Chapter 2
10) In the SWOT framework, the Strengths and Weaknesses are external environmental factors to consider.
Answer: FALSE
11) In the SWOT framework, Opportunities and Threats are environmental conditions internal to the firm.
Answer: FALSE
63) Which of the following would be considered part of the general environment of a firm? A) decreased entry barriers B) higher unemployment rates C) increased bargaining power of the firm's suppliers D) increased competitive intensity
B) higher unemployment rates
43) Banks and airlines are examples of two industries that track competitor offers continually. This is called the process of gathering A) consumer responses. B) competitive intelligence. C) past decisions. D) mainline information.
B) competitive intelligence.
86) Because the Internet lowers barriers to entry in most industries, it A) decreases the threat of new entrants. B) increases supplier power. C) makes it easier to build customer loyalty. D) increases the threat of new entrants.
D) increases the threat of new entrants.
102) Classifying an industry into strategic groups involves judgment. If it is useful as an analytical tool, we must exercise caution in deciding what dimensions to use to map these firms. Dimensions include all of the following except A) breadth of product and geographic scope. B) price and quality. C) degree of vertical integration. D) management team.
D) management team.
32) Why must successful managers recognize opportunities and threats in their company external environment? A) If they miscalculate the market, opportunities will be lost. B) If they misread the market, they are likely to become rich. C) If they identify all of the environmental threats, they are guaranteed to acquire large market share. D) If they identify all of the environmental opportunities, they are guaranteed to acquire large market share.
A) If they miscalculate the market, opportunities will be lost.
49) SWOT analysis is a framework for analyzing the internal and external environment of a company. It consists of strengths, weaknesses, opportunities, and threats. According to a SWOT analysis, which of the following is not an aspect that the strategy of the firm must follow? A) build on its weaknesses B) remedy the weaknesses or work around them C) take advantage of the opportunities presented by the environment D) protect the firm from the threats
A) build on its weaknesses
46) It is important to question the reliability of forecasts because A) if predictions are too low, a company like Motel 6 might build too many units and thus have a surplus of capacity. B) uncertainty is black and white, and therefore the gray areas are unimportant. C) underestimating uncertainty can lead to good competitive strategies. D) the growth new industries, such as that of telecommunications, cannot be predicted.
A) if predictions are too low, a company like Motel 6 might build too many units and thus have a surplus of capacity.
107) The strategic groups concept is valuable for identifying groups with ________ competitive positions. A) marginal B) exceptional C) healthy D) poor
A) marginal
106) In 2014, Audi introduced the Q3 SUV at a base price of only $32,500. And BMW, with its 1-series, is another well-known example. Such cars, priced in the low $30,000s, compete more directly with products from broad-line manufacturers like Ford, General Motors, and Toyota. This suggests that members of a strategic group can overcome ________ barriers and migrate to other groups that they find attractive if they are willing to commit time and resources. A) mobility B) competitive C) pricing D) cost
A) mobility
82) The bargaining power of suppliers increases as A) threat of forward integration by suppliers increases. B) importance of buyers to supplier group increases. C) switching costs for buyers decrease. D) more suppliers enter the market.
A) threat of forward integration by suppliers increases.
12) Although changes in the general environment may often adversely or favorably impact a firm, they seldom alter an entire industry.
Answer: FALSE
15) The Porter five-forces model is designed to help us understand how social attitudes and cultural values impact U.S. businesses.
Answer: FALSE
18) In most industries, new entrants will not be a threat because the Internet lowers entry barriers.
Answer: FALSE
2) Perceptual acuity, according to Ram Charan, is the ability to know for certain what will happen in the future.
Answer: FALSE
1) Environmental scanning and competitor intelligence provide important inputs for forecasting activities.
Answer: TRUE
13) A major sociocultural trend in the United States is the increased number of women in the workforce that has increased the need for business clothing but decreased the demand for baking product staples.
Answer: TRUE
14) Technological innovations can create entirely new industries and alter the boundaries of industries.
Answer: TRUE
16) The five-forces model helps to determine both the nature of competition in an industry and the profit potential for the industry.
Answer: TRUE
5) Competitive Intelligence (CI) is a tool that can provide management with early warnings about both threats and opportunities.
Answer: TRUE
9) SWOT analysis is useful in part because it obliges the firm to act proactively by putting an emphasis on identifying opportunities and threats that constrain the action choices a firm might make because of its internal and external environmental scan.
Answer: TRUE
34) ________ 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
B) Environmental monitoring
99) Which of the following statements about strategic groups is false? A) Two assumptions are made: (1) no two firms are totally different, and (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 firm strategies. D) Strategic groups are helpful in thinking through the implications of each industry trend for the group as a whole.
B) Strategic groupings are of little help to a firm in assessing mobility barriers that protect a group from attacks by other groups.
54) Heightened concern with fitness might be a threat to some companies and an opportunity to others. In the SWOT framework, these are ________ environmental factors. A) internal B) external C) both internal and external D) not relevant external
B) external
76) The threat of new entrants is high when there are A) high capital requirements. B) low economies of scale. C) high switching costs. D) high differentiation among competitor products and services.
B) low economies of scale.
27) Two non-competing global firms meet quarterly to discuss multiple perspectives on world trends. This is an example of how to improve A) stakeholder management. B) perceptual acuity. C) internal scanning. D) financial returns.
B) perceptual acuity.
100) Strategic groups consist of firms that are more ________ to each other than firms that are not. A) familiar B) similar C) friendly D) useful
B) similar
80) The bargaining power of the buyer is greater than that of the supplier when A) volume of purchase is low. B) the buyer profit margin is low. C) cost savings from the supplier's product are minimal. D) threat of backward integration by buyers is low.
B) the buyer profit margin is low.
24) Firms that were successful in the past can fail today because A) they keep pace with changes in the nature of competition. B) the company strategy is outdated. C) their financial situation is resilient. D) management monitors the relevant environmental factors regularly.
B) the company strategy is outdated.
88) End users are not A) the final consumers in a distribution channel. B) the first customers in a distribution channel. C) likely to have greater bargaining power because of the Internet. D) usually the C in B2C.
B) the first customers in a distribution channel.
62) All of the following are important elements of the political and legal segment of the general environment except A) the deregulation of utilities. B) the increased use of Internet technology. C) the Americans with Disabilities Act (ADA). D) increases in the federally mandated minimum wage.
B) the increased use of Internet technology.
61) 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.
B) the increasing educational attainment of women in the past decade.
104) Referring to the textbook Exhibit 2.7 The World Automobile Industry: Strategic Groups, which strategic group is the smallest in terms of breadth of product line? A) Hyundai, Kia B) Toyota, Ford, General Motors, Chrysler, Honda, Nissan C) Chery, Geely, Tata Motors D) Mercedes, BMW, Audi
C) Chery, Geely, Tata Motors
30) When the management frame of reference gets out of touch with the realities of the actual business situation, what can happen to the firm? A) Management perceptual acuity improves. B) Management gets across-the-board raises. C) The company business strategy no longer works. D) It becomes easier to maintain competitive advantage.
C) The company business strategy no longer works.
26) Perceptual acuity requires all the following except A) an ability to sense what is coming. B) the ability to detect early warning signals of environmental changes. C) a refusal to consult with others. D) a strong commitment to external environmental monitoring.
C) a refusal to consult with others.
42) Executives must be careful to avoid spending so much time and effort tracking the actions of ________ that they ignore ________. A) competitors; customers B) customers; competitors C) traditional competitors; new competitors D) existing customers; existing competitors
C) traditional competitors; new competitors
50) Scenario planning is a useful technique for firms competing in industries characterized by ________ and ________. A) predictability; stability B) low profit margins; stability C) unpredictability; change D) high profit margins; stability
C) unpredictability; change
95) Complements are products or services that have a potential impact on the ________ of the products or services of that company. A) cost B) availability C) value D) substitutability
C) value
105) Referring to the textbook Exhibit 2.7 The World Automobile Industry: Strategic Groups, which strategic group consists of firms high in product pricing/quality and average in their product-line breadth? A) Ferrari, Lamborghini, Porsche B) Toyota, Ford, General Motors, Chrysler, Honda, Nissan C) Chery, Geely, Tata Motors D) Mercedes, BMW, Audi
D) Mercedes, BMW, Audi
89) Incumbent firms may enjoy increased bargaining power because the Internet A) focuses marketing efforts on end users. B) has reduced the number of wholesalers and distributors. C) increases channel conflict. D) diminishes the power of many distribution channel intermediaries.
D) diminishes the power of many distribution channel intermediaries.
84) The bargaining power of suppliers is enhanced under which following market condition? A) no threat of forward integration B) low differentiation of the supplier products C) greater availability of substitute products D) dominance by a few suppliers
D) dominance by a few suppliers
98) Strategic groups consist of a group of A) top executives that makes strategies for a company. B) executives drawn from different companies within an industry that makes decisions on industry standards. C) firms within an industry that decides to collude rather than compete with each other so that they can increase their profits. D) firms within an industry that follows similar strategies.
D) firms within an industry that follows similar strategies.
108) The strategic groups concept is valuable for charting the ________ directions of firm strategies. A) historical B) past C) present D) future
D) future
93) The value net is a game-theoretic approach that A) extends the value chain analysis. B) uses network analysis to understand the relationships among different companies. C) helps us to understand the evolution of the five forces over time. D) is a way to analyze how the interactions of all the players in a game affect the firm.
D) is a way to analyze how the interactions of all the players in a game affect the firm.
39) Environmental forecasting does not involve plausible projections about the ________ of environmental change. A) direction B) scope C) speed D) lack of intensity
D) lack of intensity
47) 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) the retrospective nature of forecasting provides little information about the future. C) it can create legal problems for the firm if regulators discover the company is making forecasts. D) managers may view uncertainty as black and white while ignoring important gray areas.
D) managers may view uncertainty as black and white while ignoring important gray areas.
70) There are many challenges to complying with the Dodd-Frank Wall Street Reform and Consumer Protection Act to the tracking of materials from more than two million small scale or subsistence miners in the Eastern Congo. Modern supply-chain logistics are not very relevant in these environments. This is an example of which segment of the general environment? A) economic B) demographic C) sociocultural D) political and legal
D) political and legal
58) Which of the following is not a correct usage of the SWOT framework? A) build on its strengths B) remedy the weaknesses or work around them C) take advantage of the opportunities presented by the environment D) protect the firm from environmental weaknesses
D) protect the firm from environmental weaknesses
53) In the SWOT framework, ________ are internal factors that are specific to the company. A) strengths and opportunities B) strengths and threats C) threats and weaknesses D) strengths and weaknesses
D) strengths and weaknesses
31) Corporate retreats do not A) permit companies to discuss larger marketplace trends. B) guarantee positive consumer response to new products. C) give companies an opportunity to look beyond their own industries. D) oblige management to automatically change strategy.
B) guarantee positive consumer response to new products.
57) Steve Jobs, former chairman of Apple, demonstrated that ________ also are important in forecasting. A) character and ability B) intuition and judgment C) training and experience D) imagination and training
B) intuition and judgment
38) Gathering competitive intelligence A) is illegal. B) is good business practice. C) is considered unethical. D) minimizes the need to obtain information in the public domain.
B) is good business practice.
55) By emphasizing the importance of identifying opportunities and threats, the SWOT framework makes firms act ________ rather than ________. A) quickly; slowly B) immediately; eventually C) proactively; reactively D) intelligently; uninformed
C) proactively; reactively
85) In the five-forces model, conditions under which a supplier group can be powerful include all of the following except A) lack of importance of the buyer to the supplier group. B) high differentiation by the supplier. C) readily available substitute products. D) dominance by a few suppliers.
C) readily available substitute products.
101) Strategic groups are clusters of firms that share ________ strategies. A) differing B) the same C) similar D) new
C) similar
60) 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.
C) sociocultural changes.
28) Which of the following is not an input process to develop forecasts? A) environmental scanning B) competitor intelligence C) stakeholder management D) environmental monitoring
C) stakeholder management
40) When investors examine the performance of beauty products like Olay moisturizers and CoverGirl cosmetics, they are looking for A) indicators of emerging trends. B) accidental changes in behavior. C) supplier preferences. D) company management trends.
A) indicators of emerging trends.
45) In 1977, Kenneth H. Olsen, then president of Digital Equipment Corp., announced that there was no reason for individuals to have a computer in their home. Long since disproven, this is an example of A) poor forecasting of future consumer demand. B) overestimation of uncertainty. C) excellent forecasting. D) good prediction skills.
A) poor forecasting of future consumer demand.
109) The strategic groups concept is valuable for assessing the implications of industry ________ for the strategic group as a whole. A) trends B) positions C) experience D) wealth
A) trends
91) In general, the threat of substitutes is heightened because the Internet A) lowers switching costs. B) lowers barriers to entry. C) introduces new ways to accomplish the same task. D) increases output per unit of cost.
C) introduces new ways to accomplish the same task.
17) In some industries, low switching costs can act as an important barrier to entry.
Answer: FALSE
19) The Internet and digital technologies suppress the bargaining power of buyers by providing them with more information to make buying decisions.
Answer: FALSE
20) Reintermediation is responsible for an overall reduction in business opportunities.
Answer: FALSE
6) Competitive intelligence generally does not benefit very much from gathering information on competitors from sources in the public domain.
Answer: FALSE
7) Even with all the advances in recent years, forecasting is typically considered more of an art than a science and it is of little use in generating accurate predictions.
Answer: FALSE
8) Scenario analysis is a superficial approach to forecasting that seeks to explore possible developments that many only be connected to the past.
Answer: FALSE
3) Ted Turner saw the potential of 24-hour news before anyone else. This is an example of perceptual acuity.
Answer: TRUE
4) Environmental monitoring deals with tracking changes in environmental trends that are often uncovered during the environmental scanning process.
Answer: TRUE
103) Referring to the textbook Exhibit 2.7 The World Automobile Industry: Strategic Groups, which strategic group is the largest in terms of breadth of product line? A) Ferrari, Lamborghini, Porsche B) Toyota, Ford, General Motors, Chrysler, Honda, Nissan C) Chery, Geely, Tata Motors D) Mercedes, BMW, Audi
B) Toyota, Ford, General Motors, Chrysler, Honda, Nissan
75) 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 competitor to your product where a high switching cost exists C) a firm that produces substitute goods to your product line D) a firm in the same industry and in the nearest strategic group looking to join your group
B) a competitor to your product where a high switching cost exists
92) How do infomediaries and consumer information websites increase the intensity of competitive rivalry? A) by shifting customers away from issues of price B) by consolidating the marketing message that consumers use to make a purchase decision C) by making competitors in cyberspace seem less equally balanced D) by highlighting unique selling advantages of a firm
B) by consolidating the marketing message that consumers use to make a purchase decision
96) Nintendo built a security chip into its game console hardware and then licensed the right to develop games to outside firms. These firms paid a royalty to Nintendo for each copy of the game sold. This is an example of Nintendo using ________ products. A) substitute B) complement C) unrelated D) differentiated
B) complement
23) Environmental analysis requires continual questioning of all these assumptions except A) a priori ideas about the structure of the relevant industry. B) continual updating of environmental knowledge. C) presuppositions about who is and is not a competitor. D) biases about how to make money in the industry.
B) continual updating of environmental knowledge.
94) In the value net analysis, complementors are A) firms that produce substitute products. B) firms that produce products that have a positive impact on company product value. C) customers who compliment the company for their good products and services. D) firms that supply critical inputs to a company.
B) firms that produce products that have a positive impact on company product value.
79) An automobile manufacturer acquires a rental car company. This is an example of A) backward integration. B) forward integration. C) economies of scale. D) product differentiation.
B) forward integration.
56) SWOT analysis raises awareness about the role of strategy in creating a match between the environmental conditions and ________ of the firm. A) internal opportunities and threats B) internal strengths and weaknesses C) internal strengths and opportunities D) internal weaknesses and opportunities
B) internal strengths and weaknesses
78) Which of the following would be an entry barrier? A) easy access to raw materials B) low switching costs C) large economies of scale D) low capital requirements
C) large economies of scale
81) Buyer power will be greater when A) the products purchased are highly differentiated. B) it is concentrated or when a buyer group purchases large volumes relative to seller sales. C) the industry product is very important to the quality of the buyer end products or services. D) there are high switching costs.
B) it is concentrated or when a buyer group purchases large volumes relative to seller sales.
25) Which one of the following statements is an example of how to improve perceptual acuity? A) A CEO meets with other CEOs of non-competing companies to examine the world from multiple perspectives and then shares the results with his own management team. B) A CEO meets with the company management team regularly to analyze current world events and their potential impact on the company. C) A CEO meets with direct competitors to analyze current industry trends. The CEOs share their conclusions with their respective companies. D) Outsiders are brought in to the board meeting to critique the company strategy, which considers the new information in its potential revamping of the strategy.
C) A CEO meets with direct competitors to analyze current industry trends. The CEOs share their conclusions with their respective companies.
41) Which of the following websites is not an example of one used routinely for corporate competitive intelligence gathering? A) Slideshare B) Quora C) Duolingo D) YouTube
C) Duolingo
44) Which of the following would not lead a manager to believe that an ethical concern exists? A) Have I done anything that coerced somebody to share this information? B) Have I done something to circumvent a system intended to secure or protect information? C) Is the contemplated technique for gathering information relevant? D) Have I misled anybody in order to gain access?
C) Is the contemplated technique for gathering information relevant?
87) Apple uses its ________ power to pay no more than 2 percent of its sales a square foot in rent. A) supplier B) competitor C) buyer D) restraining
C) buyer
37) Which of the following is not an example of corporate competitive intelligence? A) banks tracking home loans B) airlines changing hundreds of fares daily in response to competitor tactics C) consumers comparing product offers online D) car manufacturers offering sales incentives based on rival offers
C) consumers comparing product offers online
35) Companies that are able to spot key trends in the environment know their business and most importantly know their A) suppliers. B) employees. C) customers. D) competitors.
C) customers.
21) Two of the key inputs to developing forecasts discussed in the text are A) environmental scanning and stakeholder identification. B) assessing internal strengths and environmental scanning. C) environmental scanning and competitive intelligence. D) environmental scanning and a SWOT analysis.
C) environmental scanning and competitive intelligence.
22) Salemi Industries launched Cell Zone unsuccessfully in 2005 because it did not understand the market demand for its new product. This is an example of A) vision statement evaluation. B) assessing internal strengths. C) environmental scanning. D) mission statement evaluation.
C) environmental scanning.
51) Scenario analysis draws on a range of disciplines and interests. It is a more ________ approach to forecasting. A) basic B) fundamental C) in-depth D) superficial
C) in-depth
64) 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; negligible B) negative; positive C) negative; negligible D) positive; negative
C) negative; negligible
29) Boards of directors use outsiders to critique their strategy. This is necessary mostly to improve A) financial returns. B) organizational hierarchy. C) perceptual acuity. D) employee relations.
C) perceptual acuity.
69) The Dodd-Frank Wall Street Reform and Consumer Protection Act require companies to disclose whether any tin, tantalum, tungsten or gold in their supply chain is connected to violent militia groups in the Congo or nine surrounding countries, including Angola, Rwanda, and Sudan. This is an example of which segment of the general environment? A) economic B) sociocultural C) political and legal D) demographic
C) political and legal
33) The tenure of Ms. Marchionni as CEO of Lands' End was largely a result of her efforts to re-invent the apparel brand, A) resulting in an alignment with the company culture. B) resulting in an alignment with the customer base interests. C) resulting in conflicts with the customer base and the corporate culture. D) resulting in an alignment with the wholesome style brand of the company.
C) resulting in conflicts with the customer base and the corporate culture.
48) PPG Industries, the Pittsburgh-based manufacturer of paints, coatings, optical products, specialty materials, chemicals, glass, and fiber glass suffered serious failures in 1986 and 1987 when it attempted to diversify its offers. It used a technique to help it identify possible future strategies. What was it? A) crowdsourcing B) competitive intelligence C) scenario analysis D) monitoring
C) scenario analysis
67) Research published in Personnel Psychology shows that older workers are slightly more willing to implement organizational changes than younger workers. This is an example of which segment of the general environment? A) economic B) demographic C) sociocultural D) political and legal
C) sociocultural
68) Professor Tamara Erickson says that members of different generations bring different experiences, assumptions, and benefits to the workforce. She believes companies can gain a great deal from creating a culture that welcomes workers of all ages and in which leaders address biases. This is an example of which segments of the general environment? A) economic B) demographic C) sociocultural D) political and legal
C) sociocultural
71) Data Analytics are being used by corporations to understand their customer purchasing patterns. This is an example of which segment of the general environment? A) economic B) demographic C) technological D) political and legal
C) technological
72) Genetic engineering has had a positive impact on the pharmaceutical industry. This is an example of which type of general environmental trend? A) economic B) demographic C) technological D) political and legal
C) technological
36) Scanning the general environment would identify information on A) substitute goods. B) customer and firm bargaining power. C) the aging population and ethnic shifts. D) competitive rivalry.
C) the aging population and ethnic shifts.
74) Airbnb, a room-sharing site, offers more rooms than Marriott. Goldman Sachs suggests that the supply of new rooms over the next two years will outpace the previous five even though the growth of American occupancy rates has begun to slow. Which competitive force is involved in this situation? A) the threat of favorable government policies B) the threat of new buyers C) the threat of new entrants D) the threat of proprietary products
C) the threat of new entrants
83) New communication technology can impact seemingly unrelated industries such as the airline industry. This would be an example of a A) threat of entry. B) backward integration. C) threat of substitute products. D) forward integration.
C) threat of substitute products.
59) The aging of the population, changes in ethnic composition, and effects of the millennial generation are ________ changes. A) macroeconomic B) global C) sociocultural D) demographic
D) demographic
66) In the general environment, which of the following is not a demographic trend? A) aging population B) greater disparities in income levels C) changes in ethnic composition D) more women in the workforce
D) more women in the workforce
77) Product differentiation by incumbents act as an entry barrier because A) new entrants cannot differentiate their products. B) incumbents will take legal action if new entrants do not differentiate their products. C) it helps a firm to derive greater economies of scale. D) new entrants will have to spend heavily to overcome existing customer loyalties.
D) new entrants will have to spend heavily to overcome existing customer loyalties.
52) In the SWOT framework, ________ are the same for all firms in the same competitive environment. A) strengths and weaknesses B) strengths and opportunities C) weaknesses and threats D) opportunities and threats
D) opportunities and threats
65) In the general environment, many relationships exist among the various elements. General environmental trends can have positive and negative impacts on various industries. For example, the aging population might have a ________ impact on the health care industry and a ________ impact on the baby product industry. These are called ________ impacts. A) negative; positive; demographic B) positive; negative; technological C) negative; positive; sociocultural D) positive; negative; demographic
D) positive; negative; demographic
73) Which is considered a force in the five-forces model? A) increased deregulation in an industry B) the threat of government intervention C) recent technological innovation D) rivalry among competing firms
D) rivalry among competing firms
90) Supplier power has increased because of the Internet for all the following reasons except A) the growth of new web-based businesses has created more outlets for suppliers to sell to. B) software that links buyers to a supplier's website has created rapid, low-cost order capabilities. C) the process of disintermediation makes it possible for some suppliers to reach end users directly. D) some suppliers have created web-based purchasing systems that encourage switching.
D) some suppliers have created web-based purchasing systems that encourage switching.
97) Elements of the five forces can be quantified. This is important for analyzing industry structure. Which of the following is not an example of an element that can be quantified? A) the percentage of the buyer total cost accounted for by the industry product B) the percentage of industry sales required to fill a plant or operate a logistical network to efficient scale C) the buyer switching cost D) the governmental regulatory policy
D) the governmental regulatory policy