Chat with AIExam 2: Analysis of the External Environment: Opportunities and Threats
Royalz Inc. is an automobile company that requires a lot of raw material to manufacture its cars. Royalz Inc. buys these raw materials from other companies that sell car parts as products. From which of the following does Royalz Inc. source its inputs?
(36) 
VerifiedC
Which of the following statements is true about customer needs?
(30) VerifiedB
Mention the general environmental factors that can affect the profit potential of a firm. Briefly explain the factors of technological change and social/cultural forces.
(30) 
Answered by Examlex AI CopilotThe profit potential of a firm can be influenced by a variety of environmental factors, which can be broadly categorized into several areas: economic, political/legal, technological, social/cultural, and ecological. Each of these factors can have a direct or indirect impact on a company's operations, costs, revenue, and overall profitability. Below, I will briefly explain the factors of technological change and social/cultural forces after listing the general environmental factors.
General Environmental Factors Affecting Profit Potential:
1. Economic Forces: These include factors such as inflation rates, interest rates, economic growth, unemployment levels, and currency exchange rates. Economic conditions can affect consumer purchasing power and spending patterns, which in turn can impact a firm's sales and profitability.
2. Political/Legal Forces: Government policies, regulations, tax laws, trade restrictions, and political stability can influence a firm's ability to operate and compete. Changes in these areas can affect costs, access to markets, and the overall business climate.
3. Technological Change: Technological advancements can lead to new products, processes, or services, and can significantly alter the competitive landscape. Firms that are able to adopt and leverage new technologies may gain a competitive advantage, while those that fail to adapt may fall behind. Technological change can also lead to cost savings through improved efficiency or open up new markets by enabling innovative business models.
4. Social/Cultural Forces: These encompass the values, beliefs, attitudes, and demographic trends of the society in which a firm operates. Changes in social trends can affect consumer behavior and preferences, leading to shifts in demand for certain products or services. Firms need to be aware of these changes to effectively target their offerings and marketing strategies.
5. Ecological/Environmental Forces: Environmental concerns such as climate change, resource depletion, and sustainability can influence consumer behavior and regulatory requirements. Companies may face pressure to adopt environmentally friendly practices, which can affect costs but also provide opportunities for differentiation and innovation.
Technological Change:
Technological change is one of the most significant drivers of competitive advantage and can dramatically affect a firm's profit potential. It encompasses the development of new products, improvements in production processes, and the emergence of new business models facilitated by technological innovation. Companies that are early adopters of technology can streamline their operations, reduce costs, and offer new or improved products that better meet customer needs. However, technological change can also render existing products or services obsolete, posing a risk to firms that are unable to adapt quickly.
Social/Cultural Forces:
Social and cultural forces relate to the shared beliefs, values, norms, and practices of a population. These forces can shape consumer behavior and influence the types of products and services that are in demand. For example, an increasing focus on health and wellness in many societies has led to a surge in demand for organic foods, fitness equipment, and wellness services. Similarly, demographic shifts such as an aging population or increasing cultural diversity can create opportunities for firms that tailor their offerings to these changing markets. Companies need to be attuned to social and cultural trends to remain relevant and maintain their profit potential in the face of shifting consumer preferences.
CoolDrink Inc., a beverage company, had to change its medical insurance policies because of a new federal law. The new law required all companies with over 50 full-time employees to provide health insurance for their employees. In case these companies are unable to do so, they would have to face penalty. CoolDrink Inc. had to implement changes due to ________.
(36) The companies LaceThings Inc. and BellePrints Corp. sell the same product. They constantly try to outdo each other in terms of resources, price, and customer satisfaction. The companies try to outperform each other in order to gain customer loyalty and generate more sales. This scenario is an example of ________.
(36) Zenith Corp., a bag company, produced a lot of high-end leather bags than could be sold in the market for a year. The leather bags eventually wore out and were not fit to be sold, thus causing huge losses for that year. Which of the following did Zenith Corp. most probably experience during that year?
(27) Which of the following statements is true of a fragmented industry?
(38) A federal act was passed in the country of Arahonia which changed the way many of the Arahonian industries worked. Most of the firms in Arahonia had to restructure their strategic plans accordingly. This resulted in the larger firms acquiring the smaller ones which did not exit the market altogether. This scenario best illustrates a(n)________.
(41) The management of GNH Corp., a chemical plant in the city of Werkshore, has promised to take care of its surroundings. It assured to dispose its factory wastes in a way that does not affect the habitat. In order to do so, the company had to go through renovations that allow the plant to take up green initiatives. Which of the following is the source of change for GNH Corp.?
(36) A popular food company, Crunchez Corp., is finding it difficult to retain its buyers as another food company, MidnightSnax Inc., has started to provide the same product with the same taste for a lesser price. Which of the following is a threat to Crunchez Corp.?
(33) Identify a true statement about understanding the five forces that shape industry competition.
(30) Hercules Inc. is a high performing steel manufacturing company. Chang, a stakeholder of the company, believes that it is important to protect the company from threats. Hercules Inc. has often struggled to overcome rivalry and product substitutes. Chang claims that if the company constantly keeps a check on itself by creating power over buyers, paying heed to customers' requests, and strengthening its resources and manpower, the company can maintain competitive advantage. Which of the following statements strengthens Chang's claim?
(44) WillowWorks LLC, a retail clothing store, has been sourcing its raw materials from a supplier named ThreadTym Corp. for the last five years. A change of management at ThreadTym resulted in an increase of the prices of the raw materials. As a result, WillowWorks purchases ThreadTym so that it can produce these products on its own. This scenario best illustrates ________.
(31) _________ can be most accurately defined as conditions in the competitive environment that endanger the profitability of a firm.
(31) Which of the following statements best describes forward integration?
(41) The board of directors of August Inc., a company that provides legal services, has been debating over whether to provide its 99 full-time employees with health insurance. The managers of the firm, however, are considering dropping employee health insurance as a benefit. Which of the following statements strengthens the managers' consideration?
(40) Leo Corp., an automobile company, experienced an increase in growth rate this year as the company sold its products at a lesser rate due to the economic conditions that the industry recently went through. This has helped the company to attain more investments than before and consequently to invest in new assets, research and development, and new product development. Which of the following macroeconomic forces does this scenario best illustrate?
(35) 
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