Deck 4: Environmental Scanning and Industry Analysis

Question 1

According to Michael Porter, the weaker each of the competitive forces, the more limited companies are in their ability to raise prices and earn greater profits.

Answer 1

False

Question 2

The transferring of profits from a foreign subsidiary to a corporation's headquarters is known as repatriation of profits.

Answer 2

True

Question 3

Industry analysis was popularized by Michael Porter.

Answer 3

True

Question 4

According to Michael Porter, a high force can be regarded as a threat because it is likely to reduce profits.

Question 5

A multinational corporation is a company with significant assets and activities in multiple countries.

Question 6

In dynamic environments, the CEO's focus is on forces in the societal environment.

Question 7

Strategic myopia is the willingness to reject unfamiliar as well as negative information.

Question 8

Booz & Company found that companies that are most successful at avoiding surprises had a well-defined system that integrated planning, budgeting, and business reviews.

Question 9

The origin of competitive advantage lies in the ability to identify and respond to environmental change well in advance of competition.

Question 10

A corporation uses environmental scanning to avoid strategic surprise.

Question 11

An example of an economic variable in the societal environment is interest rates.

Question 12

The growing health consciousness is an example of a political-legal force.

Question 13

An industry is a group of firms producing a similar product or service.

Question 14

Environmental scanning is the monitoring, evaluating, and disseminating of information from the external environment to key people within the corporation.

Question 15

One of the demographic variables in the societal environment is the changing household composition.

Question 16

Today's organizations must scan the natural environment for factors that might previously have been taken for granted.

Question 17

Political-legal forces regulate the values, mores, and customs of society.

Question 18

An entry barrier is an obstruction that makes it difficult for a company to enter an industry.

Question 19

The societal environment includes the economic, technological, political-legal, and sociocultural forces.

Question 20

One of the breakthrough developments in technology is the portable information device and electronic networking.

Question 21

An industry matrix summarizes the key success factors within a particular industry.

Question 22

A fragmented industry is dominated by a few large firms, each of which struggles to differentiate its products from the competition.

Question 23

Governments can do little to erect barriers to entry in an industry.

Question 24

The only factor used to determine whether an industry will be primarily multidomestic or primarily global is the pressure for local responsiveness.

Question 25

Competitive intelligence is a formal program of gathering information on a company's competitors.

Question 26

Business intelligence is one of the fastest growing fields within strategic management.

Question 27

Statistical modeling is a quantitative forecasting technique that attempts to discover causal or at least explanatory factors that link two or more time series together.

Question 28

A.C. Nielsen is an example of an outside organization providing a firm with competitive intelligence.

Question 29

To combat the increasing theft of company secrets, the U.S. government passed the Economic Espionage Act in 1996.

Question 30

According to Miles and Snow, reactors are companies with a limited product line that focus on improving the efficiency of their existing operations.

Question 31

Faulty underlying assumptions are the most frequent cause of forecasting errors.

Question 32

McDonald's and Olive Garden are in the same strategic group.

Question 33

Extrapolation rests on the assumption that the world is relatively dynamic and changes quickly in the short run.

Question 34

NutraSweet can serve as a product substitute for sugar satisfying the same need.

Question 35

Multidomestic industries are specific to each country or group of countries.

Question 36

Key success factors seldom vary from industry to industry.

Question 37

One of the possible barriers to entry is product differentiation.

Question 38

The need to invest huge financial resources in manufacturing facilities in order to produce large commercial airplanes creates a significant barrier to entry to any competitor for Boeing and Airbus.

Question 39

A buyer may be powerful when changing suppliers costs a great deal.

Question 40

In hypercompetitive industries, competitive advantage comes from an up-to-date knowledge of environmental trends and competitive activity coupled with a willingness to risk a current advantage for a possible new advantage.

Question 41

Which societal force includes demographic trends?

A) political-legal forces
B) labor forces
C) economic forces
D) technological forces
E) sociocultural forces

Question 42

A company with significant assets and activities in multiple countries is known as a(n)

A) multinational corporation.
B) repatriated corporation.
C) transferable corporation.
D) duplicate corporation.
E) emancipated corporation.

Question 43

Which environment was generally perceived by business people to be something to exploit, not conserve until the twentieth century?

A) the task environment
B) the natural environment
C) the internal environment
D) the societal environment
E) the external environment

Question 44

According to Porter, seeing clothing firms such as Under Armour enter the athletic shoe industry would reflect a

A) medium bargaining power of suppliers.
B) low threat of substitutes.
C) medium bargaining power of buyers.
D) high threat of potential entrants.
E) low competitive intensity.

Question 45

Industry analysis is primarily concerned with a corporation's

A) societal environment.
B) task environment.
C) sociocultural environment.
D) economic environment.
E) internal environment.

Question 46

The combination of the degree of complexity and the degree of change existing in an organization's external environment is/are called

A) strategic factors.
B) strategic issues.
C) environmental uncertainty.
D) strategic fit.
E) scenarios.

Question 47

All of the following are technological breakthroughs already having a significant impact on many industries EXCEPT

A) growing health consciousness.
B) alternative energy sources.
C) genetically altered organisms.
D) smart, mobile robots.
E) virtual personal assistants.

Question 48

Which is the largest of the current U.S. generations?

A) Baby Boomers
B) Woofies
C) Silent Generation
D) Gen X
E) Gen Y

Question 49

An industry scenario is a forecasted description of a particular industry's likely future. It is developed by analyzing the probable impact of future societal forces on key groups in a particular industry.

Question 50

The corporation's task environment

A) encompasses the physical working areas of the organization.
B) includes those elements or groups within an organization's industry.
C) is an advisory committee to top management.
D) is an accounting of the many jobs within an organization.
E) is the job requirement specification listing necessary skills and abilities.

Question 51

According to the text, one reason environmental uncertainty is a threat to strategic managers is because

A) it is a costly and time-consuming process.
B) it creates a new playing field in which creativity and innovation can play a major part in strategic decisions.
C) it forces the strategic manager to be more stable.
D) it hampers their ability to develop long-range plans.
E) there are too many uncontrollable variables.

Question 52

According to Porter, the collective strength of the interaction of potential entrants, buyers, substitutes, suppliers, firm rivalry, and other stakeholders determine

A) the level of government action in an industry.
B) the probable industry attractiveness and business strength position.
C) the ultimate profit potential in the industry measured in terms of long-run return on invested capital.
D) the aggregate level of demand for a product line.
E) the amount of pressure from the societal environment.

Question 53

In addition to Porter's Five Forces, another force added in the text is

A) bargaining power of unions.
B) other stakeholders.
C) threat of prospects.
D) threat of shareholders.
E) bargaining strength of employees.

Question 54

According to Porter, the corporation is most concerned with

A) the intensity of competition within its industry.
B) the aggregate level of demand for a product line.
C) a market's position on its life cycle.
D) the amount of pressure from the societal environment.
E) the level of government action in an industry.

Question 55

Which of the following is NOT a major force in the societal environment?

A) political-legal forces
B) labor forces
C) economic forces
D) technological forces
E) sociocultural forces

Question 56

The origin of competitive advantage lies in the ability to

A) gain major stockholders.
B) identify and respond to environmental change well in advance of competition.
C) launch products quickly.
D) serve customers faster.
E) create surprise for others.

Question 57

Which of the following is NOT descriptive of external environmental scanning?

A) used as a tool to ensure a corporation's long-term health
B) used to monitor, evaluate, and disseminate information relevant to the organizational development of strategy
C) used to identify major stockholders
D) used as a tool for corporations to avoid strategic surprise
E) used to determine a firm's competitive advantage

Question 58

When strategic managers have a willingness to reject unfamiliar as well as negative information it is referred to as

A) strategic paralysis.
B) corporate inertia.
C) management indifference.
D) strategic myopia.
E) corporate apathy.

Question 59

Which of the following is NOT an element of the organization's task environment?

A) local communities
B) trade associations
C) governments
D) technological developments
E) special interest groups

Question 60

Which of the following is NOT one of the eight current sociocultural trends mentioned in the text?

A) increasing environmental awareness
B) growth of the seniors market
C) decline of the mass market
D) increasing food consumption
E) impact of Generation Y boomlet

Question 61

A sugar company that is worried that consumers may buy artificial sweetener instead of sugar is concerned about the

A) threat of new entrants.
B) rivalry among existing firms.
C) threat of substitute products.
D) bargaining power of suppliers.
E) bargaining power of buyers.

Question 62

The strength of each of the six driving forces of industry competition varies according to the

A) effectiveness of the strategic planning.
B) stage of industry evolution.
C) capital requirements.
D) changes in the political environment.
E) amount of government regulation.

Question 63

When General Motors considers making its own automotive parts, Delphi Automotive Supply Company would be concerned with the

A) bargaining power of suppliers.
B) bargaining power of buyers.
C) rivalry among existing competitors.
D) threat of substitutes.
E) threat of new entrants.

Question 64

According to Porter's model, a low force can enable the company to earn greater profits and can be regarded as a(n)

A) benefit.
B) opportunity.
C) advantage.
D) threat.
E) risk.

Question 65

A relationship that illustrates the term "complementor" is

A) Microsoft and Intel.
B) General Motors and Ford.
C) Hewlett Packard and Compaq.
D) Gateway and Dell.
E) America Online and CompuServe.

Question 66

According to Porter's model, a strong or high force is likely to reduce profits and can be regarded as a(n)

A) benefit.
B) opportunity.
C) advantage.
D) threat.
E) risk.

Question 67

The U.S. major home appliance industry is an example of an industry

A) that has evolved from an oligopoly to a monopoly.
B) in which each company maintained a distinct product line.
C) that was once fragmented, but now is consolidated.
D) that has experienced consistent, increasing sales.
E) experiencing a successful strategy of product specialization because of product differentiation.

Question 68

Which of the following is NOT descriptive of the threat of substitute products or services?

A) Substitute products appear to be different, but satisfy the same need as another product.
B) If the cost of switching is low, substitutes may have a strong effect on an industry.
C) Identifying substitutes is relatively easy since they look similar.
D) Possible substitute products or services may not appear to be easily substitutable.
E) Substitutes limit the potential returns of an industry.

Question 69

Which barrier to entry is demonstrated by Microsoft's MS-DOS operating system?

A) government policy
B) access to distribution channels
C) cost disadvantages independent of size
D) capital requirements
E) economies of scale

Question 70

Other software companies could not compete with Microsoft based on the hesitation of consumers to try a new software. Which of Porter's forces does this reflect?

A) exit barriers
B) bargaining power of buyers
C) threat of substitutes
D) bargaining power of suppliers
E) rivalry among existing firms

Question 71

A company or an industry whose product works well with a firm's product and without which the product would lose much of its value is considered to be a(n)

A) complementor.
B) oligopoly.
C) strategic group.
D) industry leader.
E) staggered company.

Question 72

In a fragmented industry

A) no firm has large market share.
B) prices drop as new competitors enter the market.
C) economies of scale are used to reduce costs.
D) companies integrate to further reduce costs.
E) all of the above

Question 73

Which of the following is NOT descriptive of a high level of bargaining power of suppliers?

A) Substitutes are readily available.
B) The product or service is unique.
C) The supplier industry is dominated by a few companies, but sells too many.
D) The purchasing industry buys only a small portion of the supplier group's goods and services.
E) Suppliers are able to integrate forward and compete directly with their present customers.

Question 74

Which of the following is NOT descriptive of the "threat of new entrants"?

A) depends on the presence of entry barriers
B) have a desire to gain market share
C) depends on the reaction of existing competitors
D) does not impact industry attractiveness
E) brings new capacity and substantial resources

Question 75

An industry dominated by a few large firms, all of which struggle with product differentiation, is known as

A) multidomestic.
B) consolidated.
C) global.
D) indigenous.
E) worldwide.

Question 76

Which of the following is NOT descriptive of intense rivalry among firms?

A) slow industry growth
B) high fixed costs
C) high exit barriers
D) few competitors or competitors that are roughly equal in size and power
E) product offerings that are highly differentiated

Question 77

Which of the following is NOT descriptive of a high level of bargaining powers of buyers?

A) Changing suppliers costs very little.
B) Alternative suppliers are plentiful because of standardization of the product.
C) The purchased product represents a high percentage of buyer's costs.
D) The buyer buys a large proportion of the seller's product or service.
E) A buyer earns high profits and is very insensitive to costs and service differences.

Question 78

Which barrier to entry uses cost advantages associated with large size?

A) rivalry among existing firms
B) switching costs
C) cost disadvantages independent of size
D) capital requirements
E) economies of scale

Question 79

Which barrier to entry do corporations such as P&G use to force new entrants to spend heavily to overcome existing customer loyalty?

A) rivalry among existing firms
B) switching costs
C) capital requirements
D) product differentiation
E) access to distribution channels

Question 80

Intel was able to gain a significant cost advantage over its competitors in the production and sale of microprocessors because of

A) capital requirements.
B) product differentiation.
C) switching costs.
D) economies of scale.
E) access to distribution.