Question 1

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 2

The strengths and weaknesses of a SWOT analysis refer to the external conditions of the firm.

Accepted Answer

The Strengths and Weaknesses refer to the internal conditions of the firm in which a firm excels (strengths) and where it may be lacking relative to competitors (weaknesses).

Question 3

Scenario analysis is a form of environmental forecasting.

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.

Question 4

The SWOT analysis framework leads to a conceptually simple approach to identifying the important factors that constrain strategic choices without sacrificing analytical rigor.

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. Finally, its conceptual simplicity is achieved without sacrificing analytical rigor.

Question 5

Scenario planning is usually concerned with short-term forecasts.

Accepted Answer

Scenario analysis is an in-depth approach to environmental forecasting that involves detailed assessments by experts of societal trends, economics, politics, technology, or other dimensions of the external environment.

Question 6

Scenario analysis relies on the extrapolation of historical trends.

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 usually begins with a discussion of participant thoughts on ways in which societal trends, economics, politics, and technology may affect an issue. Scenario analysis involves the projection of future possible events. It does not rely on extrapolation of historical trends. Rather, it seeks to explore possible developments that may only be connected to the past. That is, several scenarios are considered in a scenario analysis in order to envision possible future outcomes.

Question 7

Keeping track of competitors has become more difficult today with the amount of information that is available on the Internet.

Accepted Answer

Keeping track of competitors has become easier today with the amount of information that is available on the Internet. Examples of some websites that companies routinely use for competitive intelligence gathering include Slideshare, Quora, Ispionage, and YouTube.

Question 8

In the SWOT framework, Opportunities and Threats are environmental conditions internal to the firm.

Accepted Answer

Opportunities and Threats are environmental conditions external to the firm. These could be factors in either the general or the competitive environment.

Question 9

PPG Industries has developed four alternative futures based on differing assumptions about two key variables: the cost of energy and the extent of opportunity for growth in emerging markets. This is called demand monitoring.

Accepted Answer

Costly failures led PPG to a new emphasis on strategic planning. One of the key tools it uses today is scenario planning. PPG has developed four alternative futures based on differing assumptions about two key variables: the cost of energy (because its manufacturing operations are energy-intensive) and the extent of opportunity for growth in emerging markets.

Question 10

In the SWOT framework, the Strengths and Weaknesses are external environmental factors to consider.

Accepted Answer

The Strengths and Weaknesses refer to the internal conditions of the firm in which a firm excels (strengths) and where it may be lacking relative to competitors (weaknesses).

Question 11

A Motel 6 executive indicates that he regularly reviews the number of rooms in the budget segment of the industry in the United States and the difference between the average daily room rate and the consumer price index (CPI). This is an example of Competitive Intelligence.

Accepted Answer

One of the authors of this text has conducted on-site interviews with executives from several industries to identify indicators that firms monitor as inputs to their strategy process. Environmental monitoring tracks the evolution of environmental trends, sequences of events, or streams of activities. They may be trends that the firm came across by accident or ones that were brought to its attention from outside the organization. Monitoring enables firms to evaluate how dramatically environmental trends are changing the competitive landscape.

Question 12

Although changes in the general environment may often adversely or favorably impact a firm, they seldom alter an entire industry.

Accepted Answer

The general environment is composed of factors that can have dramatic effects on firm strategy.

Question 13

Underestimating uncertainty can lead to strategies that neither defend against threats nor take advantage of opportunities.

Accepted Answer

A danger of forecasting is that managers may view uncertainty as black and white and ignore important gray areas.

Question 14

The impact of a demographic trend varies across industries.

Accepted Answer

The impact of a demographic trend, like all segments of the general environment, varies across industries. Rising levels of affluence in many developed countries bode well for brokerage services as well as for upscale pets and supplies. However, this trend may adversely affect fast-food restaurants because people can afford to dine at higher-priced restaurants.

Question 15

Steve Jobs, the former chairman of Apple, used intuition and judgment to forecast the future.

Accepted Answer

While analysis is necessary, it is also equally important to recognize the role played by intuition and judgment. Steve Jobs, the legendary former chairman of Apple, took a very different approach in determining what customers really wanted. Jobs relied on his own intuition, his radar-like feel for emerging technologies and how they could be brought together to create insanely great products that ultimately made the difference.

Question 16

Code of Ethics guidelines can assist companies in avoiding aggressive competitive intelligence gathering that results from illegal behaviors.

Accepted Answer

At times, aggressive efforts to gather competitive intelligence may lead to unethical or illegal behaviors. United Technologies has set clear Code of Ethics guidelines to help prevent unethical behavior.

Question 17

An industry is composed of a set of firms that produce similar products or services, sell to similar customers, and use similar methods of production.

Accepted Answer

To understand the business environment of a particular firm, you need to analyze both the general environment and the firm's industry and competitive environment. Generally, firms compete with other firms in the same industry. An industry is composed of a set of firms that produce similar products or services, sell to similar customers, and use similar methods of production. Gathering industry information and understanding competitive dynamics among the different companies in your industry is key to successful strategic management.

Question 18

The opportunities and threats of a SWOT analysis refer to the internal conditions of the firm.

Accepted Answer

The Opportunities and Threats are environmental conditions external to the firm. These could be factors either in the general or competitive environment. In the general environment, one might experience developments beneficial for most companies such as improving economic conditions, that lower borrowing costs or trends that benefit some companies and harm others.

Question 19

To understand the business environment of a particular firm, you need to analyze both the general environment and the firm industry and competitive environment.

Accepted Answer

Generally, firms compete with other firms in the same industry. An industry is composed of a set of firms that produce similar products or services, sell to similar customers, and use similar methods of production. Gathering industry information and understanding competitive dynamics among the different companies in your industry is key to successful strategic management. To understand the business environment of a particular firm, you need to analyze both the general environment and the firm industry and competitive environment.

Question 20

Only one scenario is considered in a scenario analysis in order to envision possible future outcomes.

Accepted Answer

Several scenarios are considered in a scenario analysis in order to envision possible future outcomes.

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