Deck 6: The External Environment

Question 1

In recent times,businesspeople have become more confident in the ability of economists to provide valid and reliable predictions about the world's economic environment.

Answer 1

False

Question 2

A firm experiencing intense rivalry with powerful competitors should energetically engage in competitor analysis.

Answer 2

True

Question 3

Firms can directly control the elements of the seven segments of the general environment.

Answer 3

False

Question 4

The process of competitor analysis should examine the competitor's future objectives,current strategy,assumptions,and capabilities.

Question 5

The intensity of rivalry in an industry is greater when the industry is growing very slowly than it is when the industry is seeing high growth in sales.

Question 6

Organizations that are in a weak position relative to their suppliers can attempt to balance power through vertical integration.

Question 7

The five-forces model suggests that firms should target the industry with the highest potential for above-average returns and then implement either a cost-leadership strategy or a differentiation strategy.

Question 8

There are three major types of competitors discussed in Porter's five-forces model: existing,potential,and indirect.

Question 9

High exit barriers are factors that cause a company to remain in an industry even though the profitability of doing so may be questionable.

Question 10

Generally,the stronger the competitive forces,the higher the profit potential of an industry.

Question 11

The firms in an industry with a high threat from substitutes have less pricing discretion than firms in an industry with few substitutes.

Question 12

Demographic,economic,political/legal,sociocultural,technological,global,and physical are the seven elements comprising the industry environment.

Question 13

The five forces model expands the arena of competitive analysis beyond direct competitors (i.e.,rivals)to include buyers and suppliers who may also be a source of competition.

Question 14

When firms analyze the external environment,they typically have complete and unambiguous data.

Question 15

The objective of assessing the external environment is to determine the timing and importance of the effects of environmental changes and trends on the strategic management of the firm.

Question 16

The higher the entry barriers,the more intense is competition in an industry.

Question 17

Driving forces can be categorized as social,technological,economic,environmental,political/legal,and global.

Question 18

Individual organizations typically have only a marginal impact on the broad environment.

Question 19

The broad environment consists of sociocultural forces,competitive forces,technological trends,and political/legal forces.

Question 20

Monitoring involves the development of a forecast of what might happen at a future point in time.

Question 21

Which of the following is not included as a major force in Michael Porter's five-forces model of industry competition?

A) Existing competitors
B) Suppliers
C) Potential competitors
D) Unions

Question 22

The economic environment refers to:

A) The nature and direction of the economy in which a firm competes or may compete
B) The economic outlook of the world provided by the World Bank
C) An analysis of how the environmental movement and world economy interact
D) An analysis of how new environmental regulations will affect the economy

Question 23

Analysis of society is important for all of the following reasons except:

A) Awareness of what is happening in society virtually guarantees that an organization will be able to successfully compete in its own industry
B) Most of the other stakeholder groups are also members of society
C) Awareness of and compliance with the attitudes of society can help an organization avoid problems associated with being a bad corporate citizen
D) Changes in society can provide opportunities for organizations

Question 24

If there are many buyers but only a few sellers,the buyers tend to have the most bargaining power.

Question 25

The technological segment of environmental analysis includes:

A) Institutions and activities involved with creating new knowledge and translating that knowledge into new outputs
B) The determination of when machinery will need to be replaced in a given firm
C) The need for new technology in order for a firm to gain a competitive advantage
D) Places where a firm's technology will allow that firm to dominate a given market

Question 26

An organization's environment typically:

A) Consists only of employees and managers
B) Includes all groups and individuals that are significantly influenced by or have a major impact on the organization
C) Includes only stockholders
D) Consists only of competitors, suppliers, and customers

Question 27

If there are many sellers but only a few buyers,the sellers tend to have the most bargaining power.

Question 28

According to Michael Porter,all of the following are conditions that create advantages for firms in certain countries and industries except:

A) Suppliers to a particular industry are the very best in the world
B) Strong industry competition
C) Buyers are among the most demanding in the world
D) Shortages of critical raw materials or other supplies

Question 29

When analysts develop feasible projections of future events and how quickly they will occur based on observed changes and trends,they are engaged in:

A) Scanning
B) Monitoring
C) Forecasting
D) Assessing

Question 30

Suppliers tend to exhibit greater power if:

A) There are few suppliers of the raw material, product, or service
B) There are many substitutes for the product or service that suppliers sell
C) Suppliers are small businesses with regards to total sales volume
D) The suppliers' products are undifferentiated and plentiful

Question 31

A general environmental analysis can be expected to produce all of the following except:

A) Objective answers
B) Recognition of environmental trends
C) Identification of organizational opportunities
D) Identification of organizational threats

Question 32

High levels of competition may be caused by:

A) Rapid industry growth
B) Low fixed costs
C) A small number of competitors
D) A lack of product differentiation

Question 33

One of the benefits of having a cost advantage is that it serves as barrier to entry.

Question 34

What is a primary reason that an organization should monitor the broad environment?

A) To anticipate concerns and trends
B) To determine the firm's internal strengths
C) To determine the firm's internal weaknesses
D) To identify key employees within the firm

Question 35

Analysis of social trends is important because:

A) The values and beliefs of key stakeholders are derived from societal influences
B) Correct assessment of social trends can help businesses avoid restrictive legislation
C) Changes in society can create either opportunities or threats for organizations
D) All of the above

Question 36

Which of the following may lead a firm to conclude that an industry is attractive to enter?

A) Strong supplier power
B) Strong customer power
C) No close substitutes
D) Many strong competitors

Question 37

The political/legal segment of an environment represents:

A) The political preferences of different ethnic groups in the society
B) The technological values of different political entities in society
C) How organizations and governments mutually try to influence each other
D) The system of regulations governments at all levels place on businesses

Question 38

According to Michael Porter,conditions that create advantages for firms in certain countries and industries include:

A) Suppliers to a particular industry are the very best in the world
B) Strong industry competition
C) Buyers are among the most demanding in the world
D) All of the above

Question 39

The five forces model over-emphasizes threats and downplays opportunities.

Question 40

High entry barriers often result in green-field entries as opposed to acquisitions.

Question 41

All of the following are forces that create high rivalry within an industry except:

A) Numerous or equally balanced competitors
B) High fixed costs
C) Fast industry growth
D) High storage costs

Question 42

Describe and discuss the four activities of the external environmental analysis process.

Question 43

Why is analysis of social trends important?

Question 44

What is a firm's strategic group and what effect does the strategic group have on the firm?

Question 45

Identify and describe the three major parts of the external environment. What is the purpose of the firm's collecting information about these aspects of its environment?

Question 46

What are some of the most critical economic factors for a firm to track and why are they important?

Question 47

According to Michael Porter,explain the conditions that create advantages for firms in certain countries and industries.

Question 48

A collection of companies in an industry that tend to focus on the same subsets of key success factors is called a(n):

A) Business guild
B) Trade association
C) Strategic group
D) Organizational herd

Question 49

Describe the factors that raise the competitive nature of an industry's rivalry.

Question 50

Switching costs refer to the:

A) Cost to a producer to exchange equipment in a facility when new technologies emerge
B) Cost of changing the firm's strategic group
C) One-time costs suppliers incur when selling to a different customer
D) One-time costs customers incur when buying from a different supplier

Question 51

Explain why it is important for organizations to analyze and understand the external environment.

Question 52

Exit barriers to a firm include all of the following except:

A) Generic assets
B) Loyalty to employees
C) Governmental concern about job loss
D) Restrictive labour agreements

Question 53

The means by which one examines whether the nature of competitive forces makes an industry attractive or unattractive is called:

A) The structure-conduct-performance paradigm
B) Industry analysis
C) Resource-based analysis
D) Value chain analysis

Question 54

Related and supporting industries are called _________ and they are an additional force that can impact the competitiveness of an industry.

A) Complementors
B) All-rounders
C) Customizers
D) Supporters

Question 55

What are high exit barriers and how do they affect the competition within an industry?

Question 56

Porter's "diamond" model:

A) Explains competitive advantage of leading industries within the same country
B) Explains competitive disadvantage of globally leading industries in different countries
C) Has been criticized for ignoring history
D) Has been criticized for focusing on institutions

Question 57

According to the five-forces model,an unattractive industry would include all of the following characteristics except:

A) Low economies of scale needed for new firms to enter
B) Low supplier power due to commodity inputs
C) High threat of substitute products due to a large number of low cost alternatives
D) High bargaining power of buyers due to low switching costs

Question 58

Identify the five forces that underlie the five forces model of competition. Explain briefly how they affect industry profit potential.

Question 59

According to the five-forces model,an attractive industry would have all of the following characteristics except:

A) Low barriers to entry
B) Suppliers and buyers with little bargaining power
C) A moderate degree of rivalry among competitors
D) Few good product substitutes

Question 60

An industry is defined as:

A) A group of firms producing the same products or services
B) Firms producing items that sell through the same distribution channels
C) Firms that sell the same products or services to the same customer base
D) A group of firms producing products that are close substitutes

Question 61

What does one assess in a five-forces analysis and what conclusions can be reached as a result of the analysis?

Question 62

According to Porter,when do customers exhibit a powerful force on competition in an industry?