Deck 2: Analyzing the External Environment Ofthe Firm: Creating Competitive Advantages

Question 1

The impact of a demographic trend varies across industries.

Answer 1

True
Explanation: The impact of a demographic trend, like all segments of the general environment, varies across industries. Rising levels of affluence in many developed countries bode well for brokerage services as well as for upscale pets and supplies. However, this trend may adversely affect fast-food restaurants because people can afford to dine at higher-priced restaurants.

Question 2

A soft trend is a projection based on measureable facts,events,or objects.It is something that will happen.

Answer 2

False
Explanation: A hard trend is a projection based on measureable facts, events, or objects. It is something that will happen.

Question 3

Competitive intelligence generally does not benefit very much from gathering information on competitors from sources in the public domain.

Answer 3

False
Explanation: Competitive intelligence is frequently done effectively through public sources of information. Examples are evident in daily newspapers and periodicals such as The Wall Street Journal, BusinessWeek, and Fortune. For example, banks continually track home loan, auto loan, and certificate of deposit (CD) interest rates charged by rivals. Major airlines change hundreds of fares daily in response to competitor tactics.

Question 4

A hard trend is something that might happen and for which the probability that it might happen can be estimated.

Question 5

Scenario planning is usually concerned with short-term forecasts.

Question 6

Crowdsourcing is used by companies to develop products.

Question 7

Although changes in the general environment may often adversely or favorably impact a firm,they seldom alter an entire industry.

Question 8

A number of choices government officials make are based on projections about future interest rates.The projections are soft trends.

Question 9

To understand the business environment of a particular firm,you need to analyze both the general environment and the firm industry and competitive environment.

Question 10

A major sociocultural trend in the United States is the increased educational attainment by women.

Question 11

The aging of the population is a hard trend.

Question 12

Competitor Intelligence (CI)is a tool that can provide management with early warnings about both threats and opportunities.

Question 13

There is generally a weak relationship between equity markets (e.g.,New York Stock Exchange)and economic indicators.

Question 14

The opportunities and threats of a SWOT analysis refer to the internal conditions of the firm.

Question 15

The Internet is a leading component in the rising emergence of digital technology.

Question 16

The strengths and weaknesses of a SWOT analysis refer to the external conditions of the firm.

Question 17

Environmental scanning and competitor intelligence provide important inputs for forecasting activities.

Question 18

Even with all of the advances in recent years,forecasting is typically considered more of an art than a science and it is of little use in generating accurate predictions.

Question 19

Technological innovations can create entirely new industries and alter the boundaries of industries.

Question 20

Environmental monitoring deals with tracking changes in environmental trends that are often uncovered during the environmental scanning process.

Question 21

Rivalry is most intense when there are high exit barriers and high industry growth.

Question 22

Rivalry will be most intense when there is a lack of differentiation or switching costs.

Question 23

In some industries,high switching costs can act as an important barrier to entry.

Question 24

The more attractive the price/performance ratio of substitute products,the tighter it constrains the ability of an industry to charge high prices.

Question 25

Complement products typically have no impact on the value of products and services of the firm.

Question 26

Reintermediation is responsible for an overall reduction in business opportunities.

Question 27

The power of a buyer group is increased if the buyer group has less concentration than the supplier group.

Question 28

The Porter Five-Forces model is designed to help us understand how social attitudes and cultural values impact U.S.businesses.
E. Porter has been the most commonly used analytical tool for examining the competitive environment. It describes the competitive environment in terms of five basic competitive forces.

Question 29

Buyer power tends to be higher if suppliers provide undifferentiated or standard products.

Question 30

In most industries,new entrants will be a bigger threat because the Internet lowers entry barriers.

Question 31

Because of the Internet and digital technologies,it is very difficult for suppliers to create purchasing techniques that lower switching costs.

Question 32

Switching costs for an end user are likely to be much higher because of the Internet.

Question 33

Industries characterized by high economies of scale typically attract fewer new entrants.

Question 34

The power of suppliers will be enhanced if they are able to maintain a credible threat of forward integration.

Question 35

Michael Porter's Five-Forces Analysis is a dynamic tool for analyzing industry attractiveness.

Question 36

The Internet and digital technologies suppress the bargaining power of buyers by providing them with more information to make buying decisions.

Question 37

Supplier power tends to be highest in industries where products are vital to buyers,where switching from one supplier to another is very costly,and where there are many suppliers.

Question 38

Five-Forces analysis implicitly assumes a zero-sum game,a perspective that can be short-sighted.

Question 39

The Internet heightens the threat of substitutes because it creates new ways to accomplish the same task.

Question 40

The five-forces model helps to determine both the nature of competition in an industry and the profit potential for the industry.
E. Porter describes the competitive environment in terms of five basic competitive forces that affect the ability of a firm to compete in a given market. Together, they determine the profit potential for a particular industry.

Question 41

PPG Industries,the Pittsburgh-based manufacturer of paints,coatings,optical products,specialty materials,chemicals,glass,and fiber glass suffered serious failures in 1986 and 1987 when it attempted to diversify its offers.It used a technique to help it identify possible future strategies.What was it?

A) crowdsourcing
B) scenario analysis
C) competitive intelligence
D) monitoring

Question 42

The strategic groups in the worldwide automobile industry have been very stable and unchanging in recent years.

Question 43

Which of the following would be considered part of a firm's general environment?

A) decreased entry barriers
B) higher unemployment rates
C) increased bargaining power of the firm's suppliers
D) increased competitive intensity

Question 44

A danger of forecasting discussed in the text is that _____________.

A) in most cases, the expense of collecting the necessary data exceeds the benefit
B) the retrospective nature of forecasting provides little information about the future
C) managers may view uncertainty as black and white while ignoring important gray areas
D) it can create legal problems for the firm if regulators discover the company is making forecasts

Question 45

Environmental forecasting does not involve plausible projections about the ________ of environmental change.

A) direction
B) scope
C) speed
D) lack of intensity

Question 46

SWOT analysis is a framework for analyzing the internal and external environment of a company.It consists of strengths,weaknesses,opportunities,and threats.According to a SWOT analysis,which of the following is not an aspect that the strategy of the firm must follow?

A) build on its weaknesses
B) remedy the weaknesses or work around them
C) take advantage of the opportunities presented by the environment
D) protect the firm from the threats

Question 47

Emerging sociocultural changes in the environment include ____________.

A) changes in the ethnic composition
B) the increasing educational attainment of women in the past decade
C) progressively less disposable income by consumers
D) changes in the geographic distribution of the population

Question 48

Larger numbers of women entering the work force since the early 1970s is an example of ______.

A) demographic changes
B) political and legal environmental changes
C) sociocultural changes
D) technological developments

Question 49

Interest-rate increases have a __________ impact on the residential home construction industry and a __________ effect on industries that produce consumer necessities such as prescription drugs or basic grocery items.

A) positive; negligible
B) negative; negligible
C) negative; positive
D) positive; negative

Question 50

Two of the key inputs to developing forecasts discussed in the text are:

A) environmental scanning and stakeholder identification.
B) environmental scanning and competitor intelligence.
C) assessing internal strengths and environmental scanning.
D) environmental scanning and a SWOT analysis.

Question 51

Taking advantage of the increasing penetration of personal computers in American homes,the Mayo Clinic transformed itself as a provider of health-related knowledge and expertise.It took advantage of the ______ trends of the _______ in the prices of PCs and the ____________ presence of PCs in virtually every home in the U.S.

A) soft; increase; increasing
B) soft; decrease; decreasing
C) hard; decrease; decreasing
D) hard; decrease; increasing

Question 52

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

A) the deregulation of utilities
B) the Americans with Disabilities Act (ADA)
C) the increased use of Internet technology
D) increases in the federally mandated minimum wage

Question 53

The use of the strategic group concept is generally not helpful in charting the future directions of the strategies of a firm.

Question 54

Which of the following is not an example of corporate competitive analysis?

A) Banks tracking home loans
B) Airlines changing hundreds of fares daily in response to competitor tactics
C) Car manufacturers offering sales incentives based on rival offers
D) Consumers comparing product offers online

Question 55

Scanning the general environment would identify information on _______________.

A) substitute goods
B) the aging population and ethnic shifts
C) customer and firm bargaining power
D) competitive rivalry

Question 56

Competition tends to be more intense among firms within a strategic group than between strategic groups.

Question 57

The same environmental trend or event may have a very different impact on different strategic groups within the same industry.

Question 58

_____________ tracks the evolution of environmental trends,sequences of events,or streams of activities.

A) Environmental scanning
B) Environmental monitoring
C) Environmental surveying
D) Competitive intelligence

Question 59

Gathering competitive intelligence ___________.

A) is good business practice
B) is illegal
C) is considered unethical
D) minimizes the need to obtain information in the public domain

Question 60

The aging of the population,changes in ethnic composition,and effects of the baby boom are ____.

A) macroeconomic changes
B) demographic changes
C) global changes
D) sociocultural changes

Question 61

The bargaining power of suppliers is enhanced under the following market condition:

A) no threat of forward integration
B) low differentiation of the supplier products
C) greater availability of substitute products
D) dominance by a few suppliers

Question 62

The bargaining power of the buyer is greater than that of the supplier when __________.

A) volume of purchase is low
B) threat of backward integration by buyers is low
C) cost savings from the supplier's product are minimal
D) the buyer's profit margin is low

Question 63

Which of the following firms would likely pose the least competitive threat?

A) a firm in the same industry and in the same strategic group
B) a firm that produces substitute goods to your product line
C) a competitor to your product where a high switching cost exists
D) a firm in the same industry and in the nearest strategic group looking to join your group

Question 64

The bargaining power of suppliers increases as ____________.

A) more suppliers enter the market
B) importance of buyers to supplier group increases
C) switching costs for buyers decrease
D) threat of forward integration by suppliers increases

Question 65

An automobile manufacturer acquires a rental car company.This is an example of _____.

A) backward integration
B) economies of scale
C) forward integration
D) product differentiation

Question 66

Exit barriers do not arise from ________.

A) specialized assets with no alternative use
B) governmental and social pressures
C) strategic interrelationships with other business units within the same company
D) flexible costs of exit

Question 67

Which of the following would be an entry barrier?

A) large economies of scale
B) low switching costs
C) easy access to raw materials
D) low capital requirements

Question 68

In the Five-Forces model,conditions under which a supplier group can be powerful include all the following EXCEPT:

A) lack of importance of the buyer to the supplier group
B) high differentiation by the supplier
C) dominance by a few suppliers
D) readily available substitute products

Question 69

Threat of substitute products comes from ____________.

A) other companies in the same industry
B) foreign companies which can use cheap labor in their countries
C) firms in other industries that produce products or services that satisfy the same customer need
D) new companies in the same industry

Question 70

In the general environment,many relationships exist among the various elements.General environmental trends can have positive and negative impacts on various industries.For example,the aging population might have a ______ impact on the health care industry and a ______ impact on the baby product industry.These are called _____________ impacts.

A) negative; positive; demographic
B) positive; negative; technological
C) negative; positive; sociocultural
D) positive; negative; demographic

Question 71

The threat of new entrants is high when there are _______.

A) low economies of scale
B) high capital requirements
C) high switching costs
D) high differentiation among competitors products and services

Question 72

Because the Internet lowers barriers to entry in most industries,it ________.

A) decreases the threat of new entrants
B) increases the threat of new entrants
C) makes it easier to build customer loyalty
D) increases supplier power

Question 73

A supplier group would be most powerful when _________.

A) there are many suppliers
B) there are few substitute products
C) there is a low differentiation of products supplied
D) there is a high threat of backward integration by the buyers

Question 74

Which is considered a force in the Five-Forces model?

A) increased deregulation in an industry
B) the threat of government intervention
C) rivalry among competing firms
D) recent technological innovation

Question 75

The most intense rivalry results from _____________.

A) numerous equally balanced competitors, slow industry growth, high fixed or storage costs
B) few competitors, slow industry growth, lack of differentiation, high fixed or storage costs
C) numerous equally balanced competitors, manufacturing capacity increases only in large increments, low exit barriers
D) a high level of differentiation

Question 76

Product differentiation by incumbents act as an entry barrier because __________.

A) new entrants cannot differentiate their products
B) incumbents will take legal action if new entrants do not differentiate their products
C) new entrants will have to spend heavily to overcome existing customer loyalties
D) it helps a firm to derive greater economies of scale

Question 77

End users are not ____________.

A) the final consumers in a distribution channel
B) usually the C in B2C
C) likely to have greater bargaining power because of the Internet
D) the first customers in a distribution channel

Question 78

Firms would be most likely to face intense rivalry with competitors when they _________.

A) are in a high growth industry with low fixed costs
B) are in a protected market
C) have high fixed costs
D) have low exit barriers for easy transition to another industry

Question 79

Buyer power will be greater when _______.

A) the products purchased are highly differentiated
B) there are high switching costs
C) the industry product is very important to the quality of the buyer end products or services
D) it is concentrated or when a buyer group purchases large volumes relative to seller sales

Question 80

New communication technology can impact seemingly unrelated industries such as the airline industry.This would be an example of a ______________.

A) threat of entry
B) backward integration
C) forward integration
D) threat of substitute products