Activities Of Cost Leaders And Bargaining Power Of Suppliers

Question

1. Grange Airlines Pty Ltd is an airline that is a cost leader within the industry. This means that:

I. The activities comprising the airline industry value chain will be significantly different for each industry participant.

II. The activities performed within Grange Airlines Pty Ltd’s value chain are likely to be different from the activities performed by its competitors.

III. Grange Airlines Pty Ltd’s strategy must involve the use of older type aircraft.

IV. Grange Airlines Pty Ltd can only implement its strategy with a customer service focus.

A. II only
B. I and II only
C. II and III only
D. I, III and IV only

2.  Using Porter’s (1985) framework for industry analysis, which one of the following statements is correct in relation to the bargaining power of suppliers?

A. If the supplier has the ability to forward integrate, the buyers in the industry are able to generate higher margins.
B. If the suppliers’ product is a costly item for the buyers, the bargaining power of suppliers would be reduced.
C. If the buyers have the ability to backward integrate, the bargaining power of the suppliers is reduced.
D. If no switching costs exist, the bargaining power of suppliers is increased.

Summary

These multiple choice questions belong to Corporate Strategy and the 1st question discusses about the activities of a cost leader and the 2nd question is about industry analysis for bargaining power of suppliers.

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