Deck 3: The External Assessment

Question 1

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

Answer 1

True

Question 2

Remaining solely domestic is an increasingly safer strategy for U.S. companies.

Answer 2

False

Question 3

The low value of the dollar benefits the U.S. economy in many ways.

Answer 3

True

Question 4

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

Question 5

Freund argues that key external factors must not be hierarchical.

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

By 2075, the United States will have no racial or ethnic majority.

Question 11

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

Question 12

There is a trend of people moving to the West Coast from the Rocky Mountain states for more affordable living.

Question 13

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

Question 14

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

Question 15

Consumer spending rebounded nicely in 2011 from 2010.

Question 16

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

Question 17

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

Question 18

The United States is getting older and less white.

Question 19

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

Question 20

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 21

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

Question 22

Major competitors' strengths may represent key threats.

Question 23

The trend toward an older America is bad news for restaurants, hotels, airlines and home builders.

Question 24

More Americans are moving than staying in place.

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

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

Question 27

India is increasing tariffs on foreign steel.

Question 28

In the United States, the population has been moving from the South and West to the Northeast and Midwest.

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

Walgreens and CVS pharmacies are located generally across the street from each other and battle each other every day on price and customer service.

Question 31

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

Question 32

Apartment complexes for the elderly have increased across the United States.

Question 33

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

Question 34

Internal opportunities can be represented by major competitors' weaknesses.

Question 35

Political, governmental, and legal factors can represent key threats or opportunities for both small and large organizations.

Question 36

In the face of a deepening global recession, countries worldwide are resorting to protectionism to safeguard their own industries.

Question 37

The United States has been more active than other nations in protectionist measures and has engaged in many "Buy American" policies.

Question 38

Hiring top executives from rival firms is a way companies obtain competitive intelligence.

Question 39

There are now more American households consisting of married couples with children than of people living alone or with unrelated people.

Question 40

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' own goals.

Question 41

Running a competitive intelligence program requires lots of people, computers, and other resources.

Question 42

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

Question 43

While forecasts might not be perfect, they are never wildly inaccurate.

Question 44

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

Question 45

Forecasts are educated assumptions about future trends and events.

Question 46

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

Question 47

Intelligence gathering is an unethical business practice.

Question 48

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

Question 49

Wild guesses should never be part of the planning process.

Question 50

Assumptions have no place in planning.

Question 51

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

Question 52

Organizations never develop their own projections.

Question 53

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 54

A forward integration strategy is used by firms to gain control or ownership of suppliers.

Question 55

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 56

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 57

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 58

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

Question 59

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

Question 60

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

Question 61

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 the above

Question 62

What happens when interest rates rise?

A) Discretionary income increases
B) The demand for discretionary goods increases
C) Discretionary income is unchanged
D) The demand for discretionary goods decreases
E) Discretionary income increases and the demand for discretionary goods decreases

Question 63

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 64

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

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

Question 65

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 66

________ 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 natural environment forces

Question 67

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 68

A total weighted score of 1.0 for an EFE Matrix indicates that the firm is responding in an outstanding way to existing opportunities and threats in its industry.

Question 69

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

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

Question 70

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 71

The weights and total weighted scores in both a Competitive Profile Matrix and an EFE Matrix have the same meaning.

Question 72

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 73

The United States' population is ________.

A) getting younger and less white
B) getting younger and more white
C) getting older and less white
D) getting older and more white
E) remaining stable as to age and racial make up

Question 74

The high unemployment rate in the U.S. is an example of a(n) ________ force affecting business.

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

Question 75

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 76

The world population is expected to grow to an estimated ________ billion in 2054.

A) 6
B) 7
C) 8
D) 9
E) 10

Question 77

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

Question 78

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) equally important as
C) more important than
D) more common than
E) less common than

Question 79

The process of performing an external audit needs to include

A) only top level managers, as it is 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 80

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