Deck 4: Exploring the External Environment: Macro Industry and Dynamics

Question 1

Both the PESTEL and SWOT analyses help managers gain a better understanding of the opportunities and threats they face.

Answer 1

True

Question 2

Growth of local and foreign national economies and exchange rates are critical economic factors.

Answer 2

True

Question 3

The primary focus of PESTEL analysis is the current impact of macro environmental factors.

Answer 3

False

Question 4

Profitability varies widely from industry to industry.

Question 5

The external environment in which firms compete exerts a strong influence on firms' profitability.

Question 6

PESTEL is an acronym for political, economic, sociocultural, technological, environmental, and legal context(s) in which a firm operates.

Question 7

One of the value-chain activities that brings carbonated beverages to market is profit.

Question 8

Industry analysis examines only the competitors in the industry.

Question 9

The stability of the political environment is particularly important for companies entering new markets.

Question 10

Political, technical, and environmental issues are elements of the macro environment.

Question 11

SWOT is a simple tool that can be used to develop an understanding of a firm's external environment.

Question 12

Once a strategy is congruent with PESTEL in a firm's home environment, it will be aligned in new geographic areas.

Question 13

The micro environment refers to economic, social, and legal issues confronting the firm.

Question 14

The external environment provides business opportunities to the firm.

Question 15

It is not critical to know what industry- and firm-specific factors affect a firm to understand its competitive position.

Question 16

Managers must remain focused on firm-specific characteristics when conducting industry analysis.

Question 17

Stakeholder analysis will fill in the gaps left by industry analysis.

Question 18

The political environment can have a significant influence on consumer confidence.

Question 19

Industry analysis includes all of a firm's key external stakeholders.

Question 20

Two trends that resulted in changes to the bottling industry were building large plants to serve multiple markets and beverage producers entering the bottling industry.

Question 21

High research and development costs, interdependent countries, and common marketing regulations represent pressures that would discourage industry globalization.

Question 22

Unemployment rates can have a strong impact on strategy.

Question 23

Making assumptions about sociocultural norms in your home market can cause early failure when entering new markets.

Question 24

Environmental factors do not contribute to the costs of operating a business.

Question 25

If companies are promoting consistent images and brands, there is pressure to globalize in order to realize tremendous economies of scale in their global advertising dollars.

Question 26

Globalization has been stimulated in the cell-phone industry as a result of the problem of multiple standards and the entry of large global competitors into the market.

Question 27

Age and lifespan demographics may be critical sociocultural factors in a successful business.

Question 28

Costs in both the automobile and airframe-manufacturing industries are such that they do not favor globalization.

Question 29

An analysis of market, cost, government, and competition factors can help determine if a market has globalized or is in the process of globalizing.

Question 30

Social influences are stable from country to country.

Question 31

General conditions of the macro environment can be characterized after PESTL analysis and an assessment of globalization have been completed.

Question 32

In a truly global industry, the core product is diversified.

Question 33

Sometimes, how easily laws may change can affect a firm's strategy.

Question 34

The legal and political environments are often interrelated in that laws and regulations only change when politicians decide the changes are necessary.

Question 35

In a truly global industry, competitive strategies are integrated in different international markets.

Question 36

Globalization is the evolution of distinct geographic product markets into a state of globally interdependent product markets.

Question 37

From the standpoint of access to raw materials, the environment has long been a factor in firm strategy.

Question 38

In market economies where monopolies are allowed, firms should be able to earn only "normal" profits.

Question 39

Many popular U.S. brands have benefited from increasing levels of consumerism in other countries.

Question 40

The more unique markets in similar regions are, the greater the pressure for an industry to globalize.

Question 41

Bottled water is on track to surpass soft drinks as the best-selling beverage in the United States.

Question 42

According to the I/O approach, the appropriate strategy and key assets are dictated by firm-specific characteristics.

Question 43

When analyzing heterogeneous markets, it is best to be extremely inclusive.

Question 44

It is important for managers to draw industry boundaries in a way that enables them to understand the dynamics of competition.

Question 45

Fragmented markets are more difficult to enter than concentrated markets.

Question 46

An industry that is dominated by a few large firms is called a monopoly.

Question 47

The concentration ratio represents the combined revenues of the largest industry participants as a ratio of total industry sales.

Question 48

Key success factors would satisfy the value criteria of the VRINE model but not the rareness criteria.

Question 49

Key success factors are firm-specific and nontransferable.

Question 50

When there is perfect competition, relatively heterogeneous products are offered by different firms.

Question 51

One implication of industry analysis is that firms perform best when they select a strategy that deviates from the industry environment.

Question 52

Industry concentration affects the intensity of competition in an industry.

Question 53

If the industry analysis is too exclusive, important threats may be omitted.

Question 54

Imperfect competition is characterized in part by numerous suppliers and buyers.

Question 55

When a market is dominated by only two or a few large firms, the industry is said to be a duopoly or oligopoly.

Question 56

When industry profits fall below normal levels, competition usually decreases.

Question 57

Key success factors can be likened to table stakes in a poker game.

Question 58

Industrial organization (I/O) economics is a discipline that helps managers analyze an industry.

Question 59

Managers can learn which strategies are rewarded most profitably by studying the industry.

Question 60

Heterogeneous products and barriers that make entry into an industry difficult are characteristics of imperfect competition.

Question 61

Porter's five-forces model identifies forces that determine the basic structure of an industry.

Question 62

Supplier power is influenced by exit barriers, industry growth, and industry concentration.

Question 63

When an industry is characterized by perfect competition, rivals in the industry will achieve above-average levels of profitability.

Question 64

Industries with consistently higher than average profitability are usually characterized by low entry barriers.

Question 65

The degree of rivalry is influenced by both complement exclusivity and price sensitivity.

Question 66

Supplier power is the degree to which firms in the supply industry are able to dictate favorable contract terms.

Question 67

Price competition tends to be more intense when the industry is a secondary industry for the major competitors in that industry.

Question 68

Supplier power is reduced when firms in a focal industry present a threat of backward integration.

Question 69

Buyer power is shaped by product differentiation, bargaining leverage, and brand identity.

Question 70

Concentration ratios teach us that industry dynamics are predominantly similar across various sectors of the same industry.

Question 71

A buyer group's power is directly impacted by its prestige and the size of its orders.

Question 72

High entry barriers lead to higher prices and higher levels of average profitability.

Question 73

Supplier power is reduced when firms in the supply industry present a threat of forward integration.

Question 74

The relative power of industry participants and industry suppliers affects the pricing and profitability of both industry groups.

Question 75

How managers define an industry is critical to the formulation of a strategy for competing in it.

Question 76

Rivalry is the intensity of competition within an industry.

Question 77

The threat of new entrants is greater when there are no switching costs.

Question 78

Complementors are an increasingly critical industry force that has been added to the five-forces model.

Question 79

As price competition increases, average prices increase as well, resulting in higher levels of profitability.

Question 80

Factors that tend to increase rivalry include attributes about firms within the industry and attributes about the products or markets.