Deck 3: The External Assessment

Question 1

An external audit focuses on identifying and evaluating trends and events within the control of management.

Answer 1

False

Question 2

Research findings suggest that a greater percentage of a firm's profitability can be explained by the industry than can be explained by the firm's internal factors.

Answer 2

False

Question 3

An increase in interest rates is directly related to an increase in discretionary income and an increase in the demand for discretionary goods.

Answer 3

False

Question 4

It is predicted that, by 2025, over 18% of the population in the United States will be over 65 years old.

Question 5

Motor vehicle firms in the United States are vulnerable when the value of the dollar falls.

Question 6

An economic trend in America is the increasing numbers of two-income households.

Question 7

Freund argues that key external factors must not be hierarchical.

Question 8

A low value of the dollar means lower exports and higher imports.

Question 9

An advantage of adopting the Euro is the ability of the country to fix its own interest rate

Question 10

External audits attempt to identify key variables that offer actionable responses.

Question 11

Economic factors do not have much impact on the attractiveness of strategies.

Question 12

The aim of an external audit is to develop an exhaustive list of every possible factor that could influence the business.

Question 13

The average age of the residents in Maine makes it one of the five youngest states.

Question 14

Industry analysis is also referred to as external strategic management audit.

Question 15

The average age of the residents in Texas makes it one of the five youngest states

Question 16

The United States is getting older and less Caucasian.

Question 17

As many managers and employees as possible should be involved in the process of performing an external audit.

Question 18

Nevada has the highest percentage of minority residents.

Question 19

To perform an external audit, a company first must gather competitive intelligence and information about social, cultural, demographic, environmental, economic, political, legal, governmental and technological trends.

Question 20

Five major categories of external variables are: 1) economic forces, 2) social and cultural forces, 3) political, governmental and legal forces, 4) technological forces and 5) demographic forces.

Question 21

In the United States, the population has been moving from the south and west to the Northeast and Midwest.

Question 22

Population growth in Idaho makes it one of the five fastest growing states.

Question 23

According to Business Week, and 9 out of 10 large companies have employees dedicated solely to gathering competitive intelligence.

Question 24

Within the European Union EU), tax rates have been standardized to end competitive tax breaks among member countries.

Question 25

The Internet is changing the very nature of many industries by altering product life cycles and changing the historical trade-off between production standardization and flexibility.

Question 26

Political forecasts can be the most important part of an external audit for firms that depend heavily on government contracts.

Question 27

Corporate intelligence can be defined as a systematic and ethical process for gathering and analyzing information about the competition's activities and general business trends to further a business's own goals.

Question 28

Recent consumption trends in the United States indicate that wine consumption is increasing at 5% while beer consumption is increasing at 10%.

Question 29

A characteristic that describes the most competitive companies in America is "whether it's broke or not, fix it-make it better; not just products, but the whole company if necessary."

Question 30

Population growth in Texas makes it the fastest growing state.

Question 31

Population growth in New York makes it one of the five fastest growing states.

Question 32

Political, governmental, and legal factors are considered key threats for most small and large organizations.

Question 33

According to Business Week, there are less than 500 corporate spies now actively engaged in intelligence activities.

Question 34

The Business Roundtable, a group of 10 CEOs, are pressuring the government to reduce the limits on greenhouse-gas emissions.

Question 35

Internal opportunities can be represented by major competitors' weaknesses.

Question 36

An effective CI program allows all areas of a firm to access consistent and verifiable information in making decisions.

Question 37

"Innovate or evaporate; particularly in technology-driven businesses, nothing quite recedes like success," is a characteristic given that describes the most competitive companies in America.

Question 38

Pepsi Bottling is the top beverage company in the U.S.

Question 39

The U.S. Air Force is one of the top five buyers of green power.

Question 40

In practice, critical technology decisions are too often delegated to lower organizational levels or are made without an understanding of their strategic implications.

Question 41

Laser eye surgery would be considered a substitute product for eyeglasses and contact lenses.

Question 42

Quantitative forecasts become less accurate as historical relationships become less stable.

Question 43

According to Michael Porter, five competitive forces create vital opportunities and threats to organizations: 1) new entrants, 2) substitute products or services, 3) bargaining power of suppliers, 4) bargaining power of buyers, and 5) rivalry among existing firms.

Question 44

The first step for using Porter's Five-Forces Model is to evaluate the relative strength of each competitive force.

Question 45

Market commonality is the extent to which the type and amount of a firm's internal resources are comparable to a rival.

Question 46

Learning from the partner is a major reason why U.S. firms enter into cooperative agreements.

Question 47

Because companies are fearful of corporate espionage, cooperative agreements between competitors are becoming less popular.

Question 48

Rampant corruption and the absence of a legal system are risks that still restrain firms from initiating business with China.

Question 49

Forward integration is used by firms to gain control or ownership of suppliers.

Question 50

The bargaining power of consumers can be the most important force impacting competitive advantage.

Question 51

Forecasts are educated assumptions about future trends and events.

Question 52

Bargaining power of consumers is usually the most powerful of Porter's five competitive forces.

Question 53

Qualitative forecasts are most appropriate when historical data are available and when the relationships among key variables are expected to remain the same in the future.

Question 54

Linear regression is a popular technique for qualitative forecasts.

Question 55

Significant barriers to entry are not always sufficient to keep some new firms from entering industries with higher-quality products, lower prices and substantial marketing resources.

Question 56

Competitive intelligence is not considered corporate espionage because 95 percent of the information a company needs to make strategic decisions is available and accessible to the public.

Question 57

Globalization is a process of worldwide integration of strategy formulation, implementation and evaluation activities.

Question 58

A global strategy seeks to meet the needs of customers worldwide with the lowest cost at the highest value.

Question 59

Linear regression is based on the assumption that the future will be different from the past.

Question 60

Without reasonable assumptions, the strategy-formulation process could not proceed effectively.

Question 61

Regardless of the number of key opportunities and threats included in an External Factor Evaluation Matrix, the highest possible total weighted score for an organization is 4.0, and the lowest possible total weighted score is 0.0.

Question 62

In general, what happens to American goods in overseas markets when there is a strong dollar?

A) less expensive
B) more attractive
C) cheaper
D) more expensive
E) desirable

Question 63

Identifying and evaluating key social, political, economic, technological and competitive trends and events comprise

A) developing an effective mission statement.
B) conducting an internal audit.
C) performing an external audit.
D) formulating strategy.
E) implementing strategy

Question 64

In 2006, china produced more automobiles than Germany.

Question 65

It is predicted that the United States will have how many racial or ethnic majorities by the year 2075?

A) none
B) one
C) two
D) three
E) five

Question 66

What happens to the demand for discretionary goods when interest rates rise?

A) rises
B) declines
C) stays the same
D) first rises then declines
E) no way to tell

Question 67

The I/O approach to competitive advantage advocates that external factors are ________ internal factors in a firm achieving competitive advantage.

A) less important than
B) as important as
C) more important than
D) more common than
E) less common than

Question 68

__________ is not part of an external audit.

A) Analyzing competitors
B) Analyzing financial ratios
C) Analyzing available technologies
D) Studying the political environment
E) Analyzing social, cultural, demographic and geographic forces

Question 69

What effect do trends in the dollar's value have on companies in different industries and in different locations?

A) significant and equal
B) marginal and equal
C) significant and unequal
D) insignificant and unequal
E) no significant impact

Question 70

In an EFE Matrix, opportunities often receive higher weights than threats, but threats too can receive high weights if they are especially severe or threatening.

Question 71

According to I/O theorists, which of the following contributes least to firm performance?

A) Economies of scale
B) Barriers to market entry
C) Product differentiation
D) Internal resources
E) Level of competitiveness

Question 72

A Competitive Profile Matrix allows strategists to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information.

Question 73

Population growth in Texas makes it the fastest growing state.

Question 74

Which state has the youngest average population?

A) Florida
B) Utah
C) Alaska
D) Maine
E) California

Question 75

The process of performing an external audit needs to include:

A) only top level managers, as it's a planning function.
B) as many managers and employees as possible.
C) primarily front-line supervisors
D) between 15 to 20 managers for it to be valid
E) stockholders and external government agencies

Question 76

Which type of trend is exemplified by the increasing numbers of two-income households in America?

A) social
B) economic
C) cultural
D) technological
E) historical

Question 77

The critical success factors in a Competitive Profile Matrix are often the same as those in an EFE Matrix.

Question 78

Freund emphasizes that key external factors should be all of these except:

A) important to achieving long-term and annual objectives.
B) measurable.
C) relatively few in number.
D) applicable to all competing firms.
E) hierarchical in the sense that some will pertain to the overall company while others will be more narrowly focused

Question 79

To perform an external audit, a company first must:

A) get an approval from the Securities and Exchange Commission
B) perform an internal audit
C) gather competitive intelligence and information about external trends
D) hire a consultant to develop a comprehensive strategic plan.
E) all of these

Question 80

Both a Competitive Profile Matrix and an EFE Matrix have the same meaning in the weights, ratings and total weighted scores.