Strategic Management Chapter 2

The architect of a new headquarters for a prestigious Fortune 500 firm has specified the use of this marble, and this marble only, for the project. Which of the following statements is most likely to be true?

The cost of the marble will be expensive because of the bargaining power of the supplier.

Which of the following explains, in part, why rivalry among McDonald's, Wendy's, and Burger King is intense?

These companies are trying to find ways to differentiate their products.

An example of a government policy barrier to entry would be a scenario in which the Antitrust Division of the Department of Justice disallows a merger because it creates a firm that is too dominant and would thus create unfair competition. (A) True (B) False

True

Demographic, economic, political/legal, sociocultural, technological, global, and physical are the seven elements comprising the industry environment. (A) True (B) False

True

Early adopters of new technology often achieve higher market shares and higher returns than later adopters of the technology. (A) True (B) False

True

Exit barriers are especially low in the airline industry because aircrafts are not particularly specialized and can easily be sold to other airlines, air cargo companies, the military, or even to wealthy individuals who want to own a private jet. (A) True (B) False

True

PepsiCo's strategy called "capital performance with a purpose" links green efforts in businesses to the bottom line. This is an example of addressing concerns in the physical segment of the general environment. (A) True (B) False

True

Suppliers are powerful when the industry is dominated by a few large companies, no satisfactory substitutes are available, the selling industry is relatively more concentrated than the purchasing industry, or switching costs are high. (A) True (B) False

True

The bankruptcy filings by General Motors and Chrysler Corporation during the Great Recession illustrate that firms cannot directly control the general environment's segments. (A) True (B) False

True

The competitor analysis is the final part of the external environment analysis and focuses on each company against which a firm directly competes (for example, Coca-Cola and PepsiCo, Home Depot and Lowe's, and Airbus and Boeing). (A) True (B) False

True

The five competitive 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. (A) True (B) False

True

The industry environment directly influences a firm and its competitive actions and responses. (A) True (B) False

True

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. (A) True (B) False

True

The process of competitor analysis should examine the competitors' future objectives, current strategy, assumptions, and capabilities. (A) True (B) False

True

When Delta Air Lines wants to study Continental Airlines, it must examine both Continental and its complementor, Star Alliance. (A) True (B) False

True

Characteristics of the current economic segment include all of the following EXCEPT:

a clear understanding of future economic opportunities and threats.

An industry is defined as:

a group of firms producing products that are close substitutes.

Switching costs, access to distribution channels, economies of scale, large numbers of competing firms, and slow industry growth are some of the entry barriers that may affect the threat of new entrants to an industry. (A) True (B) False

False

The external environment facing business stays relatively constant over time. (A) True (B) False

False

The legislation introduced in the U.S. Congress during the early tenure of the Obama administration intended to reduce the amount of work U.S. companies outsource and is an example of a potential change in the sociocultural segment of the general environment. (A) True (B) False

False

The more distant strategic groups are in terms of their strategies, the greater the likelihood of rivalry between the groups. (A) True (B) False

False

The strengths of the five competitive forces are similar across strategic groups within an industry. (A) True (B) False

False

When Google studies the internet user privacy policies of various nations, it is engaged in the forecasting component of the environmental analysis process. (A) True (B) False

False

When firms analyze the external environment, they typically have complete and unambiguous data. (A) True (B) False

False

Which of the following would be an example of the application of the next major technological opportunity for organizations?

SpaceX's reusable space vehicle

Media content has moved from paper, tape, and film to a digital world based on Internet technology. From the perspective of the five forces model, which force is most relevant here?

Substitutes

Which of the following would NOT be identified in an analysis of the economic portion of the general environment?

The ability of Ford to issue new debt in light of its recent financial performance

In analyzing the demographic segment of the general environment, one typically examines all of the following factors EXCEPT:

The average age of the population in his community is high.

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

fast industry growth.

For a restaurant business dependent on drive-thru customers, the major cost disadvantage independent of scale would be if:

favorable locations are not available.

Because of threats and risks in the global environment, some firms choose to take a more cautious approach by:

focusing on global niche markets.

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

forecasting

The ______ environment is composed of dimensions in the broader society that can influence an industry and the firms within it.

general

The three parts of the external environment that affect a firm's strategic actions are:

general, industry, and competitor.

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

generic assets.

The observation that China reached automotive production overcapacity in 2015, and has a glut of extra cars, is an aspect of the ______ segment of the general environment.

global

An owner of a stable of racehorses has been earning below-average returns for more than 15 years. To a colleague, he expressed his determination to stay in horse racing until he died because "racing is in my blood." This individual is probably still racing horses because of:

high barriers to exit.

The political/legal segment of an environment represents:

how organizations and governments mutually try to influence each other.

High-level maintenance on aircraft is performed by the manufacturer. This service after the sale means that in the aircraft industry:

the competitive rivalry in the industry is severe.

The highest amount a firm can charge for its products is most directly affected by:

the cost of substitute products.

Buyers are powerful when:

switching costs are low.

Understanding how new knowledge can develop new products, processes, or materials is a result of analyzing the ______ segment of the general environment.

technological

The economic environment refers to:

the nature and direction of the economy in which a firm competes or may compete

Product differentiation refers to the:

belief by customers that a product is unique.

Which of the following is NOT an activity used in the external environmental analysis process?

decrypting

Monitoring involves the development of a forecast of what might happen at a future point in time. (A) True (B) False

False

Scanning involves detecting meaning through early signals of environmental trends. (A) True (B) False

False

Strategic groups are firms in different industries following the same or similar strategies. (A) True (B) False

False

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

low barriers to entry.

The use of the Internet by Netflix to collect data on customer preferences is an example of:

scanning

How is consolidation among fuel providers serving airport facilities viewed in the five forces model of competition?

As an increase in the bargaining power of suppliers of a critical input.

Which of the following is NOT an entry barrier to an industry?

Bargaining power of suppliers

Blood banks are highly dependent on donors. In the terminology of industry analysis, which statement about donors is accurate?

Blood donors are suppliers and are powerful because of the critical nature of what they provide to the blood bank.

Age structure, geographic distribution, income distribution, interest rates, and process innovations are all elements of concern when studying the demographic segment of the general environment. (A) True (B) False

False

An attractive industry is one that is characterized by high entry barriers, suppliers and buyers with strong bargaining power, low threats from substitute products, or low rivalry among firms. (A) True (B) False

False

Any competitor intelligence practice that is legal is also ethical. (A) True (B) False

False

Competitor analysis is focused on the factors and conditions influencing an industry's profitability potential. (A) True (B) False

False

Contrary to popular belief, the global segment of the external environment does not provide many opportunities for firms that recently experienced low growth and profits coming from emerging markets. (A) True (B) False

False

Developing a political strategy by the newly formed General Motors would likely be ineffective as firms are generally unable to influence the political/legal environment. (A) True (B) False

False

Eavesdropping by the NSA on average Americans is ethical because it is a governmental organization instead of a for-profit company. (A) True (B) False

False

Eavesdropping is an ethical way to obtain information about competitors' actions. (A) True (B) False

False

Firms can directly control the elements of the seven segments of the general environment. (A) True (B) False

False

Generally, industries with stronger competitive forces have higher profit potential. (A) True (B) False

False

Global warming and energy consumption are aspects of the technological environment segment that firms should monitor. (A) True (B) False

False

Globalfocusing is often used by firms with high levels of international operations who further increase their internationalization by focusing on global niche markets. (A) True (B) False

False

In recent times, business leaders have become more confident in the ability of economists to provide valid and reliable predictions about the world's economic environment. (A) True (B) False

False

The aircraft industry has long been dominated by two large aircraft manufacturers, Boeing and Airbus. The demand for major aircraft is low, and Boeing and Airbus aggressively compete for orders from airlines. What effect will these conditions have on the domestic airline industry?

It will make the airline industry more attractive because of decreased supplier power.

The large amount of advertising by firms such as Procter & Gamble and Colgate-Palmolive is an example of what kind of barrier to entry?

Product differentiation

Demographic changes include variations in income distribution. Which of the following statements is true?

The general loss in real income has been somewhat offset by the increase in dual-career couples.

Golden Lotus, an exercise club targeting healthy individuals over 50, is located in a fast-growing city in the Southwest. Which of the following factors that may have an effect on the success of Golden Lotus is the most directly controllable by the company?

The power of the customers/buyers

The likelihood of entry of new competitors is affected by ______ and ______.

barriers to entry; expected retaliation of current industry organizations

Environmental scanning would be most important for which of the following organizations?

a web design company catering to a small business

DWK Foods has developed a line of cookies and candies sweetened exclusively with organic honey. Although DWK is selling some of the products over the Internet, in order to gain economies of scale the products must be sold in retail outlets as well. The main barrier to entry DWK is likely to encounter here is:

access to distribution channels.

All of the following are aspects of the political/legal segment of the general environment except:

attitudes and values

Acme Valves, Inc., has been a successful player in the oil field supply industry in the last 15 years. Acme maintained its strategy and product characteristics over this time period. However, the company has experienced declines in sales and profits over the last four quarters. The CEO of Acme should

conduct an analysis of the external environment.

An analysis of the economic segment of the external environment would include all of the following EXCEPT:

income distribution

Customer loyalty programs such as airline frequent-flyer miles are an attempt to:

increase customers' switching costs.

All of the following are examples of efforts by firms to address the physical segment of the general:

increase in hiring of women and minorities at Microsoft.

The technological segment of environmental analysis includes:

institutions and activities involved with creating new knowledge and translating that knowledge into new outputs.

The concepts of Guanxi, Wa, and Inhwa all convey the general idea of:

interpersonal relationships.

Mighty Green, a residential lawn chemical manufacturer, is committed to gaining market share in its industry. Mighty Green:

is likely to raise the level of competitive rivalry in the industry.

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

objective answers

As customers come to believe that a firm's product is unique, this allows the firm to:

obtain loyal customers.

A manufacturer of washing machines has expanded its plant and has created excess capacity, just as the general economy has taken a downturn. The company is likely to:

offer rebates and incentives for customers who purchase washing machines.

When consumers change mobile phone and data service providers, they may be required to maintain service with the provider for a specified time period. This is an example of a:

one-time cost customers incur when buying from a different supplier.

Global warming and energy consumption trends are aspects of the ______ segment of the general environment that firms should monitor.

physical

Green design, sustainable packaging, waste management, and energy efficiency are aspects of the ______ segment of the general environment that companies have sought to address with environmental sustainability initiatives.

physical

BP, in response to the Deepwater Horizon oil spill, expected increased scrutiny from which of the following segments of the general environment?

political/legal

One popular approach to taking care of the physical environment is:

producing and selling additional green products.

New entrants to an industry are more likely when:

product differentiation in the industry is low.

Economies of scale refers to the fact that as the:

quantity of product produced in a given time period increases, the cost of manufacturing each unit decreases.

The Obama administration sought to pursue policies that would:

reduce the amount of work U.S. companies outsource to firms in other nations

When rival firms compete aggressively by trying to attract competitors' customers, this might be an indication of:

slow industry growth.

An analysis of society's attitudes and values would be conducted when studying the ______ segment of the general environment.

sociocultural

Coca-Cola and PepsiCo have been accused of contributing to the obesity problem in the United States. This accusation comes from the ______segment of the general environment.

sociocultural

The environmental segments that make up the general environment typically will NOT include:

substitute products or services

The threat from substitutes is high when:

the substitute product's price is lower than the industry product's price.

Suppliers are powerful when:

they offer a credible threat of forward integration

An analysis of income distribution would include all of the following EXCEPT:

wage differentials between male and female employees working for a large manufacturer

The next critical technological opportunity for organizations is predicted to be:

wireless communications