Chapter 3: Evaluating a Company's External Environment

________ is the most powerful and widely known tool used to assess the state of competition in an industry.

Porter's five-force model

Which of the following conditions acts to weaken buyers' bargaining power?

When buyers are unlikely to integrate backward into the business of sellers

In which one of the following instances is supplier bargaining power and leverage not weakened?

When industry members pose a credible threat of backward integration into the business of suppliers

In which one of the following instances is suppliers' bargaining power and leverage not weakened?

When the items purchased from suppliers are in short supply

Increasing globalization can be a driving force in an industry because

companies need to spread their operating reach into more and more country markets to meet consumer demand and take advantage of available operating activities.

The most powerful of the five competitive forces is usually the

competitive pressures associated with rivalry among competing sellers in the industry for buyer patronage.

In identifying an industry's key success factors, strategists should

consider on what basis customers choose between competing brands, what resources and competitive capabilities firms need to be competitively successful, and what shortcomings are almost certain to put a company at a significant competitive disadvantage.

Rivalry among competing firms tends to be more intense when

demand for the product is growing slowly, one or maybe several industry members become dissatisfied with their market position, buyers have low switching costs, and strong companies outside the industry acquire weak firms in the industry and launch aggressive moves to build market share.

________ is/are the strategically relevant factors outside a company's industry boundaries—economic conditions, political factors, sociocultural forces, technological factors, environmental factors, and legal/regulatory conditions.

A company's macroenvironment

Which of the following is likely to have the biggest strategy-shaping impact on on-demand transportation providers such as Uber and Lyft?

Apple and Ford launch a global network of autonomous driverless cars, buses, and trucks on demand via a mobile app.

Which of the following factors is not a relevant consideration in judging whether buyers' bargaining power is relatively strong or relatively weak?

Buyer needs and expectations are changing slowly or rapidly

In which of the following instances are industry members not subject to stronger competitive pressures from substitute products?

Buyers are dubious about using substitutes.

Competitive pressures stemming from buyers' bargaining power tend to be weaker when

Competitive pressures stemming from buyers' bargaining power tend to be weaker when

Which of the following is not a good example of a substitute product that triggers stronger competitive pressures?

Dasani water as a substitute for Aquafina water

Which of the following factors usually is not a consideration involved with evaluating whether an industry presents a sufficiently attractive business opportunity?

Determining the industry outlook for future profitability

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

Environmental forces that include the competitive structure, the degree of industry fragmentation, and the mobility barriers that inhibit business

Which of the following is a good example of a manufacturing-related key success factor?

High labor productivity (especially if the production process has high labor content)

Which of the following is not a good example of a marketing-related key success factor (KSF)?

High utilization of fixed assets

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

How many companies in the industry have good track records for revenue growth and profitability?

Which of the following do not qualify as potential driving forces capable of inducing fundamental changes in industry and competitive conditions?

Increases in the economic power and bargaining leverage of customers and suppliers, growing supplier-seller collaboration, and growing buyer-seller collaboration

Which one of the following is not a common type of driving force?

Increasing efforts on the part of industry members to collaborate closely with their suppliers

Which one of the following does not intensify the competitive pressures associated with the threat of entry?

Industry members are struggling to earn good profits.

The collective impact of the five competitive forces on competitive pressures tends to

Lower the combined profitability of industry members.

Which of the following are most unlikely to qualify as driving forces?

Mounting competition from substitutes and increasing efforts to collaborate with suppliers via strategic alliances

Each of the following exemplifies the impact of the macroenvironment on a company's strategic opportunities except

Netflix squares off with Amazon Prime as its most potent rival in the streaming television and film industry.

Which one of the following increases the competitive pressures associated with the threat of entry?

Newcomers can expect to earn attractive profits.

Which one of the following does not cause the rivalry among competing sellers to be weak?

One or more competitors become dissatisfied with their market position

Based on an analysis of the five forces that increase or decrease competitive pressures in an industry, in which of the following industries is profitability likely to be lowest?

Pizza restaurants

Which of the following is generally not considered as a barrier to entry?

Rapid market growth

Rivalry among competing sellers tends to be less intense when

Rivalry among competing sellers tends to be less intense when

Which of the following is not a factor to consider in identifying an industry's dominant economic features?

Strength of both driving forces and competitive forces

Which of the following is not a factor that causes buyers' bargaining power to be stronger?Which of the following is not a factor that causes buyers' bargaining power to be stronger?

The industry is composed of a few large sellers, and the customer group consists of numerous buyers that purchase in fairly small quantities

Which of the following factors should a company consider when determining if an industry offers good prospects for attractive profits?

The industry's growth potential, whether competition appears destined to become stronger or weaker, how the industry's driving forces might affect overall industry profitability, the company's competitive position relative to rivals, and the company's proficiency in performing industry key success factors

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

The power and influence of industry-driving forces

Whether industry members are struggling to make good profits because of slow-growing market demand

To reduce the costs of switching suppliers

Which of the following is not generally a driving force capable of producing fundamental changes in industry and competitive conditions?

Ups and downs in the economy and interest rates

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

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

Which of the following is not an appropriate guideline for developing a strategic group map for a given industry?

Variables selected as axes for the map should be highly correlated.

Based on an analysis of the five forces that increase or decrease competitive pressures in an industry, in which of the following industries is profitability likely to be highest?

Video streaming services

Which one of the following is not a factor that affects the strength of suppliers' bargaining power?

Whether industry members are struggling to make good profits because of slow-growing market demand

Evaluating whether an industry presents a sufficiently attractive business opportunity usually does not involve a consideration of which of the following factors?

Whether the industry's product is strongly or weakly differentiated

Angela and Jeff are co-owners of five specialty cupcake and dessert bakeries in their region. Which of the following questions would not help them to predict the next strategic moves and countermoves of their rivals?

Which mode of transport does the rival's supplier use?

In seeking to predict the next moves of close or key rivals, it is not useful to consider which of these questions?

Which rivals have the strongest management team.

A company's broad macroenvironment refers to

all the strategically significant forces and factors outside a company's boundaries—general economic conditions, population demographics, societal values and lifestyles, technological

The driving forces in an industry

are major underlying causes of change in industry and competitive conditions and have the biggest influences in reshaping the industry landscape and altering competitive conditions.

The key success factors in an industry

are the strategy elements, intangible assets, and competitive capabilities that most affect industry members' abilities to prosper in the marketplace.

Industry conditions change

because forces create pressures or incentives for industry participants (competitors, customers, suppliers) to alter their actions in important ways.

The competitive pressures from substitute products tend to be stronger when

buyers are relatively comfortable with the quality and performance of substitutes, and the costs to buyers of switching over to the substitutes are low.

An industry's key success factors

can be determined through identifying an industry's dominant economic characteristics, assessing the five competitive forces, considering the impacts of the driving forces, comparing the market positions of industry members, and forecasting the likely next moves of industry rivals.

A strategic group consists of those firms in an industry that

employ similar competitive approaches and occupy similar positions in the market.

Newcomers can expect to earn attractive profits.

financially strong industry members send strong signals that they will launch strategic initiatives to combat the entry of newcomers.

An industry's driving forces

generally act in ways that will strengthen or weaken market demand, make competition more or less intense, and lead to higher or lower industry profitability.

Having good competitive intelligence about rivals' strategies, latest actions and announcements, resource strengths and weaknesses, and moves to improve their situation is important because it

helps a company to anticipate what moves rivals are likely to make next and to craft its own strategic moves.

Steps involved in driving forces analysis include

identifying the driving forces, assessing whether their impact will make the industry more or less attractive, and determining what strategy changes are needed to prepare for the impact of the driving forces.

Rivalry among competing sellers tends to be more intense when

industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit volume.

Not all positions on a strategic group map are equally attractive because

industry driving forces and competitive pressures favor some companies or groups and hurt others, and the profit potential of different strategic groups varies because of strengths and weaknesses in each strategic group's position.

Driving forces analysis

involves identifying the driving forces, assessing whether their impact will make the industry more or less attractive, and determining what strategy changes a company may need to make to prepare for the impact of the driving forces.

A strategic group

is a cluster of industry rivals that have similar competitive approaches and market positions.

A competitive environment in which there is strong rivalry among sellers, low entry barriers, strong competition from substitute products, and considerable bargaining leverage on the part of both suppliers and customers

is competitively unattractive from the standpoint of earning good profits.

A competitive environment in which there is weak to moderate rivalry among sellers, high entry barriers, weak competition from substitute products, and little bargaining leverage on the part of both suppliers and customers

is conducive to industry members earning attractive profits.

The bargaining leverage of suppliers is greater when

only a small number of suppliers exist and when it is difficult for industry members to switch to attractive substitutes.

The payoff of good scouting reports on rivals is improved ability to

predict what strategic moves rivals are likely to make next, thereby allowing a company to prepare defensive countermoves and develop strategies to exploit rivals' missteps.

Factors that cause the rivalry among competing sellers to be weak include

rapid growth in buyer demand and high buyer-switching costs.

The most powerful of the five typical sources of competitive pressures is usually

the competitive pressures associated with the market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry.

The marketplace being a competitive battlefield is primarily due to

the constant rivalry of firms to strengthen buyer patronage among competing sellers of a product or service, in order to win a competitive edge over rivals.

Whether supplier-seller relationships in an industry represent a strong or weak source of competitive pressure is a function of

the extent to which suppliers can exercise sufficient bargaining power to influence the terms and conditions of supply in their favor and the extent of seller-supplier collaboration in the industry.

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

the strength of the federal banking system

The nature and strength of the competitive forces that prevail in an industry is generally a joint product of all of the following except

those associated with environmental forces such as climate change or water shortages.

The best test of whether potential entry is a strong or weak competitive force is

to ask if the industry's growth and profit prospects are strongly attractive to potential entry candidates.

The industry is composed of a few large sellers, and the customer group consists of numerous buyers that purchase in fairly small quantities

when buyer demand is growing rapidly

Just how strong the competitive pressures are from substitute products depends on

whether attractively priced substitutes are readily available and the ease with which buyers can switch to substitutes.

Whether buyers' bargaining power poses a strong or weak source of competitive pressure on industry members depends in part on

whether buyer demand is strong or declining.