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

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

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

The external environment facing business stays relatively constant over time.

Question 7

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.

Question 8

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

Question 9

Contrary to popular belief,the global segment of the external environment does not provide many opportunities for firms such as H.J. Heinz,SAB Miller,and Citigroup,all of which recently experienced low growth and profits coming from emerging markets.

Question 10

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.

Question 11

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 12

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

Question 13

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

Question 14

Scanning involves detecting meaning through early signals of environmental trends.

Question 15

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 16

In recent times,businesspeople 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

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

Question 19

When Philip Morris International studies the cigarette tax policies of various nations,it is engaged in the forecasting component of the environmental analysis process.

Question 20

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 21

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

Question 22

The five 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 23

Tablets such as the iPad have had little effect on the sale of PCs in the United States,and PC producers such as
Taiwan's Acer Computers have experienced significant growth.

Question 24

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

Question 25

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 26

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

Question 27

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

Question 28

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 29

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

Question 30

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

Question 31

Generally,the stronger the competitive forces,the higher the profit potential of an industry.

Question 32

Exit barriers are especially low in the airline industry as 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 33

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

Question 34

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

Question 35

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

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

Question 36

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

Question 37

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

Question 38

Any competitor intelligence practice that is legal is also ethical.

Question 39

An example of a government policy barrier to entry would be a situation 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 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,and switching costs are high.

Question 41

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 42

Which of the following is NOT an activity used in the external environmental analysis process?

A)scanning
B)decrypting
C)monitoring
D)assessing

Question 43

Acme Valves,Inc.,has been a successful player in the oil field supply industry in the last 15 years. Acme maintained its traditional strategy and product characteristics over this time period. However,Acme 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 44

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 45

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 46

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 47

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 48

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 49

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 50

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 51

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 52

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 53

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 54

The three parts of the external environment which 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 55

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 56

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 57

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 58

The recent joint ventures formed by BP with Russian and Indian partners show the importance of the

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

Question 59

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 60

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 61

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 62

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 63

Global warming and energy consumption trends are aspects of the that firms should monitor.

A)technological
B)physical
C)sociocultural
D)Economic segment of the general environment

Question 64

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 65

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

Question 66

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 67

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 68

Green restaurant design,sustainable packaging,waste management,and energy efficiency are aspects of the
Segment of the general environment that McDonald's has sought to address (Chapter 2 Strategic Focus).

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

Question 69

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 70

An analysis of society's attitudes and values would be conducted when studying the general environment.

A)sociocultural
B)global
C)demographic
D)economic segment of the

Question 71

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 72

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 73

The large amount of advertising by firms such as Procter & Gamble and Colgate-Palmolive is an example of what kind of barrier to entry?

A)access to distribution channels
B)capital requirements
C)economies of scale
D)product differentiation

Question 74

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 75

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 76

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

Question 77

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

A)Boeing's Dreamliner
B)Toyota's hybrid vehicles
C)Philip Morris International's smokeless tobacco
D)Amazon's Kindle

Question 78

The next critical technological opportunity for organizations is predicted to be

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

Question 79

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 80

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.