's competitors. This analysis is called:
A) competitor analysis
B) challenger analysis
C) strategic analysis
D) participant analysis
E) industry analysis
Answer: A
Diff: 2
Page Ref: 149
Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
6) Which of the following is an example of an industry-level factor as opposed to a firm-level
factor?
A) a firm's assets
B) a firm's culture
C) the teamwork among a firm's employees
D) a firm's products
E) threat of substitutes
Answer: E
Diff: 2
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Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

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7) According to the textbook, which of the following statements is accurate regarding the
importance of industry versus firm-specific factors as it pertains to firm profitability?
A) Virtually all the studies have concluded that industry-specific factors are more important than
firm-specific factors.
B) Virtually all the studies have concluded that firm-specific factors are more important than
industry-specific factors.
C) Virtually all the studies have concluded that industry-specific factors are of almost no
importance.
D) Virtually all the studies have concluded that firm-specific factors are of almost no importance.
E) Virtually all the studies have concluded that firm-specific factors and industry-specific factors
are of equal importance.
Answer: B
Diff: 3
Page Ref: 149
Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
8) In various studies, researchers have found that from ________ of the variation in firm
profitability is directly attributable to the industry in which a firm competes.
A) 4 to 12 percent
B) 8 to 30 percent
C) 18 to 42 percent
D) 22 to 56 percent
E) 34 to 70 percent
Answer: B
Diff: 3
Page Ref: 147
Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
9) Industries that sell products to seniors, such as the eyeglass industry and the hearing aid
industry, are benefiting from the aging of the population, which is an important:
A) environmental trend
B) business trend
C) commerce trend
D) statutory trend
E) competitive trend
Answer: A
Diff: 2
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Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

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10) The Partnering for Success feature in Chapter 5 focuses on three things that are important for
startups to become active in to learn the ins and outs of their industries. The three items focused
on in the feature are?
A) local Chambers of Commerce, trade journals, and networking events
B) Facebook, industry-related e-mail listservs, and trade shows
C) trade associations, trade shows, and trade journals
D) networking events, blogs, and Facebook
E) local Chambers of Commerce, city or university-sponsored incubators, and trade associations
Answer: C
Diff: 2
Page Ref: 151
Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
11) According to the textbook, the five competitive forces included in the five-forces model
determine:
A) the average rate of new business starts in an industry
B) the average growth rate for the firms in an industry
C) the average rate of return for the firms in an industry
D) the average sales for the firms in an industry
E) the average failure rate for the firms in an industry
Answer: C
Diff: 3
Page Ref: 152
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
12) According to the textbook, how do well-managed firms respond to the five-forces that
determine industry profitability?
A) They switch industries if the forces are too compelling.
B) They focus on one force intently and excel by overcoming that force.
C) They overcome each of the forces.
D) They ignore the forces.
E) They try to position their firms in a way that avoids or diminishes the forces.
Answer: E
Diff: 2
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Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

13) In general, industries are more attractive when:
A) the majority of the threats are high
B) the majority of the threats are low
C) the threat of each of the forces is neutral—neither low nor high
D) the threat of each of the five forces is high
E) the threat of each of the five forces is low
Answer: E
Diff: 2
Page Ref: 152
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
14) The price of prescription medicine is high, partly because when someone is sick there is no
real alternative to buying medicine if they want to get better. Which of Porter's five forces
explains how this aspect of the prescription medicine industry helps keep profitability high?
A) rivalry among existing firms
B) threat of new entrants
C) threat of substitutes
D) bargaining power of buyers
E) bargaining power of suppliers
Answer: C
Diff: 2
Page Ref: 152
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
15) Which of Porter's five forces is most closely associated with the concept "barrier to entry"?
A) bargaining power of suppliers
B) rivalry among existing firms
C) threat of new entrants
D) bargaining power of buyers
E) threat of substitutes
Answer: C
Diff: 2
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Topic: The Five Competitive Forces That Determine Industry Profitability
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Objective: Describe the role of entrepreneurs and small business

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16) Which of the following is not one of the major sources of barriers to entry?
A) economies of scale
B) cost advantages independent of size
C) buyer group concentration
D) access to distribution channels
E) government and legal barriers
Answer: C
Diff: 2
Page Ref: 154
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
17) Shelly Brunner owns a sports themed restaurant which is located in an upscale business
district in Chicago. One advantage that Shelly has is that she bought the lot she built her
restaurant on 25 years ago when lots in the area were selling for $50,000. Shelly knows that
several potential competitors have looked at bare lots near his business but haven't been willing
to pay the asking prices, which are as high as $500,000. Which of the six major sources of
barriers to entry is causing a disincentive for new firms to enter Shelly's industry?
A) capital requirements
B) economies of scale
C) product differentiation
D) government and legal barriers
E) cost advantage independent of size
Answer: E
Diff: 2
Page Ref: 154
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
18) Some industries, like the athletic shoe industry, are dominated by a small number of firms
with strong brands. These industries are difficult to break into without spending heavily on
advertising. The barrier to entry that the firms in these types of industries have erected is referred
to as:
A) government and legal barriers
B) capital requirements
C) product differentiation
D) cost advantages independent of size
E) access to distribution channels
Answer: C
Diff: 2
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Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

19) Which of Porter's five forces is most directly influenced by the following factors: number
and balance of competitors, degree of difference between products, growth rate of an industry,
and level of fixed costs?
A) threat of new entrants
B) rivalry among existing firms
C) threat of substitutes
D) bargaining power of buyers
E) bargaining power of suppliers
Answer: B
Diff: 3
Page Ref: 155
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
20) If a startup pioneers an industry or a new concept within an industry, the name recognition
the startup establishes may create a formidable nontraditional barrier to entry referred to as a(n):
A) unique business model
B) aggressive supremacy
C) competitive superiority
D) first-mover advantage
E) aggressive tactical advantage
Answer: D
Diff: 2
Page Ref: 156
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
21) According to the example provided in Chapter 5, www.1800contacts.com possesses a
nontraditional barrier to entry referred to as:
A) unique business model
B) strength of management team
C) access to distribution channels
D) Internet domain name
E) first-mover advantage
Answer: D
Diff: 3
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Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

22) Which of the following was not identified in the textbook as a nontraditional barrier to entry?
A) inventing a new approach to an industry and executing the idea in an exemplary fashion
B) unique business model
C) capital requirements
D) strength of management team
E) passion of management team and employees
Answer: C
Diff: 2
Page Ref: 156
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
23) Supplier concentration, switching costs, attractiveness of substitutes, and threat of forward
integration are factors that have a direct impact on:
A) threat of new entrants
B) bargaining power of buyers
C) rivalry among existing firms
D) threat of substitutes
E) bargaining power of suppliers
Answer: E
Diff: 3
Page Ref: 157
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
24) John Petersen is thinking about starting a firm in the specialty chemical industry. In the
industry analysis John has been conducting, one thing he has noticed is that the specialty
chemical industry is characterized by the following factors: high supplier concentration, high
switching costs for buyers when they switch from one supplier to another, and no attractive
substitutes for the products that most of the suppliers provide. These factors concern John
because they tell him that the profitability of the specialty chemical industry is suppressed by
the:
A) threat of substitutes
B) bargaining power of buyers
C) rivalry among existing firms
D) bargaining power of suppliers
E) threat of new entrants
Answer: D
Diff: 2
Page Ref: 157
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

8
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

25) The five industry types discussed in the book include:
A) launching, fragmented, leveled-off, declining, and global
B) emerging, climbing, mature, declining, and worldwide
C) emerging, fragmented, mature, declining, and global
D) climbing, peaking, plateaued, declining, and international
E) launching, consolidated, plateaued, mature, and worldwide
Answer: C
Diff: 2
Page Ref: 160
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
26) Windspire is starting a firm in the small-scale wind-generated power industry. This industry
is still so new that no standard operating procedures have been developed. Small-scale windgenerated power is an example of a(n) ________ industry.
A) mature
B) declining
C) emerging
D) global
E) fragmented
Answer: C
Diff: 2
Page Ref: 161
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
27) The primary opportunity existing for startups in emerging industries is to:
A) consolidate the industry and establish industry leadership as a result of doing so
B) win customers by placing an emphasis on service and process innovation
C) pursue a niche strategy, which focuses on a narrow segment of the industry that might be
encouraged to grow through product or process innovation
D) capture a first-mover advantage
E) pursue a cost reduction strategy, which is accomplished through achieving lower costs than
industry incumbents through process innovation
Answer: D
Diff: 2
Page Ref: 161
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

9
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

28) A(n) ________ industry is one that is characterized by a large number of firms of
approximately equal size.
A) fragmented
B) mature
C) declining
D) emerging
E) global
Answer: A
Diff: 2
Page Ref: 161
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
29) The primary opportunity existing for startups in fragmented industries is to:
A) pursue a niche strategy, which focuses on a narrow segment of the industry that might be
encouraged to grow through product or process innovation
B) win customers by placing an emphasis on service and process innovation
C) capture a first-mover advantage
D) pursue a cost reduction strategy, which is accomplished through achieving lower costs than
industry incumbents through process innovation
E) consolidate the industry and establish industry leadership as a result of doing so
Answer: E
Diff: 2
Page Ref: 161
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
30) A(n) ________ industry is an industry that is experiencing slow or no increase in demand.
A) declining
B) global
C) mature
D) emerging
E) fragmented
Answer: C
Diff: 2
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Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

31) According to the textbook, InstyMeds in prescription drug sales, Fresh Healthy Vending in
food vending, and Daisy Rock in guitars are example of entrepreneurial firms who are exploiting
opportunities in ________ industries.
A) emerging
B) fragmented
C) declining
D) mature
E) emerging
Answer: D
Diff: 3
Page Ref: 161
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
32) According to the textbook, Nucor in steel, JetBlue in airlines, and Cirque du Soleil in
circuses are examples of entrepreneurial firms who are exploiting opportunities in ________
industries.
A) fragmented
B) emerging
C) declining
D) global
E) mature
Answer: C
Diff: 2
Page Ref: 161
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
33) Opportunities for leadership, niche, harvest and divestment are associated with ________
industries.
A) mature
B) emerging
C) declining
D) fragmented
E) global
Answer: C
Diff: 2
Page Ref: 161
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

11
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

34) According to the textbook, PharmaJet, in needleless injection systems, and d'light, in solarpowered lanterns, are examples of entrepreneurial firms who are exploiting opportunities in
________ industries.
A) global
B) declining
C) mature
D) emerging
E) fragmented
Answer: A
Diff: 2
Page Ref: 163
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
35) The What Went Wrong? feature in Chapter 5 focuses on Eclipse Aviation. What was Eclipse
Aviation's goal?
A) to create a new segment in the private jet industry called very light jets.
B) to create a more affordable line of private two-seat and four-seat propeller planes
C) to create ultra-luxurious private jets
D) to create a low-cost airline to compete head-to-head with Southwest Airlines
E) to create a new segment in the passenger jet industry called very heavy jets
Answer: A
Diff: 2
Page Ref: 162
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
36) A(n) ________ industry is an industry that is experiencing significant international sales.
A) global
B) mature
C) fragmented
D) declining
E) emerging
Answer: A
Diff: 2
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Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

12
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

37) The two most common strategies pursued by firms in global industries are the ________
strategy and the ________ strategy.
A) inclusive, multidomestic
B) multidomestic, global
C) multidomestic, worldwide
D) inclusive, global
E) home, worldwide
Answer: B
Diff: 2
Page Ref: 163
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
38) Firms that pursue a(n) ________ strategy compete for market share on a country-by-country
basis and vary their product or service offerings to meet the demands of the local market.
A) inclusive
B) universal
C) multidomestic
D) contemporary
E) worldwide
Answer: C
Diff: 2
Page Ref: 163
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
39) Shelly James recently launched a firm in the fruit drink industry, and has already exported
her fruit drinks to 9 different countries. One thing that Shelly's firm is doing is that it is varying
the tastes of the fruit drinks it sells on a country by country basis to meet the demands of the
local markets. Shelly's firm is pursuing a ________ strategy.
A) global
B) home
C) universal
D) contemporary
E) multidomestic
Answer: E
Diff: 2
Page Ref: 163
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

13
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

40) Katherine Chapman recently launched a firm in the clothing industry, targeting teens ages
13-17. One thing Katherine thinks she has accomplished is producing products that have
universal appeal, so she will not vary her approach from country to country. Katherine is
pursuing a ________ strategy.
A) universal
B) multidomestic
C) contemporary
D) global
E) home
Answer: D
Diff: 2
Page Ref: 163
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
41) According to the textbook, the first step in a competitor analysis is to:
A) develop a marketing plan
B) develop the strategic plan
C) study the strength of the industry
D) study the external environment
E) determine who the competition is
Answer: E
Diff: 1
Page Ref: 163
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
42) According to the textbook, the three different types of competitors a business will face are:
A) potential, direct, and upcoming
B) indirect, fleeting, and future
C) serious, cautious, and future
D) direct, indirect, and future
E) potential, fleeting, and indirect
Answer: D
Diff: 2
Page Ref: 164
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

14
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43) In the context of competitor analysis, businesses that offer identical or similar products are
referred to as:
A) immediate competitors
B) direct competitors
C) indirect competitors
D) straight competitors
E) urgent competitors
Answer: B
Diff: 2
Page Ref: 164
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
44) Aquafina operates in the bottled water industry. The companies that offer identical or similar
products and go after the same customers that Aquafina does are Dasani and Zephyrhills. Dasani
and Zephyrhills are Aquafina's:
A) direct competitors
B) indirect competitors
C) future competitors
D) impending competitors
E) potential competitors
Answer: A
Diff: 2
Page Ref: 164
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
45) In the context of competitor analysis, ________ offer close substitutes to the product sold by
the firm completing the analysis.
A) potential competitors
B) direct competitors
C) indirect competitors
D) impending competitors
E) future competitors
Answer: C
Diff: 2
Page Ref: 164
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

15
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46) In the beverage industry, soda, fruit juice, and sports drinks are ________ competitors of
bottled water.
A) occasional
B) infrequent
C) indirect
D) direct
E) future
Answer: C
Diff: 2
Page Ref: 164
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
47) In the context of competitor analysis, ________ are companies that are not yet direct or
indirect competitors but could move into one of these roles at any time.
A) stable competitors
B) roundabout competitors
C) impending competitors
D) approximate competitors
E) future competitors
Answer: E
Diff: 2
Page Ref: 164
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
48) The Savvy Entrepreneurial Firm feature in Chapter 5 focuses on three firms that are doing
well in crowded industries for two reasons:
A) they have effectively differentiated themselves from their competitors and they have captured
a first-mover advantage
B) they have passionate leaders and they run savvy promotional campaigns
C) they have captured a first-mover advantage and they have unique business models
D) they create meaningful value for customers at a fair price and they have differentiated
themselves from their competitors
E) they are low-cost leaders and they run savvy promotional campaigns
Answer: D
Diff: 3
Page Ref: 165
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

16
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49) The information that is gathered by a firm to learn about its competitors is referred to as:
A) a feasibility appraisal
B) a workable appraisal
C) a practical assessment
D) a viable assessment
E) competitive intelligence
Answer: E
Diff: 2
Page Ref: 166
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
50) Amy has just launched a firm in the sports drink industry. She has decided to complete a grid
to see how she stacks up against her competitors. Along the horizontal axis of the grid, she lists
her firm along with her major competitors. Along the vertical axis of the grid, she lists the main
competitive factors in her industry. Amy is completing a:
A) strategic analysis spreadsheet
B) tactical analysis framework
C) competitive analysis grid
D) strategic analysis grid
E) behavioral analysis spreadsheet
Answer: C
Diff: 2
Page Ref: 167
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
51) Industry analysis is business research that focuses on the potential of an industry.
Answer: TRUE
Diff: 1
Page Ref: 148
Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
52) A comparison analysis is a detailed evaluation of a firm's competitors.
Answer: FALSE
Diff: 1
Page Ref: 146
Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

53) Virtually all studies have concluded that firm-specific factors are more important than
industry-specific factors in terms of firm profitability.
Answer: TRUE
Diff: 2
Page Ref: 149
Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
54) The two trends that are most important to focus on in an industry analysis are business trends
and environmental trends.
Answer: TRUE
Diff: 2
Page Ref: 150
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
55) Business trends include economic trends, social trends, technological advances, and political
and regulatory changes.
Answer: FALSE
Diff: 2
Page Ref: 150
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
56) The five competitive forces model is a framework for understanding the structure of an
industry.
Answer: TRUE
Diff: 2
Page Ref: 152
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
57) The best industry to enter is an industry where the threat of each of Porter's five-forces is
low.
Answer: TRUE
Diff: 2
Page Ref: 152
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

18
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

58) There are four factors that determine the threat of new entrants: number and balance of
competitors, degree of difference between products, growth rate of an industry, and level of fixed
costs.
Answer: FALSE
Diff: 2
Page Ref: 153
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
59) In most industries, the major determinant of industry profitability is the level of competition
among the firms already competing in the industry.
Answer: TRUE
Diff: 2
Page Ref: 155
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
60) If the buyers are concentrated and they buy from a large number of suppliers, then the
bargaining power of buyers is increased.
Answer: TRUE
Diff: 2
Page Ref: 155
Topic: The Five Competitive Forces That Determine Industry Profitability
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
61) An emerging industry is a new industry in which standard operating procedures have yet to
be developed.
Answer: TRUE
Diff: 1
Page Ref: 159
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
62) A fragmented industry is one that is characterized by a large number of firms of
approximately equal size.
Answer: TRUE
Diff: 2
Page Ref: 159
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

63) The primary opportunity available to firms in fragmented industries is consolidation. The
most common way to do this is through a geographic roll-up strategy, in which one firm starts
acquiring similar firms that are located in different geographic areas.
Answer: TRUE
Diff: 2
Page Ref: 160
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
64) A mature industry is an industry that is experiencing slow increases in demand, numerous
repeat customers, and limited product innovation.
Answer: TRUE
Diff: 2
Page Ref: 161
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
65) Firms that pursue a global strategy use the same basic approach in all foreign markets.
Answer: TRUE
Diff: 2
Page Ref: 161
Topic: Industry Types and the Opportunities They Offer
AACSB: Dynamics of Global Economy
Objective: Describe the role of entrepreneurs and small business
66) The first step in a competitor analysis is to determine who the competition is.
Answer: TRUE
Diff: 1
Page Ref: 163
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
67) A firm's future competitors are its most important ones.
Answer: FALSE
Diff: 2
Page Ref: 164
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
68) The three types of competitors a business will face are direct competitors, indirect
competitors, and future competitors.
Answer: TRUE
Diff: 2
Page Ref: 164
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

20
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

69) The information that is gathered by a firm to learn about its competitors is referred to as
tactical intelligence.
Answer: FALSE
Diff: 2
Page Ref: 166
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
70) A competitive analysis grid is a tool for organizing the information a firm collects about its
competitors.
Answer: TRUE
Diff: 1
Page Ref: 168
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
71) What is industry analysis? Why is it important for a new venture to complete a thorough
analysis of the industry it is entering?
Answer: Industry analysis is business research that focuses on the potential of an industry. An
industry is a group of firms producing a similar product, such as MP3 players, fitness drinks, or
electronic games. Once it is determined that a new venture is feasible in regard to the industry
and market in which it will compete, a more in-depth analysis is needed to learn the ins and outs
of the industry the firm plans to enter. This analysis helps a firm determine if the target market(s)
it identified during its feasibility analysis are accessible and which ones represent the best point
of entry for a new firm.
Diff: 1
Page Ref: 148
Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
72) Identify the five competitive forces that determine industry profitably. Explain the purpose of
analyzing these forces?
Answer: The five competitive forces that determine industry profitability are the threat of
substitutes, the threat of new entrants, rivalry among existing firms, bargaining power of
suppliers, and bargaining power of buyers. The five competitive forces model is a framework for
understanding the structure of an industry and was developed by Harvard professor Michael
Porter. Each of Porter's five-forces impacts the average rate of return for the firms in an industry
by applying pressure on industry profitability. Companies analyze the five-forces to try to
position their firms in a way that avoids or diminishes the negative impacts of these forces.
Diff: 2
Page Ref: 152
Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

21
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

73) Discuss the nontraditional barriers to entry identified in the chapter. Why is it important that
entrepreneurial firms utilize one or more of these forms of barriers to entry?
Answer: The nontraditional barriers to entry, which are particularly suitable for entrepreneurial
firms, are strength of management team, first-mover advantage, passion of management team
and employees, unique business model, a unique Internet domain name, and inventing a new
approach to an industry and executing the idea in an exemplary fashion. It is important that
startups utilize one or more of these forms of barriers to entry because many of the traditional
barriers to entry, like economies of scale, are expensive. It is difficult for startups to erect
expensive barriers to entry because money is usually tight.
Diff: 3
Page Ref: 156
Topic: Industry Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
74) What is an emerging industry? What is the primary opportunity available to entrepreneurial
firms in emerging industries? Name three examples of firms in emerging industries.
Answer: An emerging industry is a new industry in which standard operating procedures have
yet to be developed. The firm that pioneers or takes the leadership of an emerging industry often
captures a first-mover advantage, which is a sometimes insurmountable advantage gained by the
firm initiating the first significant move into a new market. Examples of firms in emerging
industries include Apple with its iTunes music store, Windspire in small-scale wind-generated
power, and PharmaSecure's process for detecting counterfeit pharmaceutical products.
Diff: 2
Page Ref: 160
Topic: Industry Types and the Opportunities They Offer
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business
75) What is competitive intelligence? What are some of the ways that a firm can ethically obtain
information about its competitors?
Answer: The information that is gathered by a firm to learn about its competitors is referred to
as competitive intelligence. There are a number of ways that a firm can ethically obtain
information about its competitors. These ways include: attend conferences and trade shows, read
industry related books, magazines, and Web sites, along with general business magazines, talk to
potential customers about what motivated them to buy your product as opposed to your
competitor, purchase competitors' products to understand their features, benefits, and
shortcomings, study competitors' Web sites, and study Web sites that provide information about
competitors.
Diff: 2
Page Ref: 163
Topic: Competitor Analysis
AACSB: Reflective Thinking
Objective: Describe the role of entrepreneurs and small business

22
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Is a group of firms producing a similar product or service such as soft drinks electronic games or computers?

Is a group of firms producing a similar product of service quizlet?

What is an emerging industry what is the primary opportunity available to entrepreneurial firms in emerging industries?

Which of the following is not a major source of barriers to entry in an industry?