Question 1

Managers must chart a company's strategic course by:
A) focusing on the local environment in which they are operating.
B) ensuring excess production capacity and/or inventory.
C) competing fiercely for a share in the market.
D) building a bigger dealer network.
E) developing a thorough understanding of the company's external and internal environment.

Accepted Answer

In order to chart a company's strategic course wisely, managers must first develop a deep understanding of the company's present situation. Two facets of a company's situation are especially pertinent: (1) its external environment-most notably, the competitive conditions of the industry in which the company operates; and (2) its internal environment-particularly the company's resources and organizational capabilities.

Question 2

Each of the following exemplifies the impact of the macro-environment on a company's strategic opportunities EXCEPT:
A) sales of Smirnoff dwindle on account of new laws regulating the sale of liquor.
B) consumer confidence in GM rises as its stock price soars.
C) Nike considers Adidas its most potent rival in the industry.
D) footfalls at the outlets of Pizza Express increase following its drive to go vegan.
E) sales of Smooth Fitness Treadmills surge on account of a new feature that monitors users' blood pressure.

Accepted Answer

The six principal components of the macro-environment are political, economic, sociocultural, technological, environmental (concerning the natural environment), and legal/regulatory. Rival firms are part of the immediate industry and competitive environment.

Question 3

The most powerful of the five competitive forces is USUALLY:
A) the competitive pressures that stem from the ready availability of attractively priced substitute products.
B) the competitive pressures associated with the market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry.
C) the benefits that emerge from close collaboration with suppliers and the competitive pressures that such collaboration creates.
D) the competitive pressures associated with the potential entry of new competitors.
E) the bargaining power and leverage that large customers are able to exercise.

Accepted Answer

The strongest of the five competitive forces is often the rivalry for buyer patronage among competing sellers of a product or service.

Question 4

Which of the following is part of a company's macro-environment?
A) Conditions outside the market
B) European culture, values, and lifestyles
C) The pace of technological change factors and legal and regulatory conditions
D) The industry and competitive environment arena outside the company's operating territory
E) The company's resource strengths, resource weaknesses, and competitive capabilities

Accepted Answer

Every company operates in a broad "macro-environment" that comprises six principal components: political factors, economic conditions in the firm's general environment (local, country, regional, worldwide), sociocultural forces, technological factors, environmental factors (concerning the natural environment), and legal/regulatory conditions.

Question 5

Factors that cause the rivalry among competing sellers to be weaker include:
A) low buyer switching costs.
B) low fixed costs or storage costs.
C) many industry rivals of roughly equal size and competitive strength.
D) weakly differentiated products among rival sellers.
E) slow growth in buyer demand.

Accepted Answer

Rivalry increases and becomes a stronger force when: buyer demand is growing slowly; buyer costs to switch brands are low; the products of industry members are commodities or else weakly differentiated; the firms in the industry have excess production capacity and/or inventory; the firms in the industry have high fixed costs or high storage costs; competitors are numerous or are of roughly equal size and competitive strength; rivals have diverse objectives, strategies, and/or countries of origin; rivals have emotional stakes in the business or face high exit barriers.

Question 6

Using the five forces model of competition to determine the character and strength of the competitive forces within a given industry involves:
A) building the picture of competition in three steps: (1) identify the different parties involved, along with specific factors that bring about competitive pressures; (2) evaluate how strong the pressures stemming from each of the five forces are (strong, moderate or weak); and (3) determining whether the collective impact of the five competitive forces is conducive to earning attractive profits in the industry.
B) building the picture of competition in two steps: (1) determining which rival has the biggest competitive advantage and (2) assessing whether the competitive advantages possessed by various industry members allow most industry members to earn above-average profits.
C) evaluating whether competition is being intensified or weakened by the industry's driving forces and key success factors.
D) assessing whether the collective impact of all five forces is weak enough to allow industry members to go on the offensive or use a defensive strategy to insulate against fierce competitive pressures.
E) gauging the overall strength of competition based on how many industry rivals are operating with a competitive advantage and how many are operating at a competitive disadvantage.

Accepted Answer

Using the five forces model to determine the nature and strength of competitive pressures in a given industry involves three steps:

Question 7

The competitive pressures on companies within an industry come from all of the following,EXCEPT:
A) those associated with the market maneuvering and jockeying for buyer patronage that goes on among rival firms in the industry.
B) those companies in other industries attempting to win buyers over to their substitute products.
C) those associated with the threat of new entrants into the marketplace.
D) those associated with the bargaining power of suppliers and customers.
E) those associated with environmental factors such as water shortages.

Accepted Answer

The five forces framework holds that competitive pressures on companies within an industry come from five sources. These include (1) competition from rival sellers, (2) competition from potential new entrants to the industry, (3) competition from producers of substitute products, (4) supplier bargaining power, and (5) customer bargaining power.

Question 8

Which of the following is NOT one of the principal components of strategic significance in the PESTEL analysis?
A) Political factors including the extent to which government intervenes in the economy
B) Economic conditions that include the general economic climate and specific factors such as interest rates, inflation rate, and unemployment rate, as well as conditions in the stock and bond markets that can affect consumer confidence
C) Sociocultural forces including societal values, attitudes, cultural factors, and lifestyles that impact business
D) Technological factors that include the pace of change and technical developments that have the potential for impacting society
E) Environmental forces that include the competitive structure, the degree of industry fragmentation, and the mobility barriers that inhibit business

Accepted Answer

PESTEL analysis is an acronym that serves as a reminder of the six principal components of the macro-environment: political, economic, sociocultural, technological, environmental (concerning the natural environment, not the business environment), and legal/regulatory.

Question 9

Which of the following is LIKELY to have the biggest strategy-shaping impact on mobile service providers?
A) Coca-Cola launches mobile campaigns for community-connect and awareness.
B) Discovery Channel launches a mobile game to promote its Gold Rush TV show.
C) T-Mobile US signs a pact with Nokia Networks for greater spectrum support.
D) Hugo Boss announces the launch of its fall/winter collection via mobile.
E) Apple enters into a pact with PayPal to market its mobile wallet application.

Accepted Answer

The factors in a company's environment having the biggest strategy-shaping impact typically pertain to the company's immediate industry and competitive environment. T-Mobile US entering into a pact with Nokia Networks for greater spectrum support is likely to provoke its competitors into seeking higher cellular frequencies or greater spectrum.

Question 10

What makes the marketplace a competitive battlefield is:
A) the race of industry members to build strong defenses against the industry's driving forces.
B) the constant rivalry of firms to strengthen their standing with buyers and win a competitive edge over rivals.
C) the ongoing race among rival sellers to have the highest-quality product.
D) the ongoing efforts of industry members to introduce new and improved products/services at a faster rate than their rivals.
E) the ongoing race among rivals to achieve the fastest rate of growth in revenues and profits.

Accepted Answer

The strongest of the five competitive forces is often the rivalry for buyer patronage among competing sellers of a product or service.

Question 11

Rivalry among competing sellers is generally more intense when:
A) there are relatively few industry key success factors.
B) the industry's driving forces are strong and rivals have strongly differentiated products.
C) barriers to entry are moderately high and the pool of likely entry candidates is small.
D) rivals are active in making fresh moves to lower prices, introduce new products, increase promotional efforts and advertising, and otherwise gain sales and market share.
E) barriers to entry are high and buyer switching costs are high.

Accepted Answer

When rivalry is strong, the battle for market share is generally so vigorous that the profit margins of most industry members are squeezed to bare-bones levels.

Question 12

Which of the following factors represents the strategically relevant political factors in the macro-environment that will influence the performance of all firms across the board?
A) The strength of the federal banking system
B) The exogenous forces related to the general environmental demand
C) Social factors that could fuel a political agenda and create greater transparency
D) Bailouts and energy policies that are industry-specific
E) Tax policy, fiscal policy, and tariffs providing impetus for anti-trust matters

Accepted Answer

Political factors include political policies, including the extent to which a government intervenes in the economy. They include such matters as tax policy, fiscal policy, tariffs, the political climate, and the strength of institutions such as the federal banking system. Some political policies affect certain types of industries more than others. An example is energy policy, which affects energy producers and heavy users of energy more than other types of businesses.

Question 13

Which of the following is NOT a major question to ask in thinking strategically about industry and competitive conditions in a given industry?
A) How many companies in the industry have good track records for revenue growth and profitability?
B) What strategic moves are rivals likely to make next?
C) What are the industry's key factors for future competitive success?
D) Is the outlook for the industry conducive to providing attractive profitability?
E) What are the driving forces in the industry, and what impact will these changes have on competitive intensity and industry profitability?

Accepted Answer

Thinking strategically about a company's industry and competitive environment entails using some well-validated concepts and analytic tools. These include the five forces framework, the value net, driving forces, strategic groups, competitor analysis, and key success factors.

Question 14

The competitive battles among rival sellers striving for better market positions,higher sales and market shares,and competitive advantage,suggest the rivalry force:
A) is stronger when firms strive to be low-cost producers than when they use differentiation and focus strategies.
B) is often weak when rivals have emotional stakes in business or face high exit barriers.
C) is largely unaffected by whether industry conditions tempt rivals to use price cuts or other competitive weapons to boost unit sales.
D) tends to intensify when strong companies with sizable financial resources, proven competitive capabilities, and respected brand names hurdle entry barriers looking for growth opportunities and launch aggressive, well-funded moves to transform into strong market contenders.
E) is weaker when more firms have weakly differentiated products, buyer demand is growing slowly, and buyers have moderate switching costs.

Accepted Answer

An analysis of the factors affecting the threat of entry can help managers determine whether the threat of entry into their industry is high or low, in general. But certain kinds of companies-those with sizable financial resources, proven competitive capabilities, and a respected brand name-may be able to hurdle an industry's entry barriers even when they are high.

Question 15

The rivalry among competing sellers tends to be less intense when:
A) industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit sales.
B) buyer demand is weak and many sellers have excess capacity and/or inventory.
C) industry rivals are not particularly aggressive or active in making fresh moves to improve their market standing and business performance.
D) rivals have diverse strategies and objectives and are located in different countries.
E) rival sellers have weakly differentiated products.

Accepted Answer

When rivalry is weak, most companies in the industry are relatively well satisfied with their sales growth and market shares and rarely undertake offensives to steal customers away from one another.

Question 16

Market maneuvering among industry rivals:
A) determines whether the industry's strategic group map will be static or dynamic.
B) centers around collaborative efforts to overcome the bargaining power of powerful suppliers and powerful buyers.
C) is usually an industry's strongest driving force.
D) is usually one of the two or three weakest competitive forces because of the close familiarity that rivals have for one another's likely next moves.
E) is ongoing and dynamic, with moves and countermoves of rivals producing a continually evolving competitive landscape that delivers winners and losers.

Accepted Answer

When rivalry is strong, the battle for market share is generally so vigorous that the profit margins of most industry members are squeezed to bare-bones levels.

Question 17

A company's "macro-environment" refers to:
A) the industry and the competitive arena in which the company operates.
B) general economic conditions plus the factors driving change in the markets where a company operates.
C) the strategically relevant factors outside a company's industry boundaries-economic conditions, political factors, sociocultural forces, technological factors, environmental factors, and legal/regulatory conditions.
D) the competitive market environment that exists between a company and its competitors.
E) the dominant economic features of a company's industry.

Accepted Answer

Every company operates in a broad "macro-environment" that comprises six principal components: political factors, economic conditions in the firm's general environment (local, country, regional, worldwide), sociocultural forces, technological factors, environmental factors (concerning the natural environment), and legal/regulatory conditions.

Question 18

Rivalry among competing sellers increases:
A) when buyer demand is growing slowly.
B) as it becomes more costly for buyers to switch brands.
C) as the products of rival sellers become more strongly differentiated.
D) when there is underproduction relative to demand..
E) as the number of competitors decreases.

Accepted Answer

Rivalry increases and becomes a stronger force when: buyer demand is growing slowly; buyer costs to switch brands are low; the products of industry members are commodities or else weakly differentiated; the firms in the industry have excess production capacity and/or inventory; the firms in the industry have high fixed costs or high storage costs; competitors are numerous or are of roughly equal size and competitive strength; rivals have diverse objectives, strategies, and/or countries of origin; rivals have emotional stakes in the business or face high exit barriers.

Question 19

Which of the following is NOT one of the five typical sources of competitive pressures?
A) The power and influence of industry driving forces
B) The bargaining power of suppliers and seller-supplier collaboration
C) The threat of new entrants into the market
D) The attempts of companies in other industries to win customers over to their own substitute products
E) The market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry

Accepted Answer

The five forces framework holds that competitive pressures on companies within an industry come from five sources. These include (1) competition from rival sellers, (2) competition from potential new entrants to the industry, (3) competition from producers of substitute products, (4) supplier bargaining power, and (5) customer bargaining power.

Question 20

The most powerful and widely used tool for diagnosing the principle competitive pressures in a market is:
A) the five forces framework.
B) PESTEL.
C) the driving forces model.
D) strategic group mapping.
E) competitor analysis.

Accepted Answer

The character and strength of the competitive forces operating in an industry are never the same from one industry to another. The most powerful and widely used tool for diagnosing the principal competitive pressures in a market is the five forces framework.

Quiz 3: Evaluating a Companys External Environment

Managers must chart a company's strategic course by:

Each of the following exemplifies the impact of the macro-environment on a company's strategic opportunities EXCEPT:

The most powerful of the five competitive forces is USUALLY:

Which of the following is part of a company's macro-environment?

Factors that cause the rivalry among competing sellers to be weaker include:

Using the five forces model of competition to determine the character and strength of the competitive forces within a given industry involves:

The competitive pressures on companies within an industry come from all of the following,EXCEPT:

Which of the following is NOT one of the principal components of strategic significance in the PESTEL analysis?

Which of the following is LIKELY to have the biggest strategy-shaping impact on mobile service providers?

What makes the marketplace a competitive battlefield is:

Rivalry among competing sellers is generally more intense when:

Which of the following factors represents the strategically relevant political factors in the macro-environment that will influence the performance of all firms across the board?

Which of the following is NOT a major question to ask in thinking strategically about industry and competitive conditions in a given industry?

The competitive battles among rival sellers striving for better market positions,higher sales and market shares,and competitive advantage,suggest the rivalry force:

The rivalry among competing sellers tends to be less intense when:

Market maneuvering among industry rivals:

A company's "macro-environment" refers to:

Rivalry among competing sellers increases:

Which of the following is NOT one of the five typical sources of competitive pressures?

The most powerful and widely used tool for diagnosing the principle competitive pressures in a market is: