Deck 3: Evaluating the External Environment

Question 1

During an economic crisis credit markets typically loosen their requirements.

Answer 1

False

Question 2

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

Answer 2

False

Question 3

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

Answer 3

True

Question 4

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

Question 5

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 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

Rivalry in fragmented industries tends to become bitter and fierce.

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

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 19

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

Question 20

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

Question 21

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 22

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

Question 23

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

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

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

Question 26

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

Question 27

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 28

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

Question 29

Viable substitutes are available in all industries.

Question 30

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 31

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 32

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 33

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

Question 34

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

Question 35

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 36

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 37

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 38

_____ 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 39

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

Question 40

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 41

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 42

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 43

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 44

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 45

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 46

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 47

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 48

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 49

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 50

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 51

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 52

Rivalry in _____ industries tends to become bitter and fierce.

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

Question 53

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 54

_____ 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 55

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 56

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 57

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 customer's business
C) A foreign firm plans to enter a new geographic area
D) A buyer firm decides to enter its supplier's business
E) A local firm diversifies itself by entering a new industry

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) 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 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

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 61

A generation ago, ketchup was an essential element of every American pantry and salsa was a relatively unknown product. The popularity of salsa exploded and has been attributed to trends in demographics such as population size, age, and ethnic mix as well as cultural trends such as attitudes toward obesity and consumer activism. What factor of PESTEL does this represent?

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

Question 62

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 supplier's business
E) A local firm diversifies itself by entering a new industry

Question 63

Textbook publishers can charge high prices because students enrolled in a class must purchase the specific book that the professor has selected. Used copies are sometimes a lower-cost option, but textbook publishers have cleverly worked to undermine the used textbook market by releasing new editions after very short periods of time. According to Porter what "force" do college students represent?

A) Buyers
B) Suppliers
C) Substitutes
D) New Entrants
E) Rivals

Question 64

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

Question 65

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

Question 66

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

Question 67

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

Question 68

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

Question 69

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 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

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 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

Textbook publishers can charge high prices because students enrolled in a class must purchase the specific book that the professor has selected. Used copies are sometimes a lower-cost option, but textbook publishers have cleverly worked to undermine the used textbook market by releasing new editions after very short periods of time. According to Porter what "force" do textbook publishers represent?

A) Buyers
B) Suppliers
C) Substitutes
D) New Entrants
E) Rivals

Question 74

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

Question 75

Textbook publishers can charge high prices because students enrolled in a class must purchase the specific book that the professor has selected. Used copies are sometimes a lower-cost option, but textbook publishers have cleverly worked to undermine the used textbook market by releasing new editions after very short periods of time. According to Porter what "force" do used books industry represent?

A) Buyers
B) Suppliers
C) Substitutes
D) New Entrants
E) Rivals

Question 76

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

Question 77

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

Question 78

Describe PESTEL analysis.

Question 79

When a buyer decides to enter its supplier's 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 80

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.