Deck 2: Analyzing the External Environment of the Firm

Question 1

When the US congress passed the Sarbanes-Oxley Act in 2002

A) Canada deregulated the associations
B) no similar Canadian legislation was developed
C) Canada followed with similar provisions
D) the provincial governments developed similar laws

Answer 1

C

Question 2

An independent group of suppliers, such as farmers, gather to form a cooperative to sell their products to buyers directly, replacing their former distributor. This is an example of

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

Answer 2

C

Question 3

A SWOT analysis includes listing

A) strategies, opportunities, and tactics
B) strategies, opportunities, and threats
C) strengths, opportunities, and tactics
D) strengths, opportunities, and threats

Answer 3

D

Question 4

Gathering "competitive intelligence"

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

Question 5

Which of the following terms is described by, the tapping of the "latent talent of the (online) crowd."

A) Opensourcing
B) Kickstarting
C) Maverick spending
D) Crowdsourcing

Question 6

In the Air Canada-WestJet conflict, the issue is

A) Air Canada claims its employee website was hacked
B) WestJet claims its employee website was hacked
C) Air Canada claims its email was stolen
D) Air Canada claims WestJet used employee access information to obtain flight info

Question 7

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 8

Two 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 9

Which of the following is considered an entry barrier?

A) Large economies of scale
B) Low switching costs
C) Easy access to raw materials
D) Low capital requirements

Question 10

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 11

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

A) Decreased entry barriers
B) Increased trade deficit
C) Increased bargaining power of the firm's suppliers
D) Increased competitive intensity

Question 12

A large fabricator of building components purchased a steel company to provide raw materials for its production process. This is an example of

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

Question 13

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 14

Environmental forecasting involves developing plausible projections about the _____ of environmental change.

A) direction, scope, speed, and intensity
B) volatility
C) competitive rivalry
D) severity

Question 15

Increasingly 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 16

_____ 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 17

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) forecasting's retrospective nature provides little information about the future
C) managers may view uncertainty as "black and white" while ignoring important "grey areas"
D) it can create legal problems for the firm if regulators discover the company is making forecast

Question 18

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; neutral
B) negative; neutral
C) negative; positive
D) positive; negative

Question 19

The aging of the population, changes in ethnic composition, and effects of the baby boom are considered:

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

Question 20

Which of the following is considered a force in the "Five Forces model"?

A) Increased deregulation in an industry
B) The threat of government intervention
C) Intensity of rivalry among competing firms
D) Recent technological innovation

Question 21

Managers rarely organize their analysis of and structure their conclusions about their outlook of the environment using the SWOT.

Question 22

Rivalry between the firms Air Canada and WestJet

A) is characterized as distractive.
B) includes allegations that Air Canada set up a screen-scraper program to automatically lift data.
C) includes allegations that WestJet sent investigators to pilfer an Air Canada Executive's garbage looking for data.
D) is an example of an insignificant level of competitive rivalry.

Question 23

Threat of substitute products comes from

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

Question 24

Exit barriers may arise from

A) flexible assets with alternative uses.
B) lack of governmental and social pressures.
C) strategic competitors
D) concerns about image.

Question 25

Managers use three important processes-scanning, monitoring, and gathering competitive intelligence-to enhance their environmental awareness.

Question 26

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

Question 27

Which of the following statements about strategic groups is ?

A) Two assumptions are made: (1) no two firms are totally different, (2) no two firms are exactly the same.
B) Strategic groupings are of little help to a firm in assessing mobility barriers that protect a group from attacks by other groups.
C) Strategic groups help chart the future directions of firms' strategies.
D) Strategic groups are helpful in thinking through the implications of each industry trend for the group as a whole.

Question 28

Which of the following is an example of the interrelationship between the general and competitive environments?

A) A decline in a nation's educational standards results in a decline in the nation's productivity
B) A country's technological inferiority results in its enactment of strong trade barriers against importation
C) Increased awareness of personal health leads to lower demand, and greater rivalry in the alcoholic beverages industry
D) Greater awareness of the environment results in environmental legislation

Question 29

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 30

In the value-net analysis, complementors are

A) firms that produce substitute products.
B) customers who compliment the company for their good products and services.
C) firms that produce products or services that have a positive impact on the value of a firm's products or services.
D) firms that supply critical inputs to a company.

Question 31

Buyer power will be greater when

A) the products purchased are highly differentiated.
B) there are high switching costs.
C) the industry's product is very important to the quality of the buyer's end products or services.
D) it is concentrated on purchasing large volumes relative to seller sales.

Question 32

Which of the following best demonstrates the interrelationships among different segments of the general environment?

A) A new technology results in the development of a substitute product for your firm's product.
B) Government deregulation results in different firms being able to offer the same product as your firm.
C) The recession results in several of your competitors cutting prices and intensifying rivalry.
D) Increased concern for the environment results in legislation that impacts your current packaging.

Question 33

Delayed marriages, fewer people in relevant age groups, and rising interest rates dampening demand for houses illustrates

A) that more than one segment of the general environment may affect an industry.
B) that the global environment is not as powerful an influence as thought.
C) that macroeconomic forces dominate the general environment.
D) that the competitive environment often has a strong influence on the general environment.

Question 34

The general environment consists of elements that an organization finds inside its own boundaries and which have some bearing on its ability to exist and thrive.

Question 35

The general and competitive environments

A) are independent and dynamic.
B) tend to be interrelated and dynamic.
C) have similar impact on organizations of different industries.
D) are independent and static.

Question 36

When considering strategic groups within industries, Canadian retailer Holt Renfrew is described as

A) a high growth industry with low fixed costs
B) similar to Canadian Tire
C) a prestigious upscale player
D) a competitor of Walmart

Question 37

An industry is commonly viewed from the suppliers' perspective and is defined as a collection of similar producers that employ similar production processes.

Question 38

In Porter's 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 39

A supplier group would be most powerful when there is/are

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

Question 40

Strategic groups consist of

A) a group of top executives who make strategies for a company.
B) a group of firms within an industry that follow similar strategies.
C) a group of executives drawn from different companies within an industry that makes decisions on industry standards.
D) a group of firms within an industry that decide to collude rather than compete with each other so that they can increase their profits.

Question 41

Examples of important elements in the economic segment include exchange rates and global trade.

Question 42

The same environmental trend can often have very different effects on firms within the same industry.

Question 43

The most watched economic indicator is the is the Toronto Stock Exchange (TSE), which is composed of 30 large industrial firms.

Question 44

Scenario analysis draws on a range of disciplines and interests, including economics, sociology, and demographics.

Question 45

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

Question 46

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 47

SWOT stands for strengths, weaknesses, opponents, and threats.

Question 48

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

Question 49

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

Question 50

Technological developments also raise substantial issues about the boundaries of industries.

Question 51

Porter's five forces model is designed to help us understand how social attitudes and cultural values impact Canadian businesses.

Question 52

Competitor intelligence gathering is no different from spying.

Question 53

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

Question 54

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

Question 55

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

Question 56

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

Question 57

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

Question 58

Porter's five forces model helps to determine both the nature of competition in an industry and the industry's profit potential.

Question 59

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

Question 60

The origins of scenario planning lie in the military, which used the technique during World War II to effectively cope with multiple challenges, limited resources, and great unpredictability in the unfolding of the war

Question 61

Provide one example of a crowdsourcing success.

Question 62

Technological advances have affected industry forces in ways that have created many new strategic challenges.

Question 63

Despite being simple, the SWOT analysis is quite popular. Explain the reasons why you think this is so.

Question 64

Using the Canadian beer as an example, explain how an industry or competitive environment might be defined and analyzed.

Question 65

If all strategic groups are moving in a similar direction, this could indicate a high degree of future volatility and intensity of competition.

Question 66

Explain how competitor intelligence can be improved by gathering information about competitors in the public domain. Provide examples.

Question 67

Explain why managers must recognize opportunities and threats in their firm's external environment.

Question 68

Opportunities and threats are environmental conditions external to the firm. Drawing on any environment you like, provide two examples of opportunities and two examples of threats that may impact an organization.

Question 69

Because the Internet creates more tools and means for competing, rivalry among firms is likely to be less intense.

Question 70

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

Question 71

The use of the strategic groups concept is generally not helpful in charting the future directions of firms' strategies.

Question 72

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

Question 73

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

Question 74

Michael Porter's five forces analysis is a dynamic tool for analyzing industry attractiveness.

Question 75

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

Question 76

Rival airlines, Air Canada and WestJet are battling over allegations of corporate espionage.

Question 77

Explain the important barriers to entry in an industry. Provide examples.

Question 78

Bombardier studies people's travel patterns to decide on the number of seats they should plan for future aircraft.

Question 79

Discuss some of the limitations of forecasting.

Question 80

Many indicators of the macroeconomic environment such as GNP, interest rates, savings rates, trade and budget deficits/surplus, and so forth, are interrelated. Explain.