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

Question 1

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

Answer 1

True
Explanation:Developments in technology lead to new products and services and improve how they are produced and delivered to the end user. Innovations can create entirely new industries and alter the boundaries of existing industries.

Question 2

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

Answer 2

False
Explanation:A barrier to entry is created by the existence of one-time costs that the buyer faces when switching from one supplier product or service to another.

Question 3

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

Answer 3

True
Explanation:Environmental monitoring tracks the evolution of environmental trends, sequences of events, or streams of activities.

Question 4

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

Question 5

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

Question 6

The five-forces model helps to determine both the nature of competition in an industry and the profit potential for the industry.

Question 7

In the SWOT framework,Opportunities and Threats are environmental conditions internal to the firm.

Question 8

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

Question 9

In the SWOT framework,the Strengths and Weaknesses are external environmental factors to consider.

Question 10

Ted Turner saw the potential of 24-hour news before anyone else.This is an example of perceptual acuity.

Question 11

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

Question 12

SWOT analysis is useful in part because it obliges the firm to act proactively by putting an emphasis on identifying opportunities and threats that constrain the action choices a firm might make because of its internal and external environmental scan.

Question 13

Reintermediation is responsible for an overall reduction in business opportunities.

Question 14

The Porter five-forces model is designed to help us understand how social attitudes and cultural values impact U.S.businesses.

Question 15

In most industries,new entrants will not be a threat because the Internet lowers entry barriers.

Question 16

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

Question 17

Scenario analysis is a superficial approach to forecasting that seeks to explore possible developments that many only be connected to the past.

Question 18

A major sociocultural trend in the United States is the increased number of women in the workforce that has increased the need for business clothing but decreased the demand for baking product staples.

Question 19

Perceptual acuity,according to Ram Charan,is the ability to know for certain what will happen in the future.

Question 20

Even with all 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 21

Perceptual acuity requires all the following except

A) an ability to sense what is coming.
B) the ability to detect early warning signals of environmental changes.
C) a refusal to consult with others.
D) a strong commitment to external environmental monitoring.

Question 22

Firms that were successful in the past can fail today because

A) they keep pace with changes in the nature of competition.
B) the company strategy is outdated.
C) their financial situation is resilient.
D) management monitors the relevant environmental factors regularly.

Question 23

Boards of directors use outsiders to critique their strategy.This is necessary mostly to improve

A) financial returns.
B) organizational hierarchy.
C) perceptual acuity.
D) employee relations.

Question 24

Gathering competitive intelligence

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

Question 25

Which of the following is not an input process to develop forecasts?

A) environmental scanning
B) competitor intelligence
C) stakeholder management
D) environmental monitoring

Question 26

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

A) banks tracking home loans
B) airlines changing hundreds of fares daily in response to competitor tactics
C) consumers comparing product offers online
D) car manufacturers offering sales incentives based on rival offers

Question 27

When the management frame of reference gets out of touch with the realities of the actual business situation,what can happen to the firm?

A) Management perceptual acuity improves.
B) Management gets across-the-board raises.
C) The company business strategy no longer works.
D) It becomes easier to maintain competitive advantage.

Question 28

________ 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 29

Scanning the general environment would identify information on

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

Question 30

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

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

Question 31

When investors examine the performance of beauty products like Olay moisturizers and CoverGirl cosmetics,they are looking for

A) indicators of emerging trends.
B) accidental changes in behavior.
C) supplier preferences.
D) company management trends.

Question 32

Environmental analysis requires continual questioning of all these assumptions except

A) a priori ideas about the structure of the relevant industry.
B) continual updating of environmental knowledge.
C) presuppositions about who is and is not a competitor.
D) biases about how to make money in the industry.

Question 33

The tenure of Ms.Marchionni as CEO of Lands' End was largely a result of her efforts to re-invent the apparel brand,

A) resulting in an alignment with the company culture.
B) resulting in an alignment with the customer base interests.
C) resulting in conflicts with the customer base and the corporate culture.
D) resulting in an alignment with the wholesome style brand of the company.

Question 34

Corporate retreats do not

A) permit companies to discuss larger marketplace trends.
B) guarantee positive consumer response to new products.
C) give companies an opportunity to look beyond their own industries.
D) oblige management to automatically change strategy.

Question 35

Salemi Industries launched Cell Zone unsuccessfully in 2005 because it did not understand the market demand for its new product.This is an example of

A) vision statement evaluation.
B) assessing internal strengths.
C) environmental scanning.
D) mission statement evaluation.

Question 36

Two non-competing global firms meet quarterly to discuss multiple perspectives on world trends.This is an example of how to improve

A) stakeholder management.
B) perceptual acuity.
C) internal scanning.
D) financial returns.

Question 37

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

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

Question 38

Which one of the following statements is an example of how to improve perceptual acuity?

A) A CEO meets with other CEOs of non-competing companies to examine the world from multiple perspectives and then shares the results with his own management team.
B) A CEO meets with the company management team regularly to analyze current world events and their potential impact on the company.
C) A CEO meets with direct competitors to analyze current industry trends. The CEOs share their conclusions with their respective companies.
D) Outsiders are brought in to the board meeting to critique the company strategy, which considers the new information in its potential revamping of the strategy.

Question 39

Companies that are able to spot key trends in the environment know their business and most importantly know their

A) suppliers.
B) employees.
C) customers.
D) competitors.

Question 40

Why must successful managers recognize opportunities and threats in their company external environment?

A) If they miscalculate the market, opportunities will be lost.
B) If they misread the market, they are likely to become rich.
C) If they identify all of the environmental threats, they are guaranteed to acquire large market share.
D) If they identify all of the environmental opportunities, they are guaranteed to acquire large market share.

Question 41

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 42

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) it can create legal problems for the firm if regulators discover the company is making forecasts.
D) managers may view uncertainty as black and white while ignoring important gray areas.

Question 43

Which of the following would not lead a manager to believe that an ethical concern exists?

A) Have I done anything that coerced somebody to share this information?
B) Have I done something to circumvent a system intended to secure or protect information?
C) Is the contemplated technique for gathering information relevant?
D) Have I misled anybody in order to gain access?

Question 44

Executives must be careful to avoid spending so much time and effort tracking the actions of ________ that they ignore ________.

A) competitors; customers
B) customers; competitors
C) traditional competitors; new competitors
D) existing customers; existing competitors

Question 45

It is important to question the reliability of forecasts because

A) if predictions are too low, a company like Motel 6 might build too many units and thus have a surplus of capacity.
B) uncertainty is black and white, and therefore the gray areas are unimportant.
C) underestimating uncertainty can lead to good competitive strategies.
D) the growth new industries, such as that of telecommunications, cannot be predicted.

Question 46

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) competitive intelligence
C) scenario analysis
D) monitoring

Question 47

Scenario planning is a useful technique for firms competing in industries characterized by ________ and ________.

A) predictability; stability
B) low profit margins; stability
C) unpredictability; change
D) high profit margins; stability

Question 48

Steve Jobs,former chairman of Apple,demonstrated that ________ also are important in forecasting.

A) character and ability
B) intuition and judgment
C) training and experience
D) imagination and training

Question 49

The aging of the population,changes in ethnic composition,and effects of the millennial generation are ________ changes.

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

Question 50

In 1977,Kenneth H.Olsen,then president of Digital Equipment Corp.,announced that there was no reason for individuals to have a computer in their home.Long since disproven,this is an example of

A) poor forecasting of future consumer demand.
B) overestimation of uncertainty.
C) excellent forecasting.
D) good prediction skills.

Question 51

By emphasizing the importance of identifying opportunities and threats,the SWOT framework makes firms act ________ rather than ________.

A) quickly; slowly
B) immediately; eventually
C) proactively; reactively
D) intelligently; uninformed

Question 52

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 53

In the SWOT framework,________ are internal factors that are specific to the company.

A) strengths and opportunities
B) strengths and threats
C) threats and weaknesses
D) strengths and weaknesses

Question 54

Which of the following websites is not an example of one used routinely for corporate competitive intelligence gathering?

A) Slideshare
B) Quora
C) Duolingo
D) YouTube

Question 55

SWOT analysis raises awareness about the role of strategy in creating a match between the environmental conditions and ________ of the firm.

A) internal opportunities and threats
B) internal strengths and weaknesses
C) internal strengths and opportunities
D) internal weaknesses and opportunities

Question 56

Which of the following is not a correct usage of the SWOT framework?

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

Question 57

Scenario analysis draws on a range of disciplines and interests.It is a more ________ approach to forecasting.

A) basic
B) fundamental
C) in-depth
D) superficial

Question 58

Banks and airlines are examples of two industries that track competitor offers continually.This is called the process of gathering

A) consumer responses.
B) competitive intelligence.
C) past decisions.
D) mainline information.

Question 59

In the SWOT framework,________ are the same for all firms in the same competitive environment.

A) strengths and weaknesses
B) strengths and opportunities
C) weaknesses and threats
D) opportunities and threats

Question 60

Heightened concern with fitness might be a threat to some companies and an opportunity to others.In the SWOT framework,these are ________ environmental factors.

A) internal
B) external
C) both internal and external
D) not relevant external

Question 61

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) it helps a firm to derive greater economies of scale.
D) new entrants will have to spend heavily to overcome existing customer loyalties.

Question 62

Which of the following would be an entry barrier?

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

Question 63

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

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

Question 64

The threat of new entrants is high when there are

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

Question 65

Research published in Personnel Psychology shows that older workers are slightly more willing to implement organizational changes than younger workers.This is an example of which segment of the general environment?

A) economic
B) demographic
C) sociocultural
D) political and legal

Question 66

Genetic engineering has had a positive impact on the pharmaceutical industry.This is an example of which type of general environmental trend?

A) economic
B) demographic
C) technological
D) political and legal

Question 67

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 68

Professor Tamara Erickson says that members of different generations bring different experiences,assumptions,and benefits to the workforce.She believes companies can gain a great deal from creating a culture that welcomes workers of all ages and in which leaders address biases.This is an example of which segments of the general environment?

A) economic
B) demographic
C) sociocultural
D) political and legal

Question 69

Which is considered a force in the five-forces model?

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

Question 70

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

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

Question 71

There are many challenges to complying with the Dodd-Frank Wall Street Reform and Consumer Protection Act to the tracking of materials from more than two million small scale or subsistence miners in the Eastern Congo.Modern supply-chain logistics are not very relevant in these environments.This is an example of which segment of the general environment?

A) economic
B) demographic
C) sociocultural
D) political and legal

Question 72

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; positive
C) negative; negligible
D) positive; negative

Question 73

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

Question 74

Data Analytics are being used by corporations to understand their customer purchasing patterns.This is an example of which segment of the general environment?

A) economic
B) demographic
C) technological
D) political and legal

Question 75

The Dodd-Frank Wall Street Reform and Consumer Protection Act require companies to disclose whether any tin,tantalum,tungsten or gold in their supply chain is connected to violent militia groups in the Congo or nine surrounding countries,including Angola,Rwanda,and Sudan.This is an example of which segment of the general environment?

A) economic
B) sociocultural
C) political and legal
D) demographic

Question 76

Airbnb,a room-sharing site,offers more rooms than Marriott.Goldman Sachs suggests that the supply of new rooms over the next two years will outpace the previous five even though the growth of American occupancy rates has begun to slow.Which competitive force is involved in this situation?

A) the threat of favorable government policies
B) the threat of new buyers
C) the threat of new entrants
D) the threat of proprietary products

Question 77

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 78

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

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

Question 79

In the general environment,which of the following is not a demographic trend?

A) aging population
B) greater disparities in income levels
C) changes in ethnic composition
D) more women in the workforce

Question 80

All of the following are important elements of the political and legal segment of the general environment except

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