Deck 2: The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis

Question 1

When firms analyze the external environment, they typically have complete and unambiguous data.

Answer 1

False

Question 2

The final result of successful strategic competitiveness is above-average returns.

Answer 2

True

Question 3

Because the health of a nation's economy affects the performance of individual firms and industries, companies study the economic environment to identify changes, trends, and their strategic implications.

Answer 3

True

Question 4

Firms can directly control the elements of the six segments of the general environment.

Question 5

Without monitoring, a firm is left with a mass of data of unknown relevance.

Question 6

External environmental analysis should be conducted annually.

Question 7

Early adopters of new technology often achieve higher market shares and higher returns than later adopters of the technology.

Question 8

Differences in work attitudes between French and American workers are categorized in the demographic segment of the general environment.

Question 9

The objective of assessing the external environment is to determine the timing and significance of the effects of environmental changes and trends on the strategic management of the firm.

Question 10

An analysis of the general environment is usually focused on the future.

Question 11

Age structure, geographic distribution, income distribution, interest rates, and process innovations are all elements of concern when studying the demographic segment of the general environment.

Question 12

The political/legal segment of the general environment is the arena in which organizations and interest groups compete for attention, resources and a voice in the laws and regulations guiding interactions among nations.

Question 13

Demographic, economic, political/legal, sociocultural, technological, and global are the six elements comprising the industry environment.

Question 14

The importance that a society places on universal access to healthcare would be considered part of the sociocultural aspect of the external environment.

Question 15

It is uncommon for a large firm to receive a majority of revenues from outside its home country.

Question 16

Firms are affected only by the governmental regulations of the country in which they are headquartered.

Question 17

Using sophisticated mathematical models, producing accurate forecasts of demand for products is fairly straightforward.

Question 18

The external environment facing business stays relatively constant over time.

Question 19

Boundary spanners are organizational employees in positions to interact with external constituents.

Question 20

Monitoring involves the development of a forecast of what might happen at a future point in time.

Question 21

Strategic groups are firms in different industries following the same or similar strategies.

Question 22

In recent years, industry boundaries have become more sharply defined.

Question 23

A firm experiencing intense rivalry with powerful competitors should energetically engage in competitor analysis.

Question 24

The main competitive factor facing companies offering traditional telephone service is the existence of substitute products and services.

Question 25

Generally, the stronger the competitive forces, the higher the profit potential of an industry.

Question 26

The strengths of the five competitive forces are similar across strategic groups within an industry.

Question 27

Eavesdropping is an ethical way to obtain information about competitors' actions.

Question 28

As the Strategic Focus feature in chapter 2 describes, Wal-Mart is the nation's largest employer and second-largest company by revenue. What does this suggest in terms of the industry structure?

A) Wal-Mart can exert considerable pressure as a buyer.
B) Wal-Mart's presence in a market reduces rivalry.
C) Wal-Mart has no substitutes.
D) Wal-Mart is immune from the threat of new entrants.

Question 29

An attractive industry is one that is characterized by high entry barriers, suppliers and buyers with strong bargaining power, low threats from substitute products, and low rivalry among firms.

Question 30

Switching costs, access to distribution channels, economies of scale, large numbers of competing firms, and slow industry growth are some of the entry barriers that may affect the threat of new entrants to an industry.

Question 31

Typically, fast industry growth increases the vigor of retaliation by existing firms against a new industry rival.

Question 32

High exit barriers are factors that cause a company to remain in an industry even though the profitability of doing may be questionable.

Question 33

The five forces model of competition focuses on the segments of the general environment.

Question 34

Wal-Mart's strategic group includes all of the following firms EXCEPT

A) Safeway, Kroger and other grocery stores.
B) Target, Sears, JC Penney and other department stores.
C) Costco and other warehouse clubs.
D) The Gap, Abercrombie & Fitch, and other specialty retailers.

Question 35

Any competitor intelligence practice that is legal is also ethical.

Question 36

The process of competitor analysis should examine the competitor's future objectives, current strategy, assumptions, and capabilities.

Question 37

Acme Valves, Inc., has been a successful player in the oil field supply industry in the last 15 years. Acme maintained its traditional strategy and product characteristics over this time period. But, Acme has experienced declines in sales and profits over the last four quarters. The CEO of Acme should

A) continue with the proven strategy because its returns over the long run are important.
B) focus on improving efficiency of production and cost control.
C) conduct an analysis of the external environment.
D) immediately begin making incremental adjustments to the traditional business strategy in an effort to improve sales.

Question 38

According to the text's Strategic Focus on Wal-Mart, which portion of the general environment is effecting Wal-Mart the LEAST:

A) Political/legal - changes in how communities view the presence of Wal-Mart.
B) Global - the influence of Wal-Mart as a leading importer.
C) Technological -Wal-Mart's initiatives due to environmental concerns.
D) Supplier power - changes in the way suppliers view Wal-Mart as a customer.

Question 39

A high threat of new entrants keeps pricing pressures on existing firms, keeping consumers happy and making the industry attractive and profitable.

Question 40

Suppliers are powerful when no satisfactory substitutes are available, the selling industry is relatively more concentrated than the purchasing industry, and switching costs are high.

Question 41

The text details differences between U.S. and European perspectives on genetically modified foods. In which part(s) of an analysis of the general environment would this appear?

A) Political/legal.
B) Technological.
C) Global.
D) All of the above.

Question 42

A general environmental analysis can be expected to produce all of the following EXCEPT

A) objective answers.
B) recognition of environmental changes.
C) identification of organizational opportunities.
D) identification of organizational threats.

Question 43

The economic environment refers to

A) the nature and direction of the economy in which a firm competes or may compete.
B) the economic outlook of the world provided by the World Bank.
C) an analysis of how the environmental movement and world economy interact.
D) an analysis of how new environmental regulations will affect the U.S. economy.

Question 44

In analyzing the demographic segment of the general environment, one typically examines all of the following factors EXCEPT

A) age structure.
B) ethnic mix.
C) distribution of income.
D) cultural values.

Question 45

Which of the following identified in an analysis of the general environment is an opportunity for an entrepreneur who wishes to open a business doing "Fitness for Life" physical conditioning services (strength, balance, and flexibility training) in a city of 100,000 people?

A) the average age of the population in his community is high
B) the level of unemployment in his community is high
C) a chiropractor and two independent physical therapists are located in his community
D) the average education level of the population in his community is low

Question 46

The political/legal segment of an environment represents

A) the political preferences of different ethnic groups in the society.
B) the technological values of different political entities in society.
C) how organizations and governments mutually try to influence each other.
D) the system of regulations governments at all levels place on businesses.

Question 47

Analyzing income distribution would include all of the following EXCEPT

A) the purchasing power of various age groups.
B) the discretionary income of various ethnic groups.
C) wage differentials between male and female employees working for a large manufacturer.
D) how income is distributed among regions of the U.S.

Question 48

When analysts develop feasible projections of future events and how quickly they will occur based on observed changes and trends, they are engaged in

A) scanning.
B) monitoring.
C) forecasting.
D) assessing.

Question 49

To be effective, when should environmental analysis be conducted?

A) on an on-going basis
B) quarterly
C) annually
D) every 3-5 years

Question 50

Trade barriers

A) are regulated by the International Monetary Fund (IMF).
B) are typically used to create trade alliances among neighboring countries.
C) have little effect on firms that operate in a purely domestic market.
D) attempt to protect products manufactured in the home country.

Question 51

Which of the following would NOT be identified in an analysis of the economic portion of the general environment?

A) The willingness of Chrysler's buyers to purchase large vehicles due to an increase in oil prices.
B) The ability of Ford to issue new debt due to their recent financial performance.
C) The ability of BMW's buyers to finance car purchases due to a change in interest rates.
D) The willingness of GM buyers to purchase new vehicles due to the threat of recession.

Question 52

Which of the following is NOT an activity used in the external environmental analysis process?

A) Scanning
B) Decrypting
C) Monitoring
D) Assessing

Question 53

The ethically questionable practice of placing "cookies" on website customers' personal hard drives is an example of using the Internet for

A) assessing.
B) monitoring.
C) forecasting.
D) scanning.

Question 54

Aardvark Corp. has three products. Two products together make up two-thirds of revenues and constitute 50 percent of company profits. Aardvark's third product makes up one third of sales. With profitability far above the industry average, this product is responsible for one half of Aardvark's profits. Which of the following statements regarding assessment of the general environment is accurate for Aardvark?

A) The company should monitor the general environment for changes that might effect the revenue of all products.
B) The company should monitor the general environment for changes that might effect the profitability of the most profitable products.
C) The company should monitor the general environment for changes that might effect the profitability of all products.
D) The company should monitor the general environment for changes that might effect the revenue and profitability of all products.

Question 55

Which of the following would be LEAST effected by a rapid changes in interest rates?

A) Auto dealers
B) Hospitals
C) Home builders
D) All would be equally effected

Question 56

Environmental scanning would be most important for which of the following organizations?

A) a provider of hospice services for the terminally ill
B) a web design company catering to small businesses
C) a neighborhood sewer and water utility
D) a manufacturer of household linens

Question 57

Demographic changes include variations in income distribution. Which of the following statements is true?

A) Firms are most interested in the consumers comprising the top ten percent of the household income.
B) Consumers' real income has been increasing steadily since 1976.
C) The general loss in real income has been somewhat offset by the increase in dual-career couples.
D) Workforce diversity is making the concept of average income obsolete.

Question 58

The ____ environment is composed of elements in the broader society that can influence an industry and the firms within it.

A) general
B) competitor
C) sociocultural
D) industry

Question 59

An analysis of the economic segment of the external environment would include all of the following EXCEPT

A) interest rates.
B) international trade.
C) the strength of the U.S. dollar.
D) the move toward a contingent workforce.

Question 60

The environmental segments that comprise the general environment typically will NOT include

A) demographic factors.
B) sociocultural factors.
C) substitute products or services.
D) technological factors.

Question 61

According to the text, Google has been sued by several media companies for violations of copyright law. Which of the following would be the most appropriate interpretation of these under general environmental and industry analysis?

A) A changing technological environment due to the rise of the Internet; increased rivalry in the broadcast industry.
B) A changing legal environment pertaining to the posting of copyrighted material on Internet sites; the challenges of controlling suppliers actions.
C) A changing sociocultural environment as people are more willing to watch television shows on their computer; the bargaining power of buyers who face low switching costs between watching shows on their computer versus their television.
D) A changing global environment as the market for television shows has expanded from domestic to international; the threat of new entrants with unique content available for viewing.

Question 62

Diverse work groups tend to be more creative and innovative, as well as more ____, than homogenous work groups.

A) cohesive
B) easily influenced
C) difficult to manage
D) subject to stagnation

Question 63

Google has influenced what portion of the general environment for other software firms?

A) Technological
B) Political/legal
C) Global
D) None of the above as firms are influenced by the general environment, they do not influence it.

Question 64

An analysis of society's attitudes and values would be conducted when studying the ____ segment of the general environment.

A) sociocultural
B) global
C) demographic
D) economic

Question 65

The concepts of Guanxi, Wa, and Inhwa all convey the general idea of

A) entrepreneurial risk-taking.
B) interpersonal relationships.
C) the value of hard work.
D) personal achievement.

Question 66

New entrants to an industry are more likely when

A) it is difficult to gain access to distribution channels.
B) economies of scale in the industry are high.
C) product differentiation in the industry is low.
D) capital requirements in the industry are high.

Question 67

A Midwestern bank has outsourced its customer service function to a firm in India. This is an example of changes in the ____ segment of the general environment.

A) demographic
B) global
C) sociocultural
D) economic

Question 68

All of the following represent areas where Google is most likely assessing and forecasting the general environment EXCEPT

A) copyright law and how it effects videos posted to YouTube.
B) technology and advertising on DoubleClick.
C) copyright law and the scanning of millions of volumes of library books.
D) technology and its relationship with Microsoft.

Question 69

Economies of scale refer to the fact that as the

A) quantity of product produced in a given time period increases, the cost of manufacturing each unit increases.
B) quantity of product produced in a given time period increases, the cost of manufacturing each unit remains constant.
C) quantity of product produced in a given time period increases, the cost of manufacturing each unit decreases.
D) quantity of product produced in a given time period decreases, the cost of manufacturing each unit decreases.

Question 70

Which of the five forces of competition is MOST threatening to Google?

A) rivalry among competing search engines
B) threat of substitutes
C) bargaining power of suppliers
D) threat of new entrants

Question 71

The technological segment of environmental analysis includes

A) institutions and activities involved with creating new knowledge and translating that knowledge into new outputs.
B) the determination of when machinery will need to be replaced in a given firm.
C) the need for new technology in order for a firm to gain a competitive advantage.
D) places where a firm's technology will allow that firm to dominate a given market.

Question 72

An industry is defined as

A) a group of firms producing the same products or services.
B) firms producing items that sell through the same distribution channels.
C) firms that sell the same products or services to the same customer base.
D) a group of firms producing products that are close substitutes.

Question 73

The likelihood of entry of new competitors is affected by ____ and ____.

A) barriers to entry, expected retaliation of current industry organizations
B) the power of existing suppliers, buyers
C) the profitability of the industry, the market share of its leading firm
D) the demand for the product, the profitability of the competitors

Question 74

One of the segments of the external environment tends to drive (heavily influence) many of the other segments. This segment is the ____ segment.

A) economic
B) sociocultural
C) technological
D) political/legal

Question 75

The next critical technological opportunity for organizations is predicted to be

A) the Internet.
B) multiphasic interventions.
C) biological engineering.
D) wireless communications.

Question 76

In a suburban community outside a city in Alabama, a retail store opened that specialized in dancewear for children and adults. It was moderately successful for five years until the local newspaper published an exposé that scanty lingerie stocked in the back of the store's showroom was selling briskly to a certain clientele. Afterward, the store lost most of its customers and nearly closed. Which segment of the environment did the store owner fail to take into account when she began selling the lingerie?

A) the sociocultural segment
B) the economic segment
C) the demographic segment
D) the political/legal segment

Question 77

Which of the following is NOT an entry barrier to an industry?

A) expected competitor retaliation
B) economies of scale
C) customer product loyalty
D) bargaining power of suppliers

Question 78

Understanding how new knowledge can develop new products, processes, or materials is a result of analyzing the ____ segment of the general environment.

A) economic
B) political/legal
C) technological
D) global

Question 79

Product differentiation refers to the

A) ability of the buyers of a product to negotiate a lower price.
B) response of incumbent firms to new entrants.
C) belief by customers that a product is unique.
D) fact that as more of a product is produced the cheaper it becomes per unit.

Question 80

AT&T's bundling of high-speed Internet services, satellite television, and wireless phone services influences which of the five forces of industry structure the LEAST?

A) Rivalry between existing firms.
B) Threat of new entrants.
C) Bargaining power of buyers.
D) Bargaining power of suppliers.