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

Question 1

The three components of the external environment are:

A)general, economic and technological environments
B)general, industry and demographic environments
C)general, industry and competitor environments
D)general, competitor and structural environments

Answer 1

C

Question 2

In transferring jobs offshore, a firm has to balance efficiency and human rights.

Answer 2

False

Question 3

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.

Answer 3

False

Question 4

When forecasting, analysts must observe environmental changes to determine if an important trend is beginning to emerge.

Question 5

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

Question 6

When scanning, a firm often deals with ambiguous, incomplete and unconnected data and information.

Question 7

Competitor intelligence is the process of gathering data and information that can help a firm understand its competitors' intentions and the strategic implications resulting from them.

Question 8

The objective of assessing the external environment is to determine the effects of changes in competitor actions and strategy.

Question 9

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.

Question 10

Suppliers are powerful when substitutes are available, the selling industry is relatively consolidated and switching costs are low.

Question 11

Typically, slow industry growth increases rivalry within an industry.

Question 12

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

Question 13

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

Question 14

There is less competition between firms within a strategic group than between a member of a strategic group and companies outside that strategic group.

Question 15

High exit barriers can cause a company to remain in an industry even though the returns on its invested capital are low or negative.

Question 16

External environmental conditions create both resources and opportunities for firms that have major implications for their strategic actions.

Question 17

The five forces model is an industry-level analytical model.

Question 18

The five forces model recognises that both suppliers and customers can become a firm's competitors.

Question 19

A population's size, age structure, geographic distribution, ethic mix and income distribution are some of the elements of concern in the demographic segment of the general environment.

Question 20

The technological segment represents the impact of new products, processes and materials, but it does not include the institutions and activities involved with creating knowledge.

Question 21

The threat from substitutes is low when:

A)switching costs are low
B)the substitute product's price is higher than the industry product's price
C)the quality of the substitute product is better than the quality of the industry's product
D)the substitute product stimulates new process innovations within the industry

Question 22

The sociocultural segment of an environmental analysis is concerned with:

A)how technology impacts society
B)the political condition of the societies in which a firm does business
C)the economic condition of society
D)social attitudes and cultural values within a society

Question 23

Switching costs are the:

A)one-time costs customers incur when buying from a different supplier
B)producer's costs of exchanging equipment in a facility when new technologies emerge
C)costs of changing the firm's strategic group
D)one-time costs suppliers incur when selling to a different customer

Question 24

The likelihood that firms will enter an industry is a function which pair of factors?

A)Barriers to entry and the number of incumbents
B)Fragmentation of competition and diversity of customers
C)Retaliation expected from incumbents and barriers to entry
D)Diversity of customers and retaliation expected from incumbents

Question 25

Which of the following is not a major twenty-first-century challenge for governments with respect to demographic segment?

A)Business opportunities
B)Immigration
C)Housing
D)Retirement age
E)Pensions

Question 26

The term product differentiation refers to the:

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

Question 27

The term economies of scale refers to the fact that as the:

A)quantity of product produced in a given period increases, the cost of manufacturing each unit increases
B)quantity of product produced in a given period increases, the cost of manufacturing each unit remains constant
C)quantity of product produced in a given period increases, the cost of manufacturing each unit decreases
D)physical size of the product gets larger, the costs of production become lower

Question 28

When rival firms compete aggressively by trying to attract competitors' customers, this might be an indication of:

A)an industry with low exit barriers
B)increasing economies of scale
C)slow industry growth
D)high bargaining power among buyers

Question 29

The political/legal segment of an environment represents the:

A)political preferences of different ethnic groups in society
B)technological values of different political entities in society
C)ways in which firms and other organisations try to influence government and how government influences them
D)study of business and organisational attitudes towards government

Question 30

The technological segment in environmental analysis includes:

A)institutions and activities involved in 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)considering the technology necessary for a firm to gain a competitive advantage
D)ensuring a firm's technology will allow that firm to dominate a given market

Question 31

When analysts develop projections of anticipated outcomes based on monitored changes and trends, they are engaged in what activity?

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

Question 32

Compared to the general environment, the industry environment has:

A)a more subtle effect in creating a barrier to the hiring of new employees
B)a less direct effect on a firm's strategic competitiveness and its returns
C)a more direct effect on a firm's strategic competitiveness and its returns
D)no effect on the firm's strategic competitiveness and its returns

Question 33

The economic environment refers to:

A)the economic outlook of the world provided by the World Bank
B)how new environmental regulations will affect the economy
C)how the environmental movement and the world economy interact
D)the nature and direction of the economy in which a firm competes

Question 34

Exit barriers to a firm would include:

A)emotional barriers
B)non-specific assets
C)low government restrictions
D)low fixed costs of exit

Question 35

An executive's ability to verify potential substitutes for technologies that are in current use is a result of analysing the ________ segment of the general environment.

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

Question 36

Which one of the following factors does not affect the intensity of rivalries between firms?

A)A high number of equally balanced competitors
B)Slow industry growth
C)Business policies guiding the markets
D)High fixed costs or high storage costs

Question 37

Suppliers are powerful when:

A)satisfactory substitutes are available
B)they sell a commodity product
C)they have credible threat of forward integration
D)they are in a highly fragmented industry

Question 38

Under which of the following conditions will a buyer group be relatively weak?

A)When switching costs are high
B)When it purchases a large portion of an industry's output
C)When suppliers sell a commodity product
D)When it has a credible threat of backward integration

Question 39

Vigorous retaliation is not expected when:

A)existing firms have major stakes in the industry
B)an industry is fragmented
C)industry growth is slow or constrained
D)existing firms have substantial resources

Question 40

Which of the following is not a barrier to entry into an industry?

A)Market knowledge
B)Product differentiation
C)Capital requirements
D)Economies of scale

Question 41

Identify and describe the six segments of general environment analysis.

Question 42

What are high exit barriers and how do they affect competition within an industry?

Question 43

What are the four components of the external environmental analysis? Describe the purpose of each of these stages.

Question 44

What are some of the barriers to entry and how do they affect competition within an industry?

Question 45

Identify and describe the three major parts of the external environment.

Question 46

What are some of the sources of information that can be used to analyse the general environment?

Question 47

What factors affect the intensity of rivalry among competitors? Briefly explain each of these factors.

Question 48

Identify the five competitive forces and explain how they determine industry profit potential.

Question 49

Describe the conditions in which the bargaining power of suppliers is high and then in which the bargaining power of buyers is high.

Question 50

High mobility barriers between strategic groups:

A)increase the market share of members of a particular strategic group
B)protect the market share of members of a particular strategic group
C)reduce the market share of members of a particular strategic group
D)increase the rivalry between strategic groups

Question 51

Competitor analysis focuses on:

A)firms with which a company competes directly
B)firms that produce products that are substitutes
C)all firms in the industry
D)companies that might enter the industry

Question 52

The competition within each strategic group is:

A)typically very low
B)an unknown factor in the analysis of competitive practices within a firm's strategic group
C)more intense than that between strategic groups
D)less intense than that between strategic groups

Question 53

An industry with low entry barriers, buyers with strong bargaining positions and intense rivalry among competing firms is called a(n) ________ industry.

A)rivalrous
B)unattractive
C)moderately attractive
D)moderately unattractive

Question 54

Firms within strategic groups:

A)follow dissimilar strategies
B)follow similar strategies across certain dimensions
C)typically engage in more intergroup rivalry than intragroup rivalry
D)exist almost exclusively in the manufacturing sector

Question 55

Which one of the following is not a component of competitor analysis?

A)Assumptions
B)Market size
C)Future objectives
D)Current strategy

Question 56

Which one of the following is not a common dimension by which to classify strategic groups?

A)Product quality
B)Technological leadership
C)Customer service
D)Firm size

Question 57

What are strategic groups and what are their strategic implications?