© 2000 John Petroff
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© 2000 John Petroff |
Questions for Chapter 14 Industry Analysis
Review questions
Q-14.1
What are the two possible approaches to industry analysis?
Q-14.2 How is a top-down
sequence and method of analysis?
Q-14.3 What is the purpose
of a top-down industry analysis?
Q-14.4 What is the sequence
in a bottom-up approach?
Q-14A1.1
Does the US Bureau of Census always classify the industry to which
a firm belongs on the basis of the largest source of revenue?
Q-14A1.2 If a bed and breakfast
operation derives more revenue from horse back riding than renting
rooms, should it be classified as sporting facility rather than
hotel, motel and other inn keeping establishments?
Q-14A1.3 What are the different
approaches of classifying a company with several product lines?
Q-14A1.4 Is it realistic
to separate out different product lines of a company, and treat
them as independent businesses?
Q-14A2.1
What does NAICS stands for?
Q-14A2.2 What does SIC
stands for?
Q-14A2.3 What is the promised
improvement of NAICS over SIC?
Q-14A3.1
What are the classification used by Dow Jones averages?
Q-14A3.2 Why is the Dow
Jones classification useful for most investors?
Q-14A3.3 What are the four
groups of stocks according to investors' strategies?
Q-14A3.4 What is the major
attraction of growth stock for investors? What is the down side?
Q-14A3.5 What type of investors are not interested in growth stocks?
Q-14A3.6 Give examples
of growth industries.
Q-14A3.7 What type of investor
is attracted to cyclical stocks? What is the down side
Q-14A3.8 What type of strategy
do cyclical stocks make possible?
Q-14A3.9 What statistic
is looked at to evaluate cyclical stocks?
Q-14A3.10 Give examples
of industries that are good candidates for cyclical stock.
Q-14A3.11 What is the attraction
of income stocks? What is the down side?
Q-14A3.12 Give examples
of income stock industries.
Q-14A3.13 What is the attraction
of defensive stocks? What is the down side
Q-14A3.14 When does one
invest in defensive stocks?
Q-14A3.15 Give examples
of defensive stock industries.
Q-14A3.16 What are blue-chip
stocks? Why are sought? Why some investors stay away from them?
Q-14A3.17 What are mid-cap
and small-cap stocks? What is their attraction? What is unattractive
in them?
Q-14A3.18 What are speculative
stocks? Why should anyone be interested in them?0
Q-14B.1
Give examples of industries that have experience fast growth over
the past half century.
Q-14B.2 Give examples of
industries that have experienced the least growth over the past
half century.
Q-14B.3 What proportion
of firms remains after the expansion phase of a product?
Q-14B.4 In which discipline
is the product life cycle most thoroughly studied?
Q-14B.5 What five groups
of customers are usually studied in the context of the product
life cycle?
Q-14B.6 Which of the above
groups of customers is the smallest one?
Q-14B.7 Which group is the
largest one?
Q-14B1.1
What is the phase of the product life cycle that precedes the
introduction phase?
Q-14B1.2 What financial
aspects are characteristic of the invention phase?
Q-14B.3 What can be said
about the invention phase today in comparison to a century or
so ago?
Q-14B2.1
What factors contribute to slow sales in the introductory phase
of the product life cycle?
Q-14B2.2 Compared with
subsequent phases, is the introduction phase the most unstable
(based on examples of computer, photocoping and aircraft industries
evidence)?
Q-14B2.3 Is it conceivable
for firms in the introduction phase have negative net working
capital and negative net worth?
Q-14B2.4 Is there an advantage
of working on an introductory phase of a product within a large
corporation rather than a small start-up?
Q-14B2.5 What is the advantage
of being an independent start-up?
Q-14B2.6 Argue the positive
and negative aspects of having many competitors in the introductory
phase.
Q-14B2.7 Describe how capital
is raised by start-up companies.
Q-14B3.1
What factors contribute to sales faster and faster growth in the
expansion phase?
Q-14B3.2 Give examples
of essential services needed for the expansion of industries such
as aircrafts, computers, automobiles.
Q-14B3.3 Does the sales
expansion attract investors to the company? Why? Which type?
Q-14B3.4 Is the expansion
phase a good time for IPO?
Q-14B3.5 Why is there a
frenzy for mergers in the expansion phase?
Q-14B3.6 Why is lowering
of price critical for survival in the expansion phase? What justifies
it? What makes it possible?
Q-14B3.7 Do firms continue
to experience losses in the expansion phase? Discuss.
Q-14B3.8 Do technology
leaders experience losses in the expansion phase? Explain.
Q-14B3.9 Are product improvements
essential in the expansion phase? Why?
Q-14B3.10 Is the liquidity
of a company in the expansion phase improving or deteriorating?
Discuss.
Q-14B4.1
Are product improvements or minor modifications for broader product
selection necessary in the maturation phase?
Q-14B4.2 Which group of
customers must be approached in the maturation phase?
Q-14B4.3 What marketing
strategy is appropriate in the maturation phase?
Q-14B4.4 What is the major
emphasis of technological improvement in the maturation phase?
Q-14B4.5 Why is it mandatory
to lower costs and prices in the maturation phase?
Q-14B4.6 Are firms continuing
to experience losses in the maturation phase?
Q-14B4.7 Are new investors
attracted to companies in maturation phase?
Q-14B4.8 Is sales growth
rate in the maturation phase as high as in the expansion phase?
Q-14B4.9 Is the liquidity
of a firm completing the maturation of its product precarious
or outstanding?
Q-14B4.10 Are banks eager
to lend to firms completing maturation of products?
Q-14B4.11 Is commercial
risk subsiding in the maturation phase?
Q-14B4.12 What new competitors
are entering the industry?
Q-14B4.13 Why must the
management style of the company change in maturation?
Q-14B4.14 Is the effort
to lower cost with automation an additional danger for the firm
in the maturation phase?
Q-14B4.15 Does a firm in
the maturation phase strive to use more financial leverage? Why?
Q-14B4.16 Why do sales
in the maturation phase become cyclical?
Q-14B4.17 What new dangers
do firm in maturation phase face?
Q-114B4.18 What new marketing
strategies are needed in the maturation phase?
Q-14B5.1
Why is the market of standardized product stable but also cyclical?
Q-14B5.2 What is the new
marketing approach of firms entering the standardization phase?
Q-14B5.3 Do patents play
a role in the standardization phase? Why?
Q-14B5.4 What futher technological
improvements are needed in the standardized phase?
Q-14B5.5 Why operating
and financial leverage can be high and still be tolerated?
Q-14B5.6 Are bonds a good
financial source for firms in the standardization phase?
Q-14B5.7 Why is price competition
likely and is likely to be devastating in the standardization
phase?
Q-14B5.8 Is competition
only domestic or international in the standardization phase?
Q-14B5.9 Why more merger
are necessary in the standardization phase?
Q-14B5.10 What type of
investor is attracted to companies in the standardization phase?
Q-14B6.1
Why are products bound to reach an obsolescence phase?
Q-14B6.2 Is obsolescence
of a product sudden or stretched over long time period? Discuss
both possibilities.
Q-14B6.3 What are firms
in obsolescence phase likely to do?
Q-14C1.1
On what depends the extent to which actions of competitors affect
others companies in the industry?
Q-14C1.2 What is the name
of the statistic that indicates if control over the industry is
in hands of a few firms or diluted among many?
Q-14C1.3 An industry is
said to be concentrated when what proportion of the market is
controlled by the top three firms?
Q-14C1.4 Give examples
of highly concentrated industries in the United States.
Q-14C1.5 Give examples
of American industries that are not concentrated.
Q-14C1.6 Does the degree
of concentration change over time or not? Give examples.
Q-14C1.7 What American
sector is populated by the largest proportion of large firms?
Q-14C1.8 What is the proportion
of assets that is owned by the top 200 American firms?
Q-14C1.9 Why are natural
monopolies tolerated (or have been tolerated)?
Q-14C1.10 Why is the protection
of a patent so important for aspiring growth firms?
Q-14C1.11 Why are firms
seeking to find a product niche?
Q-14C1.12 Why is the study
of the competitive threats and weaknesses essential to a selection
of the most promising company in an industry?
Q-14C2.1
List the different types of leadership firms may seek?
Q-14C2.2 What is a likely
goal of a firm seeking to establish leadership in employee training?
Q-14C2.3 What type of customer
is attracted to the firm perceived as technology leader?
Q-14C2.4 How does a technological
leader use its position to derive a financial advantage?
Q-14C2.5 How can an analyst
determine if a company is the technological leader it claims to
be?
Q-14C2.6 Is price leadership
more important than technology leadership? When does it become
more important?
Q-14C2.7 How is the price
leadership studied?
Q-14C2.8 How important
is it to be the largest company in the industry? What advantages
does it confer?
Q-14C2.9 What marketing
strategy is easier to carry out it the firm is the largest?
Q-14C2.10 Is size more
important than technology leadership?
Q-14C3.1
What strategy can lead to success for small firms?
Q-14C3.2 Do small firms
have more to fear from large firms or from other small firms in
their proximity?
Q-14C3.3 Why are there
government programs specifically designed to help small and medium
firms?
Q-14C3.4 What are characteristics
that an analyst must find in a small business that are not applicable
to larger businesses?
Q-14C3.5 Why is selling
likely not to be the best skill of a small business entrepreneur?
Q-14C3.6 Why small businesses
are undercapitlized, and how significant is that for their future?
Q-14C3.7 Why are managerial
and leadership skills more important for a small business owner
than for a large company executive?
Q-14C5.1
What is achieved by conglomerates?
Q-14C5.2 Do theoretical
studies point to the uselessness of conglomerates to investors?
Why?
Q-14C5.3 What interests
do employees and management have in building a conglomerate?
Q-14C5.4 Mergers should
first be dictated by what managerial asset?
Q-14C5.5 What is achieved
with vertical integration?
Q-14C5.6 To reduce the
impact of business cycles, how should firms merge? Is this common?
Q-14C5.7 What are the pitfalls
of mergers?
Q-14C5.8 What essential
ingredient of business success is so difficult to cultivate in
a conglomerate?
Q-14D.1
Are all firms affected by the business cycle?
Q-14D.2 How are otherwise
non-cyclical industries still subject to effects of cyclical components?
Q-14D.3 What relationship
exists between business failures and economic activity?
Q-14D1.1
Are companies in high growth industries affected by a cyclical
consumer demand? Why?
Q-14D1.2 What aspect of
start-ups justify the timing of product introduction?
Q-14D1.3 Are business starts
correlated with the business cycle?
Q-14D1.4 What argues against
raising capital for start-ups at the peak of a business cycle?
Q-14D2.1
Which two factors influence demand for durable goods?
Q-14D2.2 How are interest
rates affecting plans to buy new equipment?
Q-14D2.3 How are expectations
of future sales affecting demand for new manufacturing equipment?
Q-14D2.4 Why are interest
rates and demand for manufacturing equipment correlated with the
business cycle?
Q-14D2.5 Describe the process
that exacerbates durable goods output and demand instability.
Q-14D2.6 Are high operating
and financial leverages common in the durable goods industry?
Q-14D2.7 Are profits of
firms in durable goods industries less unstable than orders? How
and why?
Q-14D2.8 What elements
must an analyst find in financial results of durable goods firms
that cushions the instability of demand?
Q-14D2.9 Give examples of cyclical durable goods industries.
Q-14D3.1
Give examples of cyclical non-durable good industries.
Q-14D3.2 What makes the
non-durable industries very cyclical?
Q-14D3.3 Is having a negative
net worth in such industries a sign of imminent dissolution?
Q-14D3.4 How should firms
in cyclical non-durables minimize the effect of hard times?
Q-14D4.1
Give examples of counter-cyclical industries.
Q-14D4.2 What two factors
used to contribute to a counter-cyclical pattern of the housing
industry?
Q-14D4.3 What has caused
housing construction to turn cyclical instead of counter-cyclical?
Q-14D5.1
Give examples of the services industry.
Q-14D5.2 Give arguments
why the service industries should not be cyclical.
Q-14D5.3 Why have services
become more cyclical than in the past?
Q-14E.1
What is the purpose of conducting a sensitivity analysis for an
industry?
Q-14E.2 What mathematical
procedure is used in sensitivity analysis?
Q-14E.3 List some of the
most common economic variables use in sensitivity analysis.
Q-14E.4 Why are rates of
growth rather than absolute output used in sensitivity analysis?
Q-14E.5 What purpose is
served by including attitude variables?
Q-14E.6 Give two sources
of best known attitude survey statistics.
Q-14E.7 Outline how the
results of a sensitivity analysis are used.
Q-14F.1
What is the name given to the process of predicting what products
are likely to be introduced in the coming future?
Q-14F.2 Is technological
forecast considered to be easier than financial forecast?
Q-14F.3 What are the types
of information that need to be gathered in order to conduct a
technological forecast?
Q-14F.4 Are inventors most
often those who take most of the financial benefit from inventions?
Q-14F1.1
When two technologies coexist, is it likely that they will continue
to coexist for a long time?
Q-14F1.2 What are the factors
that contribute to one technology to overcome a competing technology?
Q-14F1.3 Is it possible
to forecast which technology among competing technologies will
survive? How?
Q-14F2.1
Are technologies stationary?
Q-14F2.2 What drives technological
evolution?
Q-14F2.3 Can an analyst
identify new products from studying how a technology is evolving?
Q-14F3.1
What is the name given to the spread of knowledge across borders?
Q-14F3.2 What model is
used to predict international diffusion of technology?
Q-14F3.3 Explain what the
international diffusion of technology model proposes.
Q-14F3.4 Is the United
States currently considered the leading technological country
for practically all technologies?
Q-14F4.1
Why do technological standards need to be harmonized across countries?
Q-14F4.2 What organizations
are active in setting international technological standards?
Q-14F4.3 Can an analyst
make predictions of effects on countries from efforts of technological
standards harmonization?
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