Question 1

The three components of the external environment are:

Accepted Answer

The general environment consists of factors such as political, legal, economic, and technological factors that affect all organizations in the environment. The industry environment includes factors specifically related to the industry in which the organization operates, such as competitors, customers, and suppliers. The competitor environment refers to the specific organizations that the company competes against in its industry. Therefore, the correct answer is choice C, which includes the general, industry, and competitor environments.

Question 2

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

Accepted Answer

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.

Accepted Answer

False

Question 4

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

Accepted Answer

The answer of When forecasting, analysts must observe environmental changes...

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.

Accepted Answer

An attractive industry is characterized by low entry barriers, suppliers and buyers with weak bargaining power, low threat from substitute products, and low rivalry among firms. High entry barriers, suppliers and buyers with strong bargaining power, and high threat from substitute products can make an industry less attractive. High rivalry among firms can also make an industry less attractive as it can lead to price wars and reduced profitability.

Question 6

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

Accepted Answer

Scanning involves gathering information quickly, and as a result, the data collected can often be incomplete, ambiguous or disconnected.

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.

Accepted Answer

Competitor intelligence involves collecting and analyzing information about the activities and strategies of competitors in order to better understand the competitive environment and make more informed business decisions.

Question 8

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

Accepted Answer

The objective of assessing the external environment is broader, including understanding the effects of changes in the economy, technology, laws and regulations, and social factors, in addition to 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.

Accepted Answer

This statement is true. A nation's economic environment can have a significant impact on the performance of individual firms and industries, and it is common for companies to closely monitor economic trends to inform their strategic decisions.

Question 10

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

Accepted Answer

Suppliers are powerful when substitutes are not available, the selling industry is fragmented and switching costs are high.

Question 11

Typically, slow industry growth increases rivalry within an industry.

Accepted Answer

When industry growth is slow, firms in the industry must compete more fiercely for market share, which increases rivalry within the 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.

Accepted Answer

The statement accurately describes the political/legal segment as a competitive environment where entities seek to influence the development and implementation of laws and regulations affecting international relations.

Question 13

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

Accepted Answer

These seven elements (demographic, economic, political/legal, sociocultural, technological, global and environmental) are commonly recognized as components of 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.

Accepted Answer

The answer of There is less competition between firms within...

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.

Accepted Answer

High exit barriers make it difficult for a company to leave an industry, even if the returns on investment are low or negative. This could be due to factors such as high fixed costs, long-term contracts, or specialized assets. As a result, companies may choose to stay in the industry rather than incur the costs associated with exiting, leading to a situation where returns on invested capital remain low.

Question 16

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

Accepted Answer

The answer of External environmental conditions create both resources and...

Question 17

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

Accepted Answer

The five forces model is a framework used to analyze an industry's competitive intensity and attractiveness. It considers five competitive forces that shape every industry and market: suppliers, buyers, potential new entrants, substitute products, and competitive rivalry. Thus, it operates at an industry level, not at an individual company level.

Question 18

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

Accepted Answer

The five forces model identifies the potential threat of new entrants, substitute products, bargaining power of suppliers and customers, and competitive rivalry within the industry. In this model, both suppliers and customers can have bargaining power and become competitors of the firm.

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.

Accepted Answer

The demographic segment of the general environment considers all of these elements when analyzing a population.

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.

Accepted Answer

The technological segment includes the institutions and activities involved with creating knowledge, such as research and development, patent regulations, and intellectual property protection.

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