1.Which of the following statements about performing a global industry analysis is FALSE?

A)   In general, as the number of buyers in an industry increases, the buyer power decreases.

B)   In general, as the number of suppliers in an industry decreases, the bargaining power of each individual supplier decreases.

C)   The availability of substitute products may prevent a producer from making a significant price increase.

D)   Holding excess capacity is an effective way to mitigate against the threat of new entrants.

2.In assessing the risks in a global industry analysis, which of the following tasks is the most important? Analysts should:

A)   determine which firms in the industry are the most efficient producers.

B)   assess which firms in the industry are most likely to be profitable.

C)   make recommendations as to how to lobby for increased government intervention.

D)   examine the level of competition between industry firms.

3.Which of the following procedures in a global industry analysis is least important to perform? Analysts should examine:

A)   where the industry falls within the Industry Life Cycle.

B)   the level of cooperation along the value chain.

C)   all of the firms in the industry.

D)   how changes in gross domestic product (GDP) affect sales.

1.Which of the following statements about performing a global industry analysis is FALSE?

A)   In general, as the number of buyers in an industry increases, the buyer power decreases.

B)   In general, as the number of suppliers in an industry decreases, the bargaining power of each individual supplier decreases.

C)   The availability of substitute products may prevent a producer from making a significant price increase.

D)   Holding excess capacity is an effective way to mitigate against the threat of new entrants.

The correct answer was B)

As the number of suppliers decreases, the suppliers gain more power and have the ability to raise their prices of their product (their product serves as an input to another product). All the other statements are true.

2.In assessing the risks in a global industry analysis, which of the following tasks is the most important? Analysts should:

A)   determine which firms in the industry are the most efficient producers.

B)   assess which firms in the industry are most likely to be profitable.

C)   make recommendations as to how to lobby for increased government intervention.

D)   examine the level of competition between industry firms.

The correct answer was D)

The level of competition is a key issue that needs to be addressed since it will affect the level of potential returns and investment risk. The other three tasks are either irrelevant or very secondary to the central analysis.

3.Which of the following procedures in a global industry analysis is least important to perform? Analysts should examine:

A)   where the industry falls within the Industry Life Cycle.

B)   the level of cooperation along the value chain.

C)   all of the firms in the industry.

D)   how changes in gross domestic product (GDP) affect sales.

The correct answer was C)

It is usually not feasible to examine all the firms in a particular industry. All the other statements are standard procedures to perform in a global industry analysis.