STRATEGIC MANAGEMENT Chapter 3, The External Assessment

competitive intelligence (CI)

"A systematic and ethical process for gathering and analyzing information about the competition's activities and general business trends to further a business's own goals" (SCIP website).

external forces

(1) Economic forces; (2) social, cultural, demographic, and natural environment forces; (3) political, governmental, and legal forces; (4) technological forces; and (5) competitive forces.

Internet

A global system of interconnected computers that serve billions of users worldwide; provides a vast range of information resources and services; enables billions of businesses and individuals globally to communicate instantly with each other by email, tweets, etc.

linear regression

A quantitative statistical technique often used for forecasting, but based on the assumption that the future will be just like the past. To the extent that historical relationships are unstable, linear regression is less accurate.

Porter's Five-Forces Model

A theoretical model devised by Michael Porter, who suggests that the nature of competitiveness in a given industry can be viewed as a composite of five forces: 1) Rivalry among competing firms, 2) Potential entry of new competitors, 3) Potential development of substitute products, 4) Bargaining power of suppliers, and 5) Bargaining power of consumers.

competitive profile matrix (CPM)

A widely used strategic planning analytical tool designed to identify a firm's major competitors and its particular strengths and weaknesses in relation to a sample firm's strategic position.

external factor evaluation (EFE) matrix

A widely used strategic planning analytical tool designed to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information.

One difference between CPM and EFE is that A) CPM includes both internal and external issues. B) the weights and total weighted scores have different meanings. C) CPM ratings range from 1 to 10. D) CPM is performed only for the company, whereas EFE is performed for both the company and its competitors. E) CPM is only used in small firms.

A) CPM includes both internal and external issues.

Which of the following is NOT a characteristic that describes the most competitive companies in America? A) Divestiture is essential to growth. B) Hire and retain the best employees and managers possible. C) Continually adapt, innovate, improve—especially when the firm is successful. D) Strive to stay cost-competitive on a global basis. E) Whether it's broke or not, fix it.

A) Divestiture is essential to growth.

Standard and Poor's Industry Surveys include all of the following sections EXCEPT A) Historic Environment. B) Industry Trends. C) How to Analyze a Company. D) Glossary of Industry Terms. E) Comparative Company Financial Analysis.

A) Historic Environment.

What is the first step in designing an EFE Matrix? A) Identifying key external factors in the industry B) Summing the weighted score for each competitor C) Calculating the sales of each competitor D) Drawing the horizontal and vertical lines of the matrix E) Determining four competitors

A) Identifying key external factors in the industry

It is predicted that the United States will have how many racial or ethnic majorities by the year 2075? A) None B) One C) Two D) Three E) Five

A) None

________ perhaps has instituted the most protectionist measures in recent months by raising tariffs on most imports and subsidizing its own exports. A) Russia B) The United States C) The EU D) India E) Switzerland

A) Russia

Unpublished sources of external strategic information include all of the following EXCEPT A) abstracts. B) customer surveys. C) market research. D) speeches at professional and shareholders' meetings. E) conversations with stakeholders.

A) abstracts.

Without assumptions, planning would be A) impossible. B) easier. C) difficult. D) inexpensive. E) intuitive.

A) impossible.

A company website ________ information about a firm. A) is a good place to start to find B) is not a reliable source of C) is only acceptable as a last resort for D) should not be used as the first place to look for E) is a waste of time when searching for

A) is a good place to start to find

The historical trend of people moving from ________ has dramatically slowed. A) the Northeast to the Sunbelt B) the West to the Midwest C) the Northeast to the Midwest D) the Sunbelt to the West E) the West to the Northeast

A) the Northeast to the Sunbelt

Market commonality can be defined as A) the number and significance of markets that a firm competes in with rivals. B) the number and significance of points in common a firm has with its rivals. C) the extent to which the type of a firm's internal resources are comparable to a rival. D) the extent to which the amount of a firm's internal resources are comparable to a rival. E) none of the above

A) the number and significance of markets that a firm competes in with rivals.

Industrial Organization (I/O)

An approach to competitive advantage that advocates that external (industry) factors are more important than internal factors for a firm in striving to achieve competitive advantage.

environmental scanning

Another term for external audit; conducting research to gather and assimilate external information.

industry analysis

Another term for external audit; conducting research to gather and assimilate external information.

A total weighted score of ________ in an EFE Matrix indicates that the firm's strategies are NOT capitalizing on opportunities or avoiding external threats. A) 0.0 B) 1.0 C) 2.5 D) 3.3 E) 4.0

B) 1.0

Which of the following sectors of the economy would be most impacted by technological developments? A) Forestry B) Aeronautics C) Textiles D) Metals E) Cloth

B) Aeronautics

________ is NOT part of an external audit. A) Analyzing competitors B) Analyzing financial ratios C) Analyzing available technologies D) Studying the political environment E) Analyzing social, cultural, demographic and natural environment forces

B) Analyzing financial ratios

If suppliers are unreliable or too costly, which of these strategies may be appropriate? A) Horizontal integration B) Backward integration C) Market penetration D) Forward integration E) Concentric diversification

B) Backward integration

What are educated assumptions about future trends and events called? A) Wild guesses B) Forecasts C) Facts D) Statistics E) Premonitions

B) Forecasts

When an industry relies heavily on government contracts, which forecasts can be the most important part of an external audit? A) Economic B) Political C) Technological D) Competitive E) Multinational

B) Political

According to the U.S. Bureau of Labor Statistics, which of the following is TRUE? A) The percent of wage and salary workers who were members of a union in the USA increased from 2010 to 2011. B) Workers in education, training and library occupations had the highest unionization rate. C) Black workers were less likely to be union members than were white, Asian, or Hispanic workers. D) Private sector workers had a union membership rate more than five times higher that of public-sector workers. E) Among states, North Carolina had the highest union membership rate.

B) Workers in education, training and library occupations had the highest unionization rate.

The process of performing an external audit needs to include A) only top level managers, as it is a planning function. B) as many managers and employees as possible. C) primarily front-line supervisors. D) between 15 to 20 managers for it to be valid. E) stockholders and external government agencies.

B) as many managers and employees as possible.

The lingering high underemployment rate in the U.S. is an example of a(n) ________ force affecting business. A) social B) economic C) cultural D) technological E) historical

B) economic

Whenever new firms can easily enter a particular industry, the intensity of competitiveness among firms tends to A) stay the same. B) increase. C) decrease. D) neutralize. E) become irrelevant.

B) increase.

Competition in virtually all industries is A) nonexistent. B) intense. C) never cutthroat. D) easily avoidable. E) insignificant.

B) intense.

Not all sectors of the economy are equally affected by technological developments; the ________ industry is much more volatile than the ________ industry. A) textile; communications B) pharmaceutical; forestry C) metals; electronics D) forestry; communications E) textile; pharmaceutical

B) pharmaceutical; forestry

Which of the following is NOT a published source of external strategic information? A) periodicals B) television programs C) journals D) reports E) directories

B) television programs

Which of the following has largely refrained from protectionist measures? A) the EU B) the U.S.A. C) India D) Russia E) All of the above

B) the U.S.A.

What level of bargaining power do consumers have when the products being purchased are standard or undifferentiated? A) Marginal B) Low C) High D) Negative E) Negligible

C) High

________ is NOT a basic mission of a competitive intelligence program. A) Providing a general understanding of an industry B) Providing a general understanding of a company's competitors C) Identifying industry executives who could be hired by the firm D) Identifying areas in which competitors are vulnerable and assessing the impact strategic actions would have on competitors E) Identifying potential moves a competitor might make that would endanger a firm's position in the market

C) Identifying industry executives who could be hired by the firm

What effect do trends in the dollar's value have on companies in different industries and in different locations? A) Significant and equal B) Marginal and equal C) Significant and unequal D) Insignificant and unequal E) No significant impact

C) Significant and unequal

What is NOT one of Michael Porter's five competitive forces? A) New entrants B) Rivalry among existing firms C) Bargaining power of unions D) Bargaining power of suppliers E) Bargaining power of buyers

C) bargaining power of unions

A systematic and ethical process for gathering and analyzing information about the competition's activities and general trends to further a business' own goals is called A) unethical business practices. B) artificial intelligence. C) competitive intelligence. D) industrial espionage. E) competitive advantage.

C) competitive intelligence.

To perform an external audit, a company first must A) get an approval from the Securities and Exchange Commission. B) perform an internal audit. C) gather competitive intelligence and information about external trends. D) hire a consultant to develop a comprehensive strategic plan. E) all of the above

C) gather competitive intelligence and information about external trends.

The United States' population is A) getting younger and less white. B) getting younger and more white. C) getting older and less white. D) getting older and more white. E) remaining stable as to age and racial make up.

C) getting older and less white.

Many economists say the current rash of trade constraints will make it ________ for global economic growth. A) easier B) impossible C) harder D) more likely E) less time-consuming

C) harder

Intensity of competition ________ in lower-return industries. A) is lowest B) is nonexistent C) is highest D) is not important E) fluctuates

C) is highest

The I/O approach to competitive advantage advocates that external factors are ________ internal factors in a firm achieving competitive advantage. A) less important than B) equally important as C) more important than D) more common than E) less common than

C) more important than

Identifying and evaluating key social, political, economic, technological and competitive trends and events comprise A) developing an effective mission statement. B) conducting an internal audit. C) performing an external audit. D) formulating strategy. E) implementing strategy.

C) performing an external audit.

Freund emphasizes that key external factors should be all of these EXCEPT A) important to achieving long-term and annual objectives. B) measurable. C) relatively few in number. D) applicable to all competing firms. E) hierarchical in the sense that some will pertain to the overall company while others will be more narrowly focused.

C) relatively few in number.

Collecting and evaluating information on competitors is essential for successful A) internal analysis. B) strategy evaluation. C) strategy formulation. D) strategy implementation. E) strategy correction.

C) strategy formulation.

What is the range of a firm's total weighted score in an External Factor Evaluation Matrix? A) 0 to 5 B) 0 to 4 C) 1 to 5 D) 1 to 4 E) 0 to 10

D) 1 to 4

The world population is expected to grow to an estimated ________ billion in 2054. A) 6 B) 7 C) 8 D) 9 E) 10

D) 9

According to I/O theorists, which of the following contributes LEAST to firm's performance? A) Economies of scale B) Barriers to market entry C) Product differentiation D) Internal resources E) Level of competitiveness

D) Internal resources

Hawaii, California, and ________ already have no majority race or ethnic group. A) New York B) New Jersey C) New Hampshire D) New Mexico E) all of the above

D) New Mexico

According to Porter, what is usually the most powerful of the five competitive forces? A) Potential development of substitute products B) Bargaining power of suppliers C) Bargaining power of consumers D) Rivalry among competing firms E) Potential entry of new competitors

D) Rivalry among competing firms

What happens when interest rates rise? A) Discretionary income increases. B) The demand for discretionary goods increases. C) Discretionary income is unchanged. D) The demand for discretionary goods decreases. E) Discretionary income increases and the demand for discretionary goods decreases.

D) The demand for discretionary goods decreases.

In general, what happens to American goods in overseas markets when there is a strong dollar? A) They are less expensive. B) They are more attractive. C) They are cheaper. D) They are more expensive. E) They are desirable.

D) They are more expensive.

The responsibilities of a director of competitive analysis include all of the following EXCEPT A) researching special issues. B) disseminating information on a timely basis. C) recognizing what information is important and who needs to know. D) conducting corporate espionage. E) analyzing data.

D) conducting corporate espionage.

Changes in which of the following can significantly affect firms? A) Patent laws B) Antitrust legislation C) Tax rates D) Lobbying activities E) All of the above

E) All of the above

Which statement about business intelligence is accurate? A) Intelligence gathering is an unethical business practice. B) Running an intelligence program requires many people. C) Running an intelligence program requires many computers and other resources. D) Collecting intelligence about competitors violates antitrust laws. E) Business intelligence is not equal to espionage.

E) Business intelligence is not equal to espionage.

Who are the world's longest-living people? A) Americans B) Mexicans C) Indians D) Filipinos E) Japanese

E) Japanese

All of the following are political, governmental, and legal variables that can represent key opportunities or threats to organizations EXCEPT A) special tariffs. B) environmental protection laws. C) world oil, currency, and labor markets. D) legislation on equal employment. E) population changes by race, age, sex, and level of affluence.

E) population changes by race, age, sex, and level of affluence.

chief information officer (CIO)

Is more an external manager compared to a CTO; focuses on the firm's technical, information gathering, and social media relationship with diverse external stakeholders.

chief technology officer (CTO)

Is more of an internal manager than the CIO; focuses on technical issues such as data acquisition, data processing, decision-support systems, and software and hardware acquisition.

actionable factors

Meaningful in terms of having strategic implications; reveal potential strategies to capitalize or compensate.

external audit

Process of identifying and evaluating trends and events beyond the control of a single firm, in areas such as social, cultural, demographic technology, economic, political, and competition; reveals key opportunities and threats confronting an organization, so managers can better formulate strategies.

information technology (IT)

The development, maintenance, and use of computer systems, software, and networks for the processing and distribution of data.

resource similarity

The extent to which the type and amount of a firm's internal resources are comparable to a rival.

market commonality

The number and significance of markets that a firm competes in with rivals.

director of competitive analysis

The person who gathers and analyzes data about competitors, and disseminates data (intelligence) on a timely basis to who needs to know in order to gain and sustain a firm's competitive advantages.

competitive analysis

The process of gathering and analyzing data about competitors and disseminating the data (intelligence) on a timely basis to who needs to know in order to gain and sustain a firm's competitive advantages.