Question 1

If companies miscalculate the market, opportunities will be lost.

Accepted Answer

Successful managers must recognize opportunities and threats in the external environment of their firm in order to not lose out on them.

Question 2

Environmental monitoring is not an input to forecasting.

Accepted Answer

The three important processes of scanning, monitoring, and gathering competitive intelligence are used to develop forecasts.

Question 3

Two companies ask outsiders to critique strategy during their board's strategy sessions. Such input typically leads to spirited discussions that provide valued input on the hinge assumptions and options that are under consideration. This is an example of how to improve perceptual acuity.

Accepted Answer

How can perceptual acuity be improved? Although many CEOs may complain that the top job is a lonely one, they cannot do it effectively by sitting alone in their office. Instead, high-performing CEOs are constantly meeting with people and searching out information.

Question 4

Environmental monitoring deals with tracking changes in environmental trends that are often uncovered during the environmental scanning process.

Accepted Answer

Environmental monitoring tracks the evolution of environmental trends, sequences of events, or streams of activities.

Question 5

Competitive intelligence generally does not benefit very much from gathering information on competitors from sources in the public domain.

Accepted Answer

Competitive intelligence is frequently done effectively through public sources of information. Examples are evident in daily newspapers and periodicals such as The Wall Street Journal, Bloomberg Businessweek, and Fortune. For example, banks continually track home loan, auto loan, and certificate of deposit (CD) interest rates charged by rivals. Major airlines change hundreds of fares daily in response to competitor tactics.

Question 6

Consider the example of Salemi Industries and the launch of its product, Cell Zone, in 2005. Although it tried to carefully analyze its potential market, it misread the market demand for the product and paid a steep price for its mistake. This is an example of internal forecasting.

Accepted Answer

Analyzing the external environment is a critical step in recognizing and understanding the opportunities and threats that organizations face. Here is where some companies fail to do a good job. The key error of Salemi Industries was that it failed to take into consideration an emerging technology and how that would affect the sales of its product.

Question 7

Perceptual acuity can be improved by sitting alone and not consulting others.

Accepted Answer

How can perceptual acuity be improved? Although many CEOs may complain that the top job is a lonely one, they cannot do it effectively by sitting alone in their office. Instead, high-performing CEOs are constantly meeting with people and searching out information.

Question 8

One CEO gets together with his critical people for half a day every eight weeks to discuss what's new and what's going on in the world. The setting is informal, and outsiders often attend. This is an example of how not to improve perceptual acuity.

Accepted Answer

How can perceptual acuity be improved? Although many CEOs may complain that the top job is a lonely one, they can't do it effectively by sitting alone in their office. Instead, high-performing CEOs are constantly meeting with people and searching out information.

Question 9

Competitor Intelligence (CI) is a tool that can provide management with early warnings about both threats and opportunities.

Accepted Answer

Competitive intelligence (CI) helps firms define and understand their industry and identify strengths and weaknesses of rivals. Done properly, competitive intelligence helps a company avoid surprises by anticipating competitor moves and decreasing response time.

Question 10

SWOT analysis is useful in part because it obliges the firm to act proactively by putting an emphasis on identifying opportunities and threats that constrain the action choices a firm might make as a result of its internal and external environmental scan.

Accepted Answer

Despite its apparent simplicity, the SWOT approach has been very popular. First, it forces managers to consider both internal and external factors simultaneously. Second, its emphasis on identifying opportunities and threats makes firms act proactively rather than reactively. Third, it raises awareness about the role of strategy in creating a match between the environmental conditions and the internal strengths and weaknesses of the firm.

Question 11

Even with all of the advances in recent years, forecasting is typically considered more of an art than a science and it is of little use in generating accurate predictions.

Accepted Answer

Environmental forecasting involves the development of plausible projections about the direction, scope, speed, and intensity of environmental change. Its purpose is to predict change.

Question 12

Blockbuster, Borders, Circuit City, and Radio Shack are examples of firms that did not have good perceptual acuity.

Accepted Answer

In the business world, many once-successful firms have fallen. Perceptual acuity is the ability to sense what is coming before the fog clears.

Question 13

Environmental scanning involves surveillance of the internal environment of a firm to predict environmental changes and detect changes already under way.

Accepted Answer

Environmental scanning involves surveillance of the external environment of the firm to predict environmental changes and detect changes already under way. This alerts the organization to critical trends and events before changes develop a discernible pattern and before competitors recognize them.

Question 14

Environmental scanning and competitor intelligence provide important inputs for forecasting activities.

Accepted Answer

Three important processes (scanning, monitoring, and gathering competitive intelligence) are used to develop forecasts.

Question 15

Ted Turner saw the potential of 24-hour news before anyone else. This is an example of perceptual acuity.

Accepted Answer

Ram Charan defines perceptual acuity as the ability to sense what is coming before the fog clears. Turner saw the potential of 24-hour news before anyone else did. All the ingredients were there, but no others connected them until he created CNN.

Question 16

A CEO meets four times a year with about four other CEOS of large, but noncompeting, diverse global companies. This is an example of how to improve perceptual acuity.

Accepted Answer

How can perceptual acuity be improved? Although many CEOs may complain that the top job is a lonely one, they cannot do it effectively by sitting alone in their office. Instead, high-performing CEOs are constantly meeting with people and searching out information.

Question 17

Scenario planning is useful for anticipating major future changes in the external environment.

Accepted Answer

Scenario planning is important in anticipating major future changes in the external environment.

Question 18

When management assumptions, premises, or beliefs are incorrect or when internal inconsistencies among them render the overall theory of the business invalid, the strategy of the firm needs to be updated.

Accepted Answer

The strategy of a firm may be good at one point in time, but it may go astray when the management frame of reference gets out of touch with the realities of the actual business situation. This results when management assumptions, premises, or beliefs are incorrect or when internal inconsistencies among them render invalid the overall theory of the business.

Question 19

Perceptual acuity, according to Ram Charan, is the ability to know for certain what will happen in the future.

Accepted Answer

Ram Charan defines perceptual acuity as the ability to sense what is coming before the fog clears.

Question 20

Scenario analysis is a superficial approach to forecasting that seeks to explore possible developments that many only be connected to the past.

Accepted Answer

Scenario analysis is a more in-depth approach to forecasting. It draws on a range of disciplines and interests, among them economics, psychology, sociology, and demographics. It does not rely on extrapolation of historical trends. Rather, it seeks to explore possible developments that may only be connected to the past.

Quiz 2: Analyzing the External Environment of the Firm: Creating Competitive Advantages

If companies miscalculate the market, opportunities will be lost.

Environmental monitoring is not an input to forecasting.

Two companies ask outsiders to critique strategy during their board's strategy sessions. Such input typically leads to spirited discussions that provide valued input on the hinge assumptions and options that are under consideration. This is an example of how to improve perceptual acuity.

Environmental monitoring deals with tracking changes in environmental trends that are often uncovered during the environmental scanning process.

Competitive intelligence generally does not benefit very much from gathering information on competitors from sources in the public domain.

Consider the example of Salemi Industries and the launch of its product, Cell Zone, in 2005. Although it tried to carefully analyze its potential market, it misread the market demand for the product and paid a steep price for its mistake. This is an example of internal forecasting.

Perceptual acuity can be improved by sitting alone and not consulting others.

One CEO gets together with his critical people for half a day every eight weeks to discuss what's new and what's going on in the world. The setting is informal, and outsiders often attend. This is an example of how not to improve perceptual acuity.

Competitor Intelligence (CI) is a tool that can provide management with early warnings about both threats and opportunities.

SWOT analysis is useful in part because it obliges the firm to act proactively by putting an emphasis on identifying opportunities and threats that constrain the action choices a firm might make as a result of its internal and external environmental scan.

Even with all of the advances in recent years, forecasting is typically considered more of an art than a science and it is of little use in generating accurate predictions.

Blockbuster, Borders, Circuit City, and Radio Shack are examples of firms that did not have good perceptual acuity.

Environmental scanning involves surveillance of the internal environment of a firm to predict environmental changes and detect changes already under way.

Environmental scanning and competitor intelligence provide important inputs for forecasting activities.

Ted Turner saw the potential of 24-hour news before anyone else. This is an example of perceptual acuity.

A CEO meets four times a year with about four other CEOS of large, but noncompeting, diverse global companies. This is an example of how to improve perceptual acuity.

Scenario planning is useful for anticipating major future changes in the external environment.

When management assumptions, premises, or beliefs are incorrect or when internal inconsistencies among them render the overall theory of the business invalid, the strategy of the firm needs to be updated.

Perceptual acuity, according to Ram Charan, is the ability to know for certain what will happen in the future.

Scenario analysis is a superficial approach to forecasting that seeks to explore possible developments that many only be connected to the past.