Answer the following statements true (T) or false (F)

Question

1. The use of hedging to manage the cost of aviation fuel is an example of trend analysis. 
2. In Porter's model for industry analysis, there are three primary competitive forces in a firm's environment. 
3. Kraft Macaroni & Cheese is now challenged by new competitors such as Annie's and other store brands, which Porter's model for industry analysis calls the threat of new entrants. 
4. In a cost-leadership strategy, an organization targets a wide market and offers products or services of unique and superior value compared to competitors. 

Answer 1

1. FALSE
In the past several years, Southwest Airlines has been able to effectively use hedging to hold down its costs for aviation fuel. This is an example of contingency planning.
2. FALSE
Strategic-management expert Michael Porter suggested in his Porter's model for industry analysis that business-level strategies originate in five primary competitive forces in the firm's environment: (1) threats of new entrants, (2) bargaining power of suppliers, (3) bargaining power of buyers, (4) threats of substitute products or services, and (5) rivalry among competitors.
3. TRUE
New competitors can take away customers from existing organizations, which is called the threat of new entrants in the model. Example: Kraft Macaroni & Cheese is a venerable, well-known brand but is threatened from the low end by store brands, such as Walmart's brand, and from the high end by Annie's Creamy Macaroni and Cheese with Real Aged Wisconsin Cheddar.
4. FALSE
The cost-leadership strategy is to keep the costs, and hence prices, of a product or service below those of competitors and to target a wide market. The differentiation strategy is to offer products or services that are of unique and superior value compared with those of competitors but to target a wide market.