Deck 2: The External and Internal Environments

Question 1

A barrier to entry is a condition that prevents customers from using a firm's products or services.

Answer 1

False
Explanation: Barriers to entry are conditions that prevent new companies from entering an industry. Some major barriers to entry are government policy, capital requirements, brand identification, cost disadvantages, and distribution channels.

Question 2

Despite government crackdowns, immigration is one reason why the labor force will be more ethnically diverse in the future than it is today.

Answer 2

True
Explanation: Immigration is one reason why the labor force in the future will be more ethnically diverse than it is today. The demographic importance of immigration intersects with legal issues governing who is permitted to work in the United States.

Question 3

When investors bid up stock prices, companies have less capital to fuel their strategies.

Answer 3

False
Explanation: An important economic influence is the stock market. When investors bid up stock prices, they are paying more to own shares in companies, which means the companies have more capital to fuel their strategies.

Question 4

U.S. government policies both impose strategic constraints and provide opportunities for organizations.

Question 5

Organizations are open systems that affect and are affected by their external environments.

Question 6

The fastest-growing age group in the U.S. civilian labor force is the group between 30 and 40 years old.

Question 7

The percentage of women participating in the U.S. workforce has increased sharply since 1999.

Question 8

Red Bull, an energy drink, is a competitor to Pepsi.

Question 9

An organization's macroenvironment includes its customers and suppliers.

Question 10

Porter's model for competitive analysis is one example of analyzing the competitive environment for adapting to and even influencing the nature of competition.

Question 11

While the stock market can impact a firm, it has no effect on the behavior of individual managers.

Question 12

A more diverse workforce presents managers with challenges as well as opportunities.

Question 13

Regulatory agencies set rules but are typically weak institutions since they do not have the power to investigate company practices or to take legal action to ensure compliance with the law.

Question 14

Firms that develop strategies that do not include technological advances will realize obsolescence and extinction.

Question 15

Strategy is an example of an input to an organization.

Question 16

Social metrics are measures of various characteristics of the people who make up groups or other social units.

Question 17

The first question in understanding competitive environments from Porter's model is "How strong is the competition?"

Question 18

A firm's competitive environment includes new entrants, as well as substitutes and complements.

Question 19

Family leave, flexible working hours, and child care assistance have been introduced as a direct result of the growing ethnic diversity in the workplace.

Question 20

The external environment includes all relevant forces outside the organization's boundaries.

Question 21

Southwest Airlines demonstrates the independent action strategy known as competitive pacification by cutting fares when it enters a new market.

Question 22

Interest rates, inflation, the federal deficit, and unemployment levels are all elements in which aspect of the macroenvironment?

A) The social environment.
B) The demographic environment.
C) The international environment.
D) The regulatory environment.
E) The economic environment.

Question 23

Organizations that are defenders are more likely to engage in strategic maneuvering than are prospectors.

Question 24

Organizations that are affected by and that affect their environment are called

A) Input systems.
B) Output systems.
C) Open systems.
D) Closed systems.
E) Social systems.

Question 25

Landscaping products are complements when people are buying new homes.

Question 26

In a dynamic environment, bureaucratic organizations are more efficient than organic organizations.

Question 27

Stories told by employees almost never have any connection to the true culture of the organization.

Question 28

The Internet has empowered customers by providing an easy source of information.

Question 29

A strong organization culture is one in which everyone understands and believes in the firm's goals, priorities, and practices.

Question 30

Environmental scanning means sorting through information available to the public to interpret what is important and what is not.

Question 31

Needing to learn a new software program as a result of changing suppliers is an example of a switching cost.

Question 32

Liz, a new manager at Stamford Soft, has been asked to focus on the competitive environment of the organization. Which of these factors is among those on which Liz should focus?

A) Government legislation.
B) Culture.
C) Demographics.
D) Buyers.
E) Technology.

Question 33

The goal of supply chain management is having the right product in the right quantity at the right place at the right cost.

Question 34

April, a manager in a call center, encourages her employees to solve customers' problems without her approval of the particular situation. Here April has empowered her employees.

Question 35

Competitive intelligence is also known as corporate espionage.

Question 36

Powerful suppliers can increase a buying organization's profits, especially when the organization must hold prices steady for its customers.

Question 37

The economy is a crucial component of the macroenvironment. Which of the following statements is most true about economic macro effects?

A) The impact of changes in the economy is predictable to competitors.
B) There are complex interconnections among the economies of different countries.
C) Changes in the economy are impossible to quantify.
D) High-level managers have little awareness of economic indicators.
E) The economy has no macro effects on managers.

Question 38

Input chain management is the managing of the network of facilities and people that obtain materials from outside the organization, transform them into products, and distribute them to customers.

Question 39

Benchmarking means comparing your processes to the best-in-class performance by a company in a given area.

Question 40

According to Porter's model, Netflix streaming video would be considered a substitute for Blockbuster DVD rental.

Question 41

Conditions that may prevent new firms from entering an industry (e.g., the use of patents) are referred to as

A) Barriers to entry.
B) Roadblocks.
C) Unfair trade practices.
D) Insider trading.
E) Trade protectionism.

Question 42

Which of the following is an element of Porter's model for analyzing the competitive environment?

A) Substitutes and complements.
B) Cost strategy.
C) Potential customers.
D) Regulatory forces.
E) SBU strategy.
As shown in Figure 2.4, the competitive environment includes rivalry among current competitors and the impact of new entrants, substitute and complementary products, suppliers, and customers.

Question 43

The SEC recently proposed regulations requiring companies to disclose more details about executive compensation. This illustrates an important interaction between organizations and their relevant

A) Demographics.
B) Regulators.
C) Attorneys.
D) Labor officials.
E) Suppliers.

Question 44

A company that is concerned with the quantity and quality of resources available for its business processes will investigate which factor in the macroenvironment?

A) The natural environment.
B) The social environment.
C) The demographic environment.
D) The regulatory environment.
E) The economic environment.

Question 45

__________ trends regarding how people think and behave have major implications for management of the labor force, corporate social actions, and strategic decisions about products and markets.

A) Psychological
B) Political
C) Economic
D) Technological
E) Societal

Question 46

Walmart recently engaged Amazon.com in a price war, offering best-selling books for first $10, then $9; and now Target has jumped into the war with best sellers for $8.98. This scenario is an example of which aspect of the competitive environment?

A) Customers.
B) Competitors.
C) Regulators.
D) The economy.
E) Substitutes.

Question 47

Armando was recently hired as the workplace safety compliance officer at Preston Mining Company. Armando will have the responsibility to monitor regulations from which of these government agencies?

A) FCC.
B) EPA.
C) SEC.
D) OSHA.
E) NLRB.

Question 48

New methods of communication, production, and even the development of entire new industries are the results of the changes in

A) Demographics.
B) Societal preferences.
C) Politics.
D) Technology.
E) The economy.

Question 49

The competitive environment consists of

A) The firm and its rivals, suppliers, customers (buyers), new entrants, and substitute or complementary products.
B) Only those organizations on which the focal organization to provide supplies and materials.
C) The workers of the organizations that complete the organization's activities.
D) The organizations that hold the firm accountable to their stakeholders.
E) The broader influences that affect a firm's competitive advantage.
As shown in Figure 2.4, the competitive environment includes rivalry among current competitors and the impact of new entrants, substitute and complementary products, suppliers, and customers.

Question 50

Measures of various characteristics of the people who make up groups or other social units are called

A) Psychographics.
B) Demographics.
C) Social characteristics.
D) Lifestyle analytics.
E) Unit characterization.

Question 51

The development of new products that may replace sales of existing products is referred to as the threat of

A) New entrants.
B) Substitutes.
C) Enhanced supply.
D) Technology.
E) Complements.

Question 52

A firm's current competition, suppliers, customers, and the threat of new entrants or of substitutes are all elements in the

A) Task environment.
B) Peters model for organizational excellence.
C) Microenvironment.
D) Porter model for competitive analysis.
E) Industrial microenvironment.
As shown in Figure 2.4, Porter's model of the competitive environment includes rivalry among current competitors and the impact of new entrants, substitute and complementary products, suppliers, and customers.

Question 53

A low-cost airline described as one of the excellent companies in the bestseller of the early 1980s, In Search of Excellence, is no longer in business. Industry analysts state that although the service and prices provided by the airline were what customers wanted, the larger airlines were able to drive the low-cost airline out of business through an aggressive price war. This scenario is illustrative of which aspect of the competitive environment?

A) Customers.
B) Rivals.
C) Regulators.
D) The economy.
E) Social trends.

Question 54

Using international bribery as a business tactic may result in fines for U.S. firms. This statement reflects which type of environmental force at work?

A) Competitive.
B) Economic.
C) Legal/political.
D) Societal values.
E) Demographics.

Question 55

Hospitals and universities are very expensive to run not only due to the capital equipment that is required for each, but also due to the personnel such as specialized medical doctors and researchers. The cost of these types of institutions is an example of

A) Enhancing barriers to entry.
B) Eliminating protectionism.
C) Unfair competition.
D) Enhancing trade protectionism.
E) Eliminating barriers to entry.

Question 56

Managers with ready access to information

A) Increase costs.
B) Are able to manage and communicate more effectively.
C) Are in danger of losing power to rivals or suppliers.
D) Decrease their span of control.
E) Always increase sales.

Question 57

Of the following, which produces the highest barrier to entry?

A) Brand identification.
B) Customer ratings.
C) Pricing practices.
D) The economy.
E) Technology.

Question 58

Which of the following statements about workforce demographics is true?

A) Training of entry-level workers is not needed in today's modern workplace.
B) Workforce demographics have little to do with human resource strategies.
C) Older, experienced workers are likely to be relatively scarce over the next five years.
D) Population growth influences the size and composition of the labor force.
E) Technical tasks can be sent overseas to be accomplished, but companies usually then have to pay more for labor.

Question 59

Advances in genetic engineering and biotechnology are expected to produce some food products that will be available year-round even in northern climates. This provides grocers an opportunity to reduce shipping costs while at the same time offering fresher produce to customers. These advances are an example of changes in the

A) Technological environment.
B) Economic environment.
C) Political environment.
D) Demographic environment.
E) Ecological environment.

Question 60

Which of the following is a competitor that a mass merchandiser like Target must identify and anticipate the actions of?

A) Consumer advocacy groups.
B) Mass merchandiser suppliers.
C) Wholesale outlets like Sam's or Costco.
D) Companies entering new markets.
E) All of these are potential competitors.

Question 61

In determining how interest rates will change in the future, a manager would use

A) Budgeting.
B) Scenario development.
C) Forecasting.
D) Benchmarking.
E) Environmental scanning.

Question 62

Which of the following would be considered a consumer?

A) OSHA.
B) Neiman Marcus.
C) An individual.
D) IBM.
E) All of these would be considered consumers.

Question 63

Which of the following scenarios would be the most favorable to an existing firm in the industry according to the Porter model of the competitive environment?

A) Many competitors, few entry barriers, and few customers.
B) Many competitors, high threat of entry, many customers.
C) Few entry barriers, many substitutes, many customers.
D) High industry growth, many barriers to entry, customers have low bargaining power.
E) Low industry growth, few barriers to entry, suppliers have low bargaining power.
Porter's model suggests that high industry growth, many barriers to entry, and a situation where customers have low bargaining power is the most favorable of the scenarios listed. See Table 2.2 for other scenarios.

Question 64

_____________ create(s) alternative combinations of different factors into a total picture of the environment and the firm.

A) Scenarios
B) Forecasting
C) Benchmarking
D) Competitive intelligence
E) Buffering

Question 65

_____________ refers to the degree of discontinuous change that occurs within the industry.

A) Environmental complexity
B) Environmental dysfunction
C) Environmental contracting
D) Environmental cooptation
E) Environmental dynamism

Question 66

An outcome of environmental scanning is __________, the information necessary to decide how best to manage in the competitive environment managers have identified.

A) an organizational plan
B) entry barrier concepts
C) competitive intelligence
D) corporate espionage plans
E) competitive counterplans

Question 67

Fixed costs buyers face if they change suppliers are called

A) Changing costs.
B) Switching costs.
C) Supplier costs.
D) Exchange costs.
E) Sunk costs.

Question 68

Organizations must acquire a variety of resources in order to produce a product or service of value. These resources may include materials, equipment, financing, or even employees. The sources that provide these various resources are referred to as

A) Resource firms.
B) Placement centers.
C) Retailers.
D) Suppliers.
E) Customs houses.

Question 69

The main difference between a final consumer and an intermediate consumer is that

A) The final consumer usually pays cash for the purchase, whereas the intermediate customer uses a credit arrangement.
B) An intermediate consumer will utilize the purchase in order to sell its product/service to final consumers, whereas a final consumer uses the product herself.
C) Final consumers purchase more (in dollar value) than do intermediate consumers.
D) Intermediate consumers are usually more flexible in their product requirements and scheduling than final consumers.
E) Final consumers have more bargaining power than intermediate consumers.

Question 70

Giving customers what they want or need, they way they want it, the first time is known as

A) Planned giving.
B) Planned obsolescence.
C) Customer service.
D) Cause marketing.
E) Operations management.

Question 71

Environmental uncertainty results from

A) Complexity.
B) Simplicity.
C) Cooperation.
D) Product and industry stability.
E) An incrementally changing environment.

Question 72

Ranier Outdoor Clothing managers engage in an annual organizational assessment, trying to predict industry changes as well as possible opportunities and threats. They look at issues such as who their competitors are, current entry barriers, and what substitutes exist for their products. This assessment is called

A) Scenario development.
B) Forecasting.
C) Benchmarking.
D) Environmental scanning.
E) SWOT analysis.

Question 73

Which of the following is an example of a potential substitute product?

A) Hand sanitizer for soap.
B) Ink cartridges for printers.
C) Mops for detergent.
D) iTunes for iPods.
E) Furniture for apartments.
Only hand sanitizer is a substitute for soap, where customers use it as an alternative, buying less of one kind of product but more of another. The remaining choices are examples of complements.

Question 74

Farley Roofing provides subcontracting services to residential construction firms. There are many firms in the marketplace like Farley, which does about 85 percent of its work for Beltway Builders. Beltway typically negotiates heavily with its subcontractors, which ultimately reduces Farley's profits. This situation is indicative of the high bargaining power of

A) Customers.
B) Suppliers.
C) Substitute companies.
D) Competitors.
E) New construction companies.

Question 75

When microwave ovens were first introduced, they posed a potential threat to conventional oven producers. But the effect of microwaves on the sales of conventional ovens has been minimal; in fact, most homes today utilize both appliances. Oven technology has not advanced much lately and industry profits are flat. Based on this information,

A) The threat of new entrants for either type of oven is high.
B) The threat of competitive rivalry for either type of oven is high.
C) The threat of new entrants for either type of oven is low.
D) The threat of substitutes for either type of oven is high.
E) The regulatory influence on these ovens is high and changing.

Question 76

The method for predicting how variables will change in the future is called

A) Budgeting.
B) Scenario development.
C) Forecasting.
D) Benchmarking.
E) Environmental scanning.

Question 77

A narrative that describes a particular set of future conditions for a business is called

A) Benchmarking.
B) A scenario.
C) Forecasting.
D) Managerial outcome analysis.
E) Competitive intelligence.

Question 78

A customer who purchases raw materials or wholesale products before selling them to other parties is called a(n)

A) Final supplier.
B) Intermediate consumer.
C) Middle customer.
D) First-tier supplier.
E) Preliminary customer.

Question 79

Laredo Bank & Trust uses the janitorial services of ProKleen, which provides necessary cleaning supplies, crew training, background security checks (since the crews work after hours), and all other associated expenses. The other available janitorial services do not provide security checks, so the bank would have to hire guards to watch the janitors. This expense effectively limits the bank to ProKleen's services. This illustrates the concept of

A) High employment costs.
B) Unfavorable supplier status.
C) Favorable quality status.
D) Complementary products.
E) High switching costs.

Question 80

Management of the network of facilities and people that obtains materials from the outside, transforms them into products, and distributes the products to customers is called

A) Collaboration.
B) Switching costs.
C) Cooptation.
D) Customer service.
E) Supply chain management.