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

Question 1

The political/legal segment of the general environment is the arena in which organizations and interest groups compete for attention, resources and a voice in the laws and regulations guiding interactions among nations.

Answer 1

True

Question 2

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.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

The belief that effective health care reform in the United States requires securing coverage for all citizens and lowering the cost of services would be considered part of the sociocultural segment of the external environment.

Question 5

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

Question 6

Scanning involves detecting meaning through early signals of environmental trends.

Question 7

The external environment facing business stays relatively constant over time.

Question 8

Contrary to popular belief, the global segment of the external environment does not provide many opportunities for firms such as McDonald's, H.J. Heinz, and Procter & Gamble, all of which earn less than 50% of their revenues from foreign markets.

Question 9

Compared with the general environment, the industry environment has a more indirect effect on the firm's strategic competitiveness and ability to earn above-average returns.

Question 10

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 11

It is uncommon for a large firm to receive a majority of revenues from outside its home country.

Question 12

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

Question 13

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

Question 14

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

Question 15

To successfully deal with today's external environment and to achieve strategic competitiveness, firms must be aware and fully understand the different segments of that environment.

Question 16

Target Corporation's statement that it "strives to be a responsible steward of the environment" is an example of addressing concerns in the physical segment of the general environment.

Question 17

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

Question 18

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

Question 19

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 20

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

Question 21

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 22

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 23

The environmental segments that comprise the general environment typically will NOT include

A) demographic factors.
B) sociocultural factors.
C) substitute products or services.
D) technological factors.

Question 24

A high threat of new entrants keeps pricing pressures on existing firms, keeping consumers happy and making the industry attractive and profitable.

Question 25

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 26

A firm experiencing intense rivalry with powerful competitors should energetically engage in competitor analysis.

Question 27

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

Question 28

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 29

The main competitive factor facing newspaper companies is the existence of substitute products and services.

Question 30

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 31

Which of the following identified in an analysis of the general environment is an opportunity for an entrepreneur who wishes to open a business doing "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 32

High exit barriers are factors that cause a company to remain in an industry even though the profitability of doing may be questionable.

Question 33

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 34

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 35

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. But, 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 36

Any competitor intelligence practice that is legal is also ethical.

Question 37

Analyzing 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 U.S.

Question 38

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

Question 39

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

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

Question 40

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 owner fail to take into account when she began selling the lingerie?

A) the sociocultural segment
B) the economic segment
C) the demographic segment
D) the political/legal segment

Question 41

Blood banks are highly dependent on donors. In the terminology of industry analysis, which statement of donors is accurate?

A) Blood donors are suppliers and are powerful due to the critical nature of what they provide to the blood bank.
B) Blood donors are suppliers and are powerful due to their concentration relative to the blood bank.
C) Blood donors are buyers and are not due to low switching costs needed to change to alternative inputs.
D) Blood donors are buyers and are powerful due to the volume of blood needed.

Question 42

Clarissa is a sales representative for a large pharmaceutical firm. While calling on one of her major clients, the purchasing director of a hospital, the client told her confidential information that a sales representative from a competing firm had passed on to him. The information completely contradicts Clarissa's firm's understanding of the competitor's business strategy, and would allow Clarissa's employer to gain many of the competitor's clients.

A) There is no ethical or legal concern here for Clarissa.
B) The ethical dilemma is not Clarissa's but her client's, since he passed on confidential information to her voluntarily.
C) The ethical dilemma here is the right of competitors not to reveal certain information.
D) This is an example of ethical competitor intelligence obtained as eavesdropping.

Question 43

The competition within each strategic group is

A) more intense than is the competition between strategic groups.
B) less intense than is the competition between strategic groups.
C) typically very low.
D) an unknown factor in the analysis of competitive practices within a firm's strategic group.

Question 44

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 45

The existence of high exit barriers such as ownership of specialized assets (e.g., large aircraft) in the airline industry indicates that

A) customers are relatively weak because of the high switching costs created by frequent flyer programs.
B) the industry is moving toward differentiation of services.
C) the competitive rivalry in the industry is severe.
D) the economic segment of the external environment has shifted, but airline strategies have not changed.

Question 46

Customer loyalty programs such as airline frequent flyer miles are an attempt to

A) decrease competitors' access to distribution channels.
B) develop a cost advantage independent of scale.
C) increase customers' switching costs.
D) overcome the perishability of the hotel "product."

Question 47

DWK Foods has developed a line of cookies and candies sweetened exclusively with organic honey. Although DWK is selling some of the products over the Internet, in order to gain economies of scale, the products must be sold in retail outlets. The main barrier to entry DWK is likely to encounter here is

A) government licensing and permits.
B) access to distribution channels.
C) consumers' switching costs.
D) cost disadvantages independent of scale.

Question 48

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 49

Global warming 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 50

Mighty Green, a residential lawn chemical manufacturer, is committed to gaining market share in its industry. Mighty Green

A) is likely to raise the level of competitive rivalry in the industry.
B) probably has top management who are affected by emotional barriers to exit.
C) has decided that long-run above-average returns are not important.
D) will probably embark on an acquisition strategy.

Question 51

A certain marble quarry provides a unique type of marble that is richly colored and strikingly veined. It has been used for churches and public buildings throughout the world. The architect of a new headquarters for a prestigious Fortune 500 firm has specified the use of this marble, and this marble only, for this project. Which of the following statements is most likely to be true?

A) The cost of the marble will be expensive because of the bargaining power of the supplier.
B) The cost of the marble will be moderate because of the bargaining power of the buyer.
C) The cost of the marble will be moderate because of economies of scale.
D) The cost of the marble will be expensive because of the high strategic stakes involved.

Question 52

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 53

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 54

Which of the following represents a competitive intelligence practice that is both legal and ethical?

A) A firm hires a competitor's employee and asks that employee to share the names and addresses of business contacts from his/her previous job.
B) An executive attends a trade show solely to obtain a competitor's brochures, listen to sales pitches, and ask questions about the competitor's products.
C) A city council member shares information about the decision process for selecting a contractor to build a new library wing with his wife, an executive with a construction firm bidding on the contract.
D) A marketing manager at Smith-Phillips, Inc., sells confidential plans for the company's expansion into the Far East to a firm that is not a direct competitor.

Question 55

Exit barriers to a firm include all of the following EXCEPT

A) generic assets.
B) loyalty to employees.
C) governmental concern about job loss.
D) restrictive labor agreements.

Question 56

Golden Lotus, an exercise club targeting healthy individuals over 50, is located in a fast-growing city in the Southwest. Which of the following factors that may have an effect on the success of Golden Lotus is the most directly controllable by the company?

A) the socio-cultural environment
B) the demographics of the environment
C) the economy of the local area
D) the power of the customers/buyers

Question 57

Competitor intelligence is

A) legally or illegally-gained data about competitors' internal strategic processes and competitive decisions.
B) strategic information gained from industrial espionage targeting international competitors.
C) the data that the firm gathers to understand competitors' objectives, strategies, assumptions, and capabilities.
D) illegal to gather under the Sarbanes-Oxley Act.

Question 58

Competitor analysis focuses on

A) firms with which the company competes directly.
B) firms that produce products that are substitutes.
C) all firms in the industry.
D) companies that might enter the industry.

Question 59

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 60

The large expenditures on 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 61

Explain why it is important for organizations to analyze and understand the external environment.

Question 62

Describe the seven segments of the general environment.

Question 63

Identify the five forces that underlie the five forces model of competition. Explain briefly how they affect industry profit potential.

Question 64

What is a firm's strategic group? What effect does the strategic group have on the firm?

Question 65

What do firms need to know about their competitors? What legal and ethical intelligence gathering techniques can be used to obtain this information?