Deck 3: Evaluating the External Environment

Question 1

Rivalry in fragmented industries tends to become bitter and fierce.

Answer 1

True

Question 2

The likelihood of new entrants joining an industry is low if existing competitors enjoy economies of scale.

Answer 2

True

Question 3

Bitter rivalry between an industry's competitors can lead to increase in prices of their products or services, thereby harming consumers.

Answer 3

False

Question 4

Moore's Law suggests that the performance of alternative energy technology roughly doubles every four years.

Question 5

Rivalry tends to be fierce among an industry's competitors if the competitors are well differentiated from each other.

Question 6

Rivalry tends to be fierce among an industry's competitors if fixed costs in the industry are low.

Question 7

Rivalry tends to be fierce among an industry's competitors if the growth rate of demand for the industry's offerings is high.

Question 8

PESTEL analysis is an important tool for organizing factors within the general environment and identifying how these factors influence industries and the firms within them.

Question 9

Bitter rivalry between an industry's competitors is especially detrimental to the competing firms if their competition is based on unique features of their products or services.

Question 10

The purpose of Porter's five forces analysis is to identify the factors that affect the profit potential of an industry.

Question 11

Rivalry tends to be fierce among an industry's competitors if exit barriers in the industry are low.

Question 12

The environment provides resources that an organization needs in order to create goods and services.

Question 13

Attitudes toward obesity constitute a social factor in the PESTEL framework.

Question 14

The likelihood of new entrants joining an industry is high if differentiation among existing competitors is high.

Question 15

During an economic crisis credit markets typically loosen their requirements.

Question 16

Changes in legal factors can have a positive impact on the profit potential of many industries.

Question 17

High industry concentration increases the chances of bitter rivalry between an industry's competitors.

Question 18

The political segment includes elements such as tax policies, changes in trade restrictions and tariffs, and the stability of governments.

Question 19

A few organizations wield such power and influence that they can shape some elements of the general environment.

Question 20

The environmental segment involves the physical conditions within which organizations operate.

Question 21

Which of the following segments of PESTEL analysis includes elements such as tax policies and changes in trade restrictions and tariffs?

A)Political
B)Economic
C)Social
D)Technological
E)Environmental

Question 22

Backward vertical integration involves a supplier entering the industry that it supplies inputs to.

Question 23

Which of the following segments of PESTEL analysis is the "Moore's Law" associated with?

A)Political
B)Economic
C)Social
D)Technological
E)Environmental

Question 24

The general environment, a component of the environment of an organization, is also called the:

A)micro-environment.
B)macro-environment.
C)common environment.
D)competitive environment.
E)meso-environment.

Question 25

PESTEL reflects the names of the six segments of the general environment: political, _____, environmental, and legal.

A)ecological, strategic, technical
B)ecological, social, technological
C)economic, strategic, technical
D)economic, social, technological
E)ecological, strategic, technological

Question 26

When unemployment rises, discretionary income plummets.That hurts businesses selling costly but non-essential goods.This example represents the _____ segment of PESTEL analysis.

A)political
B)economic
C)social
D)technological
E)environmental

Question 27

Which of the following segments of PESTEL analysis includes elements such as inflation rates, unemployment rates, and levels of disposable income?

A)Political
B)Economic
C)Social
D)Technological
E)Environmental

Question 28

As buyers, large companies like Walmart have the power to insist on price concessions because their sales volumes are so high.

Question 29

Forward vertical integration involves a buyer entering the industry that it purchases goods or services from.

Question 30

Suppliers tend to be powerful if the supplier's industry is concentrated.

Question 31

PESTEL analysis differs from the five forces analysis in that PESTEL analysis is used for:

A)analyzing a firm's strengths and weaknesses along with the opportunities and threats that exist in the firm's environment.
B)evaluating strategic groups in order to understand gaps in the industry that represent untapped opportunities.
C)analyzing how much profit potential exists in an industry.
D)evaluating profit potential of an organization's various business units or product lines.
E)organizing factors within the general environment and identifying how these factors influence industries and the firms within them.

Question 32

Farmers rely heavily on cheap labor provided by illegal immigrants.A tightening of the immigration policy would reduce their profit margins and potentially increase the prices of agricultural products.For these farmers, this aspect of illegal immigration represents the _____ segment of PESTEL analysis.

A)political
B)economic
C)social
D)technological
E)environmental

Question 33

Buyers are less powerful when they face little or no switching costs in changing vendors.

Question 34

Which of the following segments of PESTEL analysis includes cultural trends such as attitudes toward obesity and consumer activism?

A)Political
B)Economic
C)Social
D)Technological
E)Environmental

Question 35

In the pharmaceutical industry, major companies have started offering coupons to keep people off of substitute generic drugs.

Question 36

Suppliers tend to be less powerful if there are no effective substitutes for what the supplier group provides.

Question 37

The analysis of strategic groups can reveal gaps in the industry that represent untapped opportunities.

Question 38

According to the Five Force Analysis, if a firm is to make more profit, it must take that profit from a rival, a supplier, or a buyer.

Question 39

_____ analysis is an important tool that executives can rely upon to organize factors within the general environment and identify how these factors influence industries and the firms within them.

A)PESTEL
B)SWOT
C)Porter's
D)BCG matrix
E)Five forces

Question 40

Viable substitutes are available in all industries.

Question 41

New entrants are more likely to join an industry if:

A)differentiation among existing competitors is high.
B)access to distribution channels is limited.
C)existing competitors lack economies of scale.
D)capital requirements to enter the industry are high.
E)expected retaliation from existing competitors is high.

Question 42

_____ is one of the five forces of Michael Porter's five forces analysis.

A)Competitors in an industry
B)Governmental regulations
C)Economic elements
D)Geographic origin of an industry
E)Cultural and social trends affecting an industry

Question 43

Rivalry in _____ industries tends to become bitter and fierce.

A)fragmented
B)regulated
C)rapidly expanding
D)concentrated
E)unregulated

Question 44

Suppliers are more likely to be powerful relative to the firms to which they sell their goods and services if:

A)differentiation among existing suppliers is high.
B)the suppliers' industry is highly fragmented.
C)existing suppliers lack economies of scale.
D)the suppliers' industry is dominated by a few companies.
E)cost advantages independent of size are negligible.

Question 45

A strategy that involves a supplier entering the industry that it supplies inputs to is referred to as:

A)forward horizontal integration.
B)backward vertical integration.
C)horizontal diversification.
D)backward horizontal integration.
E)forward vertical integration.

Question 46

A farmer realizes that he is not getting fair price from the agents who buy produce from him and sell it to the markets.As such, he decides to sell produce directly to the local market.This is an example of:

A)forward horizontal integration
B)backward vertical integration
C)horizontal diversification
D)backward horizontal integration
E)forward vertical integration

Question 47

Which of the following conditions is most likely to cause fierce rivalry between competitors of an industry?

A)Exit barriers in the industry are low
B)Fixed costs in the industry are low
C)Competitors are differentiated from each other
D)Competition is based on the uniqueness of the industry's offerings
E)The growth rate of demand for the industry's offerings is low

Question 48

Suppliers are more likely to be powerful relative to the firms to which they sell their goods and services if:

A)differentiation among existing suppliers is high.
B)the suppliers' industry is highly fragmented.
C)existing suppliers lack economies of scale.
D)suppliers' goods or services cannot be substituted effectively.
E)cost advantages independent of size are negligible.

Question 49

The likelihood of new entrants joining an industry is low if access to distribution channels is limited because:

A)new entrants struggle to match incumbents' prices.
B)this discourages customers from buying a new entrant's offerings.
C)new entrants struggle to gather enough cash to get started.
D)each incumbent has a group of loyal customers that enjoy its unique features.
E)new entrants struggle to get their offerings to customers.

Question 50

Michael Porter's five forces analysis is an important tool:

A)that considers a firm's strengths and weaknesses along with the opportunities and threats that exist in the firm's environment.
B)for executives to analyze strategic groups in order to understand gaps in the industry that represent untapped opportunities.
C)for analyzing how much profit potential exists in an industry.
D)for evaluating profit potential of an organization's various business units or product lines.
E)for organizing factors within the general environment and identifying how these factors influence industries and the firms within them.

Question 51

Piracy of intellectual property poses a threat to businesses that create such properties in order to profit from them.This example represents the _____ segment of PESTEL analysis.

A)political
B)economic
C)social
D)legal
E)environmental

Question 52

Concentrated industries differ from fragmented industries in that in concentrated industries:

A)exit barriers for businesses are unusually high.
B)growth rate of demand for the industry's offerings is usually low.
C)competitors are well-differentiated from each other.
D)fixed costs of managing a business are very high.
E)businesses tend to keep their competition rather polite.

Question 53

Which of the following is one of the five forces of Michael Porter's five forces analysis?

A)Economic elements
B)Governmental regulations
C)Cultural and social trends affecting an industry
D)Geographic origin of an industry
E)Suppliers to an industry

Question 54

Which of the following is an example of forward vertical integration?

A)A start-up company created by an entrepreneur enters an industry
B)A supplier firm chooses to enter its customers' business
C)A foreign firm plans to enter a new geographic area
D)A buyer firm decides to enter its suppliers' business
E)A local firm diversifies itself by entering a new industry

Question 55

The likelihood of new entrants joining an industry is low if capital requirements to enter the industry are high because:

A)new entrants struggle to match incumbents' prices.
B)this discourages customers from buying a new entrant's offerings.
C)new entrants struggle to gather enough cash to get started.
D)each incumbent has a group of loyal customers that enjoy its unique features.
E)new entrants struggle to get their offerings to customers.

Question 56

The likelihood of new entrants joining an industry is low if switching costs are high because:

A)new entrants struggle to match incumbents' prices.
B)this discourages customers from buying a new entrant's offerings.
C)new entrants struggle to gather enough cash to get started.
D)each incumbent has a group of loyal customers that enjoy its unique features.
E)new entrants struggle to get their offerings to customers.

Question 57

New entrants are more likely to join an industry if:

A)differentiation among existing competitors is low.
B)access to distribution channels is limited.
C)switching costs for consumers are high.
D)capital requirements to enter the industry are high.
E)expected retaliation from existing competitors is high.

Question 58

Suppliers are more likely to be powerful relative to the firms to which they sell their goods and services if:

A)differentiation among existing suppliers is high.
B)access to distribution channels is limited.
C)existing suppliers lack economies of scale.
D)the suppliers' industry is highly concentrated.
E)cost advantages independent of size are negligible.

Question 59

Rivalry between competitors of an industry tends to be fierce when:

A)exit barriers in the industry are low.
B)fixed costs in the industry are low.
C)competitors are not differentiated from each other.
D)competition is based on the uniqueness of the industry's offerings.
E)the growth rate of demand for the industry's offerings is high.

Question 60

The likelihood of new entrants joining an industry is low if existing competitors enjoy economies of scale because:

A)new entrants struggle to match incumbents' prices.
B)this discourages customers from buying a new entrant's offerings.
C)new entrants struggle to gather enough cash to get started.
D)each incumbent has a group of loyal customers that enjoy its unique features.
E)new entrants struggle to get their offerings to customers.

Question 61

Buyers are more likely to be powerful relative to the firms from which they purchase goods and services if:

A)there are relatively few firms supplying the industry compared to the number of buyers.
B)the good or service purchased by the buyers represents a negligible percentage of the buyer's costs.
C)the industry's goods or services are highly differentiated.
D)buyers face high switching costs in changing vendors.
E)the good or service is of limited importance to the quality or price of the buyer's offerings.

Question 62

Describe four scenarios that help to predict the likelihood that fierce rivalry will erupt between an industry's competitors.

Question 63

Factors in the general environment can have different effects depending on the industry type.Give two examples.

Question 64

Buyers are more likely to be powerful relative to the firms from which they purchase goods and services if:

A)there are relatively few firms supplying the industry compared to the number of buyers.
B)the good or service purchased by the buyers represents a high percentage of the buyer's costs.
C)the industry's goods or services are highly differentiated.
D)buyers face high switching costs in changing vendors.
E)the good or service is of significant importance to the quality or price of the buyer's offerings.

Question 65

What does the environment of any organization consist of? How can a business influence the environment?

Question 66

Why is understanding the nature of strategic groups within an industry important?

Question 67

What is the purpose of conducting Michael Porter's five forces analysis? Describe the five forces that such an analysis focuses on.

Question 68

Give an example each of forward vertical integration and backward vertical integration.

Question 69

Why would an executive in charge of an organization want to understand the environment surrounding that organization?

Question 70

Breadmakers, Inc.produces and supplies fresh sandwich breads to various sandwich businesses.Breadmakers has recently decided to open its own stores for selling sandwiches to consumers.This is an example of:

A)forward horizontal integration
B)backward vertical integration
C)horizontal diversification
D)backward horizontal integration
E)forward vertical integration

Question 71

When a buyer decides to enter its suppliers' business, the strategy is referred to as _____.

A)forward horizontal integration
B)backward vertical integration
C)horizontal diversification
D)backward horizontal integration
E)forward vertical integration

Question 72

Which of the following groups consists of a set of industry competitors that have similar characteristics to each other but differ in important ways from the members of other groups?

A)collaborative
B)PESTEL
C)strategic
D)SWOT
E)niche

Question 73

Describe PESTEL analysis.

Question 74

Which of the following is an example of backward vertical integration?

A)A stratup company created by an entrepreneur enters an industry
B)A supplier firm chooses to enter its customers' business
C)A foreign firm plans to enter a new geographic area
D)A buyer firm decides to enter its suppliers' business
E)A local firm diversifies itself by entering a new industry

Question 75

How is the strategic groups analysis different from Porter's five forces analysis?

Question 76

Buyers are more likely to be powerful relative to the firms from which they purchase goods and services if:

A)there are relatively few firms supplying the industry compared to the number of buyers.
B)the good or service purchased by the buyers represents a negligible percentage of the buyer's costs.
C)the industry's goods or services are standardized or undifferentiated.
D)buyers face high switching costs in changing vendors.
E)the good or service is of significant importance to the quality or price of the buyer's offerings.