Deck 4: Exploring the External Environment: Macro Industry and Dynamics

Question 1

Two trends that resulted in changes to the bottling industry were building large plants to serve multiple markets and beverage producers entering the bottling industry.

Answer 1

True

Question 2

PESTEL is an acronym for political, economic, sociocultural, technological, environmental, and legal context(s) in which a firm operates.

Answer 2

True

Question 3

The external environment in which firms compete exerts a strong influence on firms' profitability.

Answer 3

True

Question 4

Profitability varies widely from industry to industry.

Question 5

The external environment provides business opportunities to the firm.

Question 6

Growth of local and foreign national economies and exchange rates are critical economic factors.

Question 7

The political environment can have a significant influence on consumer confidence.

Question 8

The micro environment refers to economic, social, and legal issues confronting the firm.

Question 9

The primary focus of PESTEL analysis is the current impact of macro environmental factors.

Question 10

Once a strategy is congruent with PESTEL in a firm's home environment, it will be aligned in new geographic areas.

Question 11

Industry analysis examines only the competitors in the industry.

Question 12

Both the PESTEL and SWOT analyses help managers gain a better understanding of the opportunities and threats they face.

Question 13

Political, technical, and environmental issues are elements of the macro environment.

Question 14

SWOT is a simple tool that can be used to develop an understanding of a firm's external environment.

Question 15

Stakeholder analysis will fill in the gaps left by industry analysis.

Question 16

Managers must remain focused on firm-specific characteristics when conducting industry analysis.

Question 17

The stability of the political environment is particularly important for companies entering new markets.

Question 18

It is not critical to know what industry- and firm-specific factors affect a firm to understand its competitive position.

Question 19

Industry analysis includes all of a firm's key external stakeholders.

Question 20

One of the value-chain activities that brings carbonated beverages to market is profit.

Question 21

The legal and political environments are often interrelated in that laws and regulations only change when politicians decide the changes are necessary.

Question 22

Making assumptions about sociocultural norms in your home market can cause early failure when entering new markets.

Question 23

Social influences are stable from country to country.

Question 24

Sometimes, how easily laws may change can affect a firm's strategy.

Question 25

Many popular U.S. brands have benefited from increasing levels of consumerism in other countries.

Question 26

In a truly global industry, the core product is diversified.

Question 27

In market economies where monopolies are allowed, firms should be able to earn only "normal" profits.

Question 28

Environmental factors do not contribute to the costs of operating a business.

Question 29

From the standpoint of access to raw materials, the environment has long been a factor in firm strategy.

Question 30

Age and lifespan demographics may be critical sociocultural factors in a successful business.

Question 31

An analysis of market, cost, government, and competition factors can help determine if a market has globalized or is in the process of globalizing.

Question 32

High research and development costs, interdependent countries, and common marketing regulations represent pressures that would discourage industry globalization.

Question 33

Costs in both the automobile and airframe-manufacturing industries are such that they do not favor globalization.

Question 34

If companies are promoting consistent images and brands, there is pressure to globalize in order to realize tremendous economies of scale in their global advertising dollars.

Question 35

Unemployment rates can have a strong impact on strategy.

Question 36

Globalization is the evolution of distinct geographic product markets into a state of globally interdependent product markets.

Question 37

The more unique markets in similar regions are, the greater the pressure for an industry to globalize.

Question 38

In a truly global industry, competitive strategies are integrated in different international markets.

Question 39

Globalization has been stimulated in the cell-phone industry as a result of the problem of multiple standards and the entry of large global competitors into the market.

Question 40

General conditions of the macro environment can be characterized after PESTL analysis and an assessment of globalization have been completed.

Question 41

Fragmented markets are more difficult to enter than concentrated markets.

Question 42

Heterogeneous products and barriers that make entry into an industry difficult are characteristics of imperfect competition.

Question 43

When a market is dominated by only two or a few large firms, the industry is said to be a duopoly or oligopoly.

Question 44

If the industry analysis is too exclusive, important threats may be omitted.

Question 45

Key success factors are firm-specific and nontransferable.

Question 46

Managers can learn which strategies are rewarded most profitably by studying the industry.

Question 47

According to the I/O approach, the appropriate strategy and key assets are dictated by firm-specific characteristics.

Question 48

The concentration ratio represents the combined revenues of the largest industry participants as a ratio of total industry sales.

Question 49

Key success factors would satisfy the value criteria of the VRINE model but not the rareness criteria.

Question 50

Industry concentration affects the intensity of competition in an industry.

Question 51

Bottled water is on track to surpass soft drinks as the best-selling beverage in the United States.

Question 52

One implication of industry analysis is that firms perform best when they select a strategy that deviates from the industry environment.

Question 53

An industry that is dominated by a few large firms is called a monopoly.

Question 54

When analyzing heterogeneous markets, it is best to be extremely inclusive.

Question 55

Industrial organization (I/O) economics is a discipline that helps managers analyze an industry.

Question 56

When there is perfect competition, relatively heterogeneous products are offered by different firms.

Question 57

It is important for managers to draw industry boundaries in a way that enables them to understand the dynamics of competition.

Question 58

Imperfect competition is characterized in part by numerous suppliers and buyers.

Question 59

Key success factors can be likened to table stakes in a poker game.

Question 60

When industry profits fall below normal levels, competition usually decreases.

Question 61

Supplier power is reduced when firms in a focal industry present a threat of backward integration.

Question 62

Supplier power is the degree to which firms in the supply industry are able to dictate favorable contract terms.

Question 63

The relative power of industry participants and industry suppliers affects the pricing and profitability of both industry groups.

Question 64

Supplier power is reduced when firms in the supply industry present a threat of forward integration.

Question 65

How managers define an industry is critical to the formulation of a strategy for competing in it.

Question 66

Porter's five-forces model identifies forces that determine the basic structure of an industry.

Question 67

As price competition increases, average prices increase as well, resulting in higher levels of profitability.

Question 68

The degree of rivalry is influenced by both complement exclusivity and price sensitivity.

Question 69

A buyer group's power is directly impacted by its prestige and the size of its orders.

Question 70

Factors that tend to increase rivalry include attributes about firms within the industry and attributes about the products or markets.

Question 71

Supplier power is influenced by exit barriers, industry growth, and industry concentration.

Question 72

High entry barriers lead to higher prices and higher levels of average profitability.

Question 73

Buyer power is shaped by product differentiation, bargaining leverage, and brand identity.

Question 74

When an industry is characterized by perfect competition, rivals in the industry will achieve above-average levels of profitability.

Question 75

Industries with consistently higher than average profitability are usually characterized by low entry barriers.

Question 76

Concentration ratios teach us that industry dynamics are predominantly similar across various sectors of the same industry.

Question 77

Rivalry is the intensity of competition within an industry.

Question 78

Price competition tends to be more intense when the industry is a secondary industry for the major competitors in that industry.

Question 79

The threat of new entrants is greater when there are no switching costs.

Question 80

Complementors are an increasingly critical industry force that has been added to the five-forces model.