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

Question 1

When Philip Morris International studies the cigarette tax policies of various nations, it is engaged in the forecasting component of the environmental analysis process.

Answer 1

False

Question 2

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.

Answer 2

False

Question 3

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.

Answer 3

True

Question 4

Competitor analysis is focused on the factors and conditions influencing an industry's profitability potential.

Question 5

To successfully deal with today's external environment and to achieve strategic competitiveness, firms must be aware and fully understand the different segments of that environment.

Question 6

The European sovereign-debt crisis and political upheavals in Tunisia, Libya, Bahrain and Syria illustrate uncertainties in the political/legal segment of the general environment that could affect the performance of business firms.

Question 7

The Chapter 2 Opening Case suggests that in the future, BP and all otheroil and gas firms should expect regulatory change in the political/legal segment of the general environment.

Question 8

The external environment facing business stays relatively constant over time.

Question 9

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

Question 10

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

Question 11

Legislation introduced in the U.S. Congress during the early tenure of the Obama administration intended to reduce the amount of work U.S. companies outsource is an example of a potential change in the sociocultural segment of the general environment.

Question 12

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

Question 13

Scanning involves detecting meaning through early signals of environmental trends.

Question 14

The recent joint ventures formed formed by BP with Russian and Indian partners show the importance of the technological segment of the general environment that BP and other integrated oil firms have to deal with when contending with scarce resources (Chapter 2 Opening Case).

Question 15

Microsoft's ability to achieve strategic competitiveness if affected by the threat of smartphones surpassing personal computer sales in the near future.

Question 16

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

Question 17

The industry environment directly influences the firm and its competitive actions and responses.

Question 18

The recent bankruptcy filings by General Motors and Chrysler Corporation illustrate that firms cannot directly control the general environment's segments.

Question 19

In recent times, businesspeople have become more confident in the ability of economists to provide valid and reliable predictions about the world's economic environment.

Question 20

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

Question 21

Compared with the general environment, the industry environment has a more indirect effect on the firm's strategic competitiveness and ability to earn above-average returns.

Question 22

The Chapter 2 Strategic Focus indicates that producing and selling "green" (i.e., environmentally friendly) products is one way that companies have responded to pressures from the physical environment.

Question 23

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

Question 24

According to a recent study reported in the Wall Street Journal, 95% of consumer products examined committed at least one offense of "green washing," a term used to describe unproven environmental claims (Chapter 2 Strategic Focus).

Question 25

The Chapter 2 Strategic Focus notes that McDonald's has pursued green restaurant design, sustainable packaging, waste management, and energy efficiency all of which are aspects of the technological segment of the general environment.

Question 26

Producing and selling "green" (environmentally friendly) products is one way that companies have responded to pressures from the physical environment (Chapter 2 Strategic Focus).

Question 27

The five forces model expands the arena of competitive analysis beyond direct competitors (i.e., rivals) to include buyers and suppliers who may also be a source of competition.

Question 28

PepsiCo's strategy called "capital performance with a purpose" links green efforts in ll businesses to the bottom line. This is an example of addressing concerns in the physical segment of the general environment.

Question 29

An example of a government policy barrier to entry would be where the Antitrust Division of the Department of Justice disallows a merger because it creates a firm that is too dominant and would thus create unfair competition.

Question 30

Contrary to popular belief, the global segment of the external environment does not provide many opportunities for firms such as H.J. Heinz, SAB Miller, and Citigroup, all of which recently experienced low growth and profits coming from emerging markets.

Question 31

The technological segment includes the institutions and activities involved with creating new knowledge and translating that knowledge into new outputs, products, processes, and materials.

Question 32

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

Question 33

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 34

The Chapter 2 Strategic Focus on efforts by firms to address the physical environment indicated that producing and selling "green" (environmentally friendly) products was not a successful strategy.

Question 35

Global warming and energy consumption are aspects of the technological environment segment that firms should monitor.

Question 36

According to the Chapter 2 Strategic Focus, in response to hard economic conditions, there is declining trend among many companies to reduce their impact on the physical environment.

Question 37

Developing a political strategy by the newly formed General Motors would likely be ineffective as firms are generally unable to influence the political/legal environment.

Question 38

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

Question 39

Although health care reform legislation was passed in the early part of the Obama administration, it continues to be a bone of contention especially since the 2010 midterm election and attempts have been made to repeal it in many states. These attitudes about health care reform make up the sociocultural segment of the general environment.

Question 40

Globalfocusing is often used by firms with high levels of international operations who further increase their internationalization by focusing on global niche markets.

Question 41

The main competitive factor facing newspaper companies is the existence of substitute products and services.

Question 42

Substitution of digital for traditional media has led to industry convergence. For example, mobile phone producers such as Nokia, Samsung, and Motorola now produce smartphones in response to Apple's iPhone (Chapter 2 Strategic Focus).

Question 43

Any competitor intelligence practice that is legal is also ethical.

Question 44

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

Question 45

Exit barriers are especially low in the airline industry as aircraft are not particularly specialized and can easily be sold to other airlines, air cargo companies, the military, or even to wealthy individuals who want to own a private jet.

Question 46

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

Question 47

Suppliers are powerful when the industry is dominated by a few large companies, no satisfactory substitutes are available, the selling industry is relatively more concentrated than the purchasing industry, and switching costs are high.

Question 48

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

Question 49

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 50

One broad theme of the Chapter 2 Strategic Focus is that traditional sources of media (paper, tape, and film) are facing powerful substitutes in the form of digital media.

Question 51

The more distant strategic groups are in terms of their strategies, the greater the liklihood of rivalry between the groups.

Question 52

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

Question 53

The competitor analysis is the final part of the external environment analysis and focuses on each company against which a firm directly competes (e.g., Coca-Cola and PepsiCo, Home Depot and Lowe's, and Airbus and Boeing).

Question 54

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

Question 55

When Delta airlines wants to study Continental Airlines, it must examine both Continental and its complementor, Star Alliance.

Question 56

Tablets such as the iPad have had little effect on the sale of PCs in the U.S. and PC producers such as Taiwan's Acer Computers have experienced significant growith.

Question 57

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

Question 58

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

Question 59

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

Question 60

One barrier faced by digital device producers is that the firms producing the content (musicians, news organizations and newspapers, television and movie producers, and publishers) have resisted making that content available through all digital devices. (Chapter 2 Strategic Focus).

Question 61

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 62

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 63

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

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

Question 64

The use of the Internet by Netflix to collect data on customer preferences is an example of

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

Question 65

Characteristics of the current economic segment include all of the following EXCEPT

A) general uncertainty.
B) a clear understanding of future economic opportunities and threats.
C) inability of economists to provide valid and reliable predictions.
D) an expanding economy in Vietnam.

Question 66

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 67

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 68

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 69

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

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

Question 70

According to the Chapter 2 Opening Case on BP, in response to the Deepwater Horozon oil spill, the company should expect increased scrutiny coming from which of the following segments of the general environment?

A) Political/legal.
B) Global.
C) Technological.
D) Sociocultural.

Question 71

The three parts of the external environment which affect a firms strategic actions are

A) economic, political, and legal
B) general, industry, and competitor
C) industry, business, and product
D) local, national, and global

Question 72

The recent joint ventures formed by BP with Russian and Indian partners show the importance of the ___________ segment of the general environment that BP and other integrated oil firms have to deal when contending with scarce resources (Chapter 2 Opening Case).

A) political/legal
B) physical
C) demographic
D) global

Question 73

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

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

Question 74

In the chapter discussion of the political legal segment of the general environment, it was noted that President Obama's administration has sought to pursue policies that would

A) remove the U.S. from NAFTA.
B) abolish antitrust laws.
C) increase the amount of work U.S. companies outsource to firms in other nations.
D) reduce the amount of work U.S. companies outsource to firms in other nations.

Question 75

As noted in the Chapter 2 Opening Case, gas drilling and fracturing have dramatically increased gas reserves and may provide a substitute for other carbon dioxide producing products such as coal. This change illustrates the effect of the _____________segment of the general environment.

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

Question 76

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

A) interest rates.
B) trade deficits or surpluses.
C) inflation rates.
D) the move toward a contingent workforce.

Question 77

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 78

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 79

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) In general, living standards have deteriorated over time.
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 80

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.