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

Question 1

Opportunities allow a company to exploit conditions in the environment while threats can lead to damage to a company's integrity.

Answer 1

True

Question 2

Because recessions and recoveries follow certain patterns, firms can study the economic environment to predict economic trends.This was particularly valuable in dealing with the recovery after the global recession of 2008-2009.

Answer 2

False

Question 3

The global segment of the external environment provides many opportunities for large corporations but does not represent an appropriate market segment for family business firms, even large ones.

Answer 3

False

Question 4

Scanning involves detecting meaning through early signals of environmental changes and trends.

Question 5

The UK's exit from the EU 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 6

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 7

The bankruptcy filings by major corporations during the Great Recession illustrate that firms cannot directly control the general environment's segments.

Question 8

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 9

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

Question 10

A firm that sells cannabis in the states of Colorado and Washington might consider expanding into California, as that state recently legalized the retail selling of cannabis.The firm may also want to examine other state laws to see where else cannabis sales are legal.However, it would be ineffective to develop a strategy to encourage legalization in states that currently prohibit it as a means of future expansion, since firms are generally unable to influence the political/legal segment of the external environment.

Question 11

China allows its firms to copy, or pirate, software created by firms in the United States and other countries.The Chinese firms take the intellectual property created by the other companies and then sell the resulting products for a lower price, undercutting the sales of the companies that invested in the product development.This activity represents a threat in the general environment that might prevent the U.S.companies from achieving strategic competitiveness.

Question 12

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

Question 13

Globalfocusing is often used by firms with high levels of international operations that further increase their internationalization by focusing on global niche markets.

Question 14

Early adopters of new technology often achieve higher market shares and higher returns than later adopters of the technology.

Question 15

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

Question 16

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

Question 17

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

Question 18

The external environment facing business stays relatively constant over time.

Question 19

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

Question 20

When Google studies the Internet user privacy policies of various nations, it is engaged in the forecasting component of the environmental analysis process.

Question 21

The five competitive 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 22

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 23

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, or switching costs are high.

Question 24

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

Question 25

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

Question 26

An example of a government policy barrier to entry would be a scenario 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 27

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

A) Political/legal
B) Global
C) Technological
D) Sociocultural

Question 28

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 29

Exit barriers are especially low in the airline industry because 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 30

Any competitor intelligence practice that is legal is also ethical.

Question 31

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

Question 32

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

Question 33

A competitor's capabilities can be measured by studying its current strategies and future objectives.

Question 34

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

Question 35

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 36

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

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, or low rivalry among firms.

Question 38

Methods of waste reduction and options to use renewable energy are aspects of the technological environment segment that firms should monitor.

Question 39

Generally, industries with stronger competitive forces have higher profit potential.

Question 40

In order to gain information about its competitor, EBD Corp., Alpha Company obtained copies of EBD's annual reports for the last five years.This action is unethical, and possibly illegal.

Question 41

Acme Valves, Inc., has been a successful player in the oil field supply industry in the last 15 years.Acme maintained its strategy and product characteristics over this time period.However, the company 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 42

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 43

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 44

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 45

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 46

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 47

All of the following are aspects of the political/legal segment of the general environment EXCEPT:

A) antitrust laws.
B) attitudes and values.
C) taxation laws.
D) deregulation philosophies.

Question 48

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

A) Scanning
B) Decrypting
C) Monitoring
D) Assessing

Question 49

The European Union has imposed new tariffs on certain goods entering the region from other countries.When completing an analysis of the general environment, into which segment would you categorize this activity?

A) Demographic
B) Economic
C) Global
D) Political/Legal

Question 50

What is the relationship between a firm's industry environment and the firm's earning potential?

A) A firm cannot influence the industry environment, and must focus on other factors in order to achieve above-average returns.
B) The more a firm can favorably influence its industry environment, the more likely it is to achieve above-average returns.
C) The less a firm is affected by its industry environment, the better situated it is to achieve above-average returns.
D) The more a firm can neutralize competitors' advantages, the greater its chances are for above-average returns.

Question 51

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 52

How does the aging of the population pose a threat to firms?

A) Older people have limited purchasing power
B) Delayed retirement keeps people in positions when they are no longer able to effectively do their jobs.
C) It becomes more difficult for firms to hire and retain a workforce that meets their needs.
D) Older and more experienced workers demand higher salaries, boosting production costs.

Question 53

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 54

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 55

The __________ environment is composed of dimensions in the broader society that influence an industry and the firms within it.

A) general
B) competitor
C) sociocultural
D) industry

Question 56

Which of the following information, gathered in an analysis of the general environment, would indicate 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 57

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 58

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 59

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 60

The recent joint ventures formed by BP with Russian and Indian partners show the importance of the __________ segment of the general environment in those countries that BP and other oil firms must manage when contending with scarce resources.

A) technological
B) physical
C) demographic
D) global

Question 61

The observation that a country reached automotive production overcapacity in 2018, is an aspect of the __________ segment of the general environment.

A) demographic
B) global
C) physical
D) technological

Question 62

Green design, sustainable packaging, waste management, and energy efficiency are aspects of the __________ segment of the general environment that companies have sought to address with environmental sustainability initiatives.

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

Question 63

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

A) sociocultural
B) global
C) demographic
D) economic

Question 64

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 of the following segments of the environment did the store owners fail to take into account when they began selling the lingerie?

A) Sociocultural
B) Economic
C) Demographic
D) Political/legal

Question 65

The concepts of guanxi and wa convey the general idea of:

A) entrepreneurial risk-taking.
B) interpersonal relationships.
C) the value of hard work.
D) personal achievement.

Question 66

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

A) Boeing's 747
B) Toyota's hybrid vehicles
C) Budweiser's non-alcoholic beer
D) SpaceX's reusable space vehicle

Question 67

Product differentiation refers to the:

A) ability of the buyer of a product to negotiate a lower price.
B) response of incumbent firms to new entrants.
C) belief by customers that a product is unique.
D) fact that as more of a product is produced the cheaper it becomes per unit.

Question 68

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 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

Economies of scale refers to the fact that as the quantity of product produced in a given time period __________, the cost of manufacturing each unit __________.

A) increases; increases
B) increases; remains constant
C) increases; decreases
D) decreases; decreases

Question 71

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 72

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 73

The next critical technological opportunity for organizations is predicted to be: Bella's Boutique used to be a brick and mortar store exclusively.It has gradually increased its Internet sales, and online sales now account for most of its revenue.This change in sales model illustrates the importance of monitoring which segment of the environment?

A) Political/legal
B) Economic
C) Demographic
D) Technological

Question 74

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 75

The large amount of advertising by firms such as Procter & Gamble and Colgate-Palmolive promotes which of the following barriers to entry?

A) Access to distribution channels
B) Capital requirements
C) Economies of scale
D) Product differentiation

Question 76

Diverse energy sources and energy consumption trends are aspects of the __________ segment of the general environment that firms should monitor.

A) technological
B) physical
C) sociocultural
D) economic

Question 77

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 78

All of the following are examples of efforts by firms to address the physical segment of the general environment EXCEPT the:

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.

Question 79

The likelihood of entry of new competitors is affected by __________ and __________.

A) barriers to entry; the expected retaliation of current industry participants
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 80

The technological segment of environmental analysis includes:

A) institutions and activities involved in 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 used by a firm to gain a competitive advantage.
D) places where a firm's technology will allow that firm to dominate a given market.