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

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

Answer 2

False

Question 3

The Strategic Focus case example of the premium-priced home builders who discovered the trend towards desiring smaller homes illustrated the application of the external environmental analysis process by these builders.

Answer 3

True

Question 4

Early signals from President Obama's administration that the amount of work U.S. companies outsource might be affected by new government policies is an example of a potential change in the sociocultural segment of the general environment.

Question 5

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

Question 6

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 7

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

Question 8

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 9

The external environment facing business stays relatively constant over time.

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

Contrary to popular belief, the global segment of the external environment does not provide many opportunities for firms such as McDonald's, H.J. Heinz, and Procter & Gamble, all of which earn less than 50% of their revenues from foreign markets.

Question 12

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

Question 13

The health-related concerns in the general environment facing Philip Morris International are part of the physical segment.

Question 14

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

Question 15

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 16

Scanning involves detecting meaning through early signals of environmental trends.

Question 17

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

Question 18

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 19

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 20

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

Question 21

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

Question 22

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 23

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

Question 24

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

Question 25

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 26

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 27

The belief that effective health care reform in the United States requires securing coverage for all citizens and lowering the cost of services would be considered part of the sociocultural segment of the external environment.

Question 28

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

Question 29

The $1.5 billion fine imposed on Intel in 2009 by the European Commission for "breaking European antitrust rules" is an example of a government policy barrier to entry.

Question 30

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

Question 31

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

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

Green restaurant design, sustainable packaging, waste management, and energy efficiency are aspects of the technological segment of the general environment which McDonald's has sought to address.

Question 34

The Strategic Focus case 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

Target Corporation's statement that it "strives to be a responsible steward of the environment" is an example of addressing concerns in the physical segment of the general environment.

Question 36

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

Question 37

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

Question 38

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 39

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 40

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 41

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

Question 42

Any competitor intelligence practice that is legal is also ethical.

Question 43

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 44

As the Opening Case in chapter 2 notes, Philip Morris International's commitment to sustainable tobacco farming, efficient use of natural resources, reducing waste in manufacturing, eliminating child labor, and giving back to its communities is part of its actions in the ________________segment of the general environment.

A) physical
B) political/legal
C) sociocultural
D) industry

Question 45

Analysis of the _____________segment of the general environment led Philip Morris International to conclude that fewer people would risk disease by consuming tobacco products.

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

Question 46

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 47

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 48

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

Question 49

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

Question 50

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 51

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 52

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

Question 53

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

Question 54

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

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

Question 55

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 56

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 57

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 58

The Strategic Focus case notes that several companies have used the environmental analysis process (scanning, monitoring, forecasting, and assessing) to respond to customers' desire for more value from brand-name products. All of the following are examples of "different" values that companies are providing as a result of this process EXCEPT

A) Frito-Lay added 20% more product to selected snack offerings without increasing prices.
B) Kohler provided energy efficient faucets, toilets, and showerheads at the same price as its less efficient products.
C) GE's efficient hybrid water heaters that reduced energy costs.
D) Premium-priced builders responded to the trend of buyers wanting larger houses.

Question 59

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

Question 60

According to the chapter's Opening Case on Philip Morris International, the company's joint venture with Swedish Match to market smokeless tobacco is a move to address which segment of the general environment?

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

Question 61

The observation that in mid-2009, the global automobile industry had the capacity to build 94 million vehicles per year, 34 million more than actually needed, is an aspect of the ____ segment of the general environment.

A) demographic
B) global
C) physical
D) technological

Question 62

Chapter 2 notes that the European Union and South Korea remain committed to developing trade agreements that benefit both parties. In which segment of an analysis of the general environment would this appear?

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

Question 63

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 64

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 65

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 66

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 67

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 68

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 69

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 70

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 71

In the chapter discussion of the political legal segment of the general environment, it was noted that President Obama's administration might form 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 72

Which of the following would be an example of the application of next major technological opportunity for organizations?

A) Boeing's Dreamliner.
B) Toyota's hybrid vehicles.
C) Philip Morris International's smokeless tobacco.
D) Amazon's Kindle.

Question 73

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 74

All of the following are aspects of the political/legal segment of the general environment EXCEPT

A) antitrust laws.
B) attitudes and values.
C) free trade agreements between nations.
D) industries chosen for deregulation.

Question 75

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 76

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 77

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 78

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 79

The next critical technological opportunity for organizations is predicted to be

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

Question 80

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