Markets (for example the automobile market in Germany) have an entry barrier and an exit barrier. The
entry barrier supplies information as to how difficult it is for a new provider to enter the
market – for example to sell cars in Germany. The exit barrier supplies information as
to how difficult it is to exit (leave) the market again.
Here distinctions are made between four types of markets:
- "flea market": low entry barrier, low exit barrier
- "mouse trap": low entry barrier, high exit barrier
- "gold mine": high entry barrier, low exit barrier
- "gilded cage": high entry barrier, high exit barrier
Complete the process diagram in such a way that it assigns each market to the correct position.
Example 3
Which of the two statements is/are correct?
I. Decision Point V could read: "exit barrier high?".
II. Element Y could read: "Gilded Cage."
(A) Only statement I is correct.
(A) Only statement I is correct. incorrect
(B) Only statement II is correct.
(B) Only statement II is correct. correct
(C) Both statements are correct.
(C) Both statements are correct. incorrect
(D) Neither of the two statements is correct.
(D) Neither of the two statements is correct. incorrect
Degree of difficulty: medium to high
Solution
In the case of Statement I, it suffices to consider the following: Decision Point V must
contain a question which, if its answer is "YES," corresponds to the market form
"Gold Mine." If the answer to the question in Statement I ("exit barrier high?")
is "YES," it does not correspond to "Gold Mine," since, in the case of the
"Gold Mine," the exit barrier is low. Therefore Statement I is false.
In the case of Statement II it is necessary to recognize that there are two possible ways
of completing the process diagram:
If the question at Decision Point V is "entrance barrier high?," then the question
at Decision Point X must read "exit barrier low?" in order to correspond to the
element "Mouse Trap," which is a given. In this case, "Flea Market" would
be entered in Element Y.
It is also possible, however, that Decision Point V reads "exit barrier low?." In this
case, the question at Decision Point X would have to read "entry barrier high?" in order
to correspond to the Element "Mouse Trap." Element Y would then be "Gilded Cage."
Statement II is accordingly correct.
The solution to this item is therefore B.
Example 4
Which of the two statements is/are correct?
I. Decision Point V could say: "entry barrier low?".
II. Decision point X could say the same as decision point W.
(A) Only statement I is correct.
(A) Only statement I is correct. incorrect
(B) Only statement II is correct.
(B) Only statement II is correct. incorrect
(C) Both statements are correct.
(C) Both statements are correct. incorrect
(D) Neither of the two statements is correct.
(D) Neither of the two statements is correct. correct
Degree of difficulty: medium to high
Solution
Statement I I is not correct. If decision point V says "entry barrier low?", in the
case of "mouse trap" this question should to be answered "YES", because the entry barriers
for a "mouse trap" are low. If the question at decision point V is answered "YES", it is
no longer possible to reach the "mouse trap". If element Z also says "mouse trap" then only
one assignment possibility remains (box Y), but two forms, the "gilded cage"
and "flea market" still have to be assigned.
Statement II is not correct. If the question in X and Z is the same, then
"mouse trap" and "gold mine" should be reached by the way of a "NO" answer. Therefore,
one of the barriers (entry barrier or exit barrier) should be the same for both forms.
However, both the entry barrier (gold mine: high; mouse trap: low) and the exit barrier
(gold mine: low; mouse trap: high) are different.
The correct solution is therefore (D), since neither of the two statements is correct.
