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

Question 1

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.

Answer 1

False

Question 2

Although health care reform legislation was passed in the early part of the Obama administration, it continues to be a contentious issue for employers, employees, and politicians because of its increased expenses.  These attitudes about health care reform make up the sociocultural segment of the general environment.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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 5

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

Question 6

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

Question 7

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 8

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

Question 9

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

Question 10

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

Question 11

The external environment facing business stays relatively constant over time.

Question 12

Contrary to popular belief, the global segment of the external environment does not provide many opportunities for firms that recently experienced low growth and profits coming from emerging markets.

Question 13

The 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 and is an example of a potential change in the sociocultural segment of the general environment.

Question 14

Scanning involves detecting meaning through early signals of environmental trends.

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

When Google studies the internet user privacy policies of various nations, it is engaged in the forecasting component of the environmental analysis process.

Question 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

An example of a government policy barrier to entry would be a scenario in which 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 25

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

Question 26

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

Question 27

Exit barriers are especially low in the airline industry because 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 28

Generally, industries with stronger competitive forces have higher profit potential.

Question 29

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

Question 30

BP, in response to the Deepwater Horizon oil spill, expected increased scrutiny from which of the following segments of the general environment?

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

Question 31

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

Question 32

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

Question 33

Any competitor intelligence practice that is legal is also ethical.

Question 34

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 35

Coca-Cola and PepsiCo have been accused of contributing to the obesity problem in the United States.  This accusation comes from the  ______segment of the general environment.

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

Question 36

Eavesdropping by the NSA on average Americans is ethical because it is a governmental organization instead of a for-profit company.

Question 37

The five competitive 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 38

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

Question 39

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

Question 40

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, or switching costs are high.

Question 41

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) the inability of economists to provide valid and reliable predictions.
D) an expanding economy in Vietnam.

Question 42

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 affect the revenue of all products.
B) The company should monitor the general environment for changes that might affect the profitability of the most profitable products.
C) The company should monitor the general environment for changes that might affect the profitability of all products.
D) The company should monitor the general environment for changes that might affect the revenue and profitability of all products.

Question 43

The three parts of the external environment that affect a firm's 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

The environmental segments that make up the general environment typically will NOT include:

A) demographic factors.
B) sociocultural factors.
C) substitute products or services.
D) technological factors.

Question 45

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 46

Acme Valves, Inc., has been a successful player in the oil field supply industry in the last 15 years. Acme maintained its strategy and product characteristics over this time period. However, the company 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 47

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 48

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 in light of an increase in oil prices
B) The ability of Ford to issue new debt in light of its recent financial performance
C) The ability of BMW's buyers to finance car purchases in light of a change in interest rates
D) The willingness of GM buyers to purchase new vehicles in light of the threat of recession

Question 49

The recent joint ventures formed by BP with Russian and Indian partners show the importance of the ______ segment of the general environment in those countries that BP and other oil firms have to manage when contending with scarce resources.

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

Question 50

The Obama administration sought to pursue policies that would:

A) remove the United States 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 51

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 52

An analysis of 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 United States.

Question 53

Demographic changes include variations in income distribution. Which of the following statements is true?

A) Firms are most interested in the consumers in the top 10 percent of 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 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

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 56

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) income distribution.

Question 57

Which of the following, identified in an analysis of the general environment, is an opportunity for an entrepreneur who wishes to open a business providing "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 58

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 59

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 60

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 61

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 62

The likelihood of entry of new competitors is affected by ______ and ______.

A) barriers to entry; expected retaliation of current industry organizations
B) the power of existing suppliers; buyers
C) the profitability of the industry; the market share of its leading firm
D) the demand for the product; the profitability of the competitors

Question 63

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

A) Boeing's 747
B) Toyota's hybrid vehicles
C) Budweiser's non-alcoholic beer
D) SpaceX's reusable space vehicle

Question 64

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

A) technological
B) physical
C) sociocultural
D) economic

Question 65

New entrants to an industry are more likely when:

A) it is difficult to gain access to distribution channels.
B) economies of scale in the industry are high.
C) product differentiation in the industry is low.
D) capital requirements in the industry are high.

Question 66

All of the following are examples of efforts by firms to address the physical segment of the general:

A) development of sustainable packaging by McDonald's.
B) reduction in carbon dioxide emissions by Procter & Gamble.
C) reduction in water usage in plants by Unilever.
D) increase in hiring of women and minorities at Microsoft.

Question 67

Green design, sustainable packaging, waste management, and energy efficiency are aspects of the ______ segment of the general environment that companies have sought to address with environmental sustainability initiatives.

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

Question 68

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

A) lobby groups.
B) attitudes and values.
C) taxation laws.
D) industries chosen for deregulation.

Question 69

Which of the following is NOT an entry barrier to an industry?

A) Expected competitor retaliation
B) Economies of scale
C) Customer product loyalty
D) Bargaining power of suppliers

Question 70

An industry is defined as:

A) a group of firms producing the same products or services.
B) firms producing items that sell through the same distribution channels.
C) firms that sell the same products or services to the same customer base.
D) a group of firms producing products that are close substitutes.

Question 71

Economies of scale refers to the fact that as the:

A) quantity of product produced in a given time period increases, the cost of manufacturing each unit increases.
B) quantity of product produced in a given time period increases, the cost of manufacturing each unit remains constant.
C) quantity of product produced in a given time period increases, the cost of manufacturing each unit decreases.
D) quantity of product produced in a given time period decreases, the cost of manufacturing each unit decreases.

Question 72

The observation that China reached automotive production overcapacity in 2015, and has a glut of extra cars, is an aspect of the ______ segment of the general environment.

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

Question 73

Because of threats and risks in the global environment, some firms choose to take a more cautious approach by:

A) avoiding global markets altogether.
B) expanding only to developed countries.
C) focusing on global niche markets.
D) acquiring already established firms in foreign markets.

Question 74

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 75

One popular approach to taking care of the physical environment is:

A) producing and selling additional green products.
B) lobbying the government to reduce environmental regulations.
C) making donations to the Sierra Club and other environmental organizations.
D) increasing health benefits for employees.

Question 76

The next critical technological opportunity for organizations is predicted to be:

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

Question 77

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 used by a firm to gain a competitive advantage.
D) places where a firm's technology will allow that firm to dominate a given market.

Question 78

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 79

The concepts of Guanxi, Wa, and Inhwa all convey the general idea of:

A) entrepreneurial risk-taking.
B) interpersonal relationships.
C) the value of hard work.
D) personal achievement.

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 owners fail to take into account when they began selling the lingerie?

A) the sociocultural segment
B) the economic segment
C) the demographic segment
D) the political/legal segment