Chapter 2

. An analysis of society's attitudes and values would be conducted when studying the general segment of the environment. a. sociocultural b. global c. demographic d. economic

a

A certain marble quarry provides a unique type of marble that is richly colored and strikingly veined. It has been used for churches and public buildings throughout the world. The architect of a new headquarters for a prestigious Fortune 500 firm has specified the use of this marble, and this marble only, for this project. Which of the following statements is most likely to be true? a. The cost of the marble will be expensive because of the bargaining power of the supplier. b. The cost of the marble will be moderate because of the bargaining power of the buyer. c. The cost of the marble will be moderate because of economies of scale. d.Thecostofthemarblewillbeexpensivebecauseofthehighstrategicstakesinvolved

a

A general environmental analysis can be expected to produce all of the following EXCEPT a. objective answers. b. recognition of environmental trends. c. identification of organizational opportunities. d. identification of organizational threats.

a

According to the five forces model, an attractive industry would have all of the following characteristics EXCEPT a. low barriers to entry. b. suppliers and buyers with little bargaining power. c. a moderate degree of rivalry among competitors. d. few good product substitutes.

a

After Amazon lowered the price on Kindle e-readers, Sony eventually lowered the price on its Reader. Sony needed to do this because a. it is in the same strategic group. b. it is outside the strategic group. c. of inter-strategic group competition. d. of strategic distinctiveness.

a

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 a. high barriers to exit. b. high switching costs. c. high fixed costs. d.low levels of competitive rivalry

a

BP, in response to the Deepwater Horizon oil spill, expected increased scrutiny coming from which of the following segments of the general environment? a. political/legal b. global c. technological d. sociocultural

a

Blood banks are highly dependent on donors. In the terminology of industry analysis, which statement of donors is accurate? a. Blood donors are suppliers and are powerful because of the critical nature of what they provide to the blood bank. b. Blood donors are suppliers and are powerful because of their concentration relative to the blood bank. c. Blood donors are buyers and are not powerful because switching costs to change to alternative inputs are low. d. Blood donors are buyers and are powerful because of the volume of blood needed.

a

Competitor analysis focuses on a. firms with which the company competes directly. b. firms that produce products that are substitutes. c. all firms in the industry. d. companies that might enter the industry.

a

Exit barriers to a firm include all of the following EXCEPT a. generic assets. b. loyalty to employees. c. governmental concern about job loss. d. restrictive labor agreements.

a

For a retail business dependent on drive-in customers, the major cost disadvantage independent of scale would be if a. favorable locations are not available. b. other competitors have proprietary product technology. c. access to raw materials is difficult. d. other competitors have government subsidies.

a

In a suburban community outside a city in Alabama, a retail store opened that specialized in dancewear for children and adults. It was moderately successful for five years until the local newspaper published an exposé that scanty lingerie stocked in the back of the store's showroom was selling briskly to a certain clientele. Afterward, the store lost most of its customers and nearly closed. Which segment of the environment did the store owners fail to take into account when they began selling the lingerie? a. the sociocultural segment b. the economic segment c. the demographic segment d. the political/legal segment

a

Mighty Green, a residential lawn chemical manufacturer, is committed to gaining market share in its industry. Mighty Green a. is likely to raise the level of competitive rivalry in the industry. b. probably has top management who are affected by emotional barriers to exit. c. has decided that long-run above-average returns are not important. d. will probably embark on an acquisition strategy.

a

One popular approach to taking care of the physical environment is a. producing and selling additional green products. b. lobbying the government to reduce environmental regulations. c. making donations to the Sierra Club and other environmental organizations. d. increasing health benefits for employees.

a

The __________ environment is composed of dimensions in the broader society that can influence an industry and the firms within it. a. general b. competitor c. sociocultural d. industry

a

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? a. It will make the airline industry more attractive because of decreased supplier power. b. It will make the airline industry less attractive because of decreased supplier power. c. It will make the airline industry more attractive because of increased supplier power. d. It will make the airline industry more attractive because of a new entrant.

a

The competition within each strategic group is a. more intense than is the competition between strategic groups. b. less intense than is the competition between strategic groups. c. typically very low. d. an unknown factor in the analysis of competitive practices within a firm's strategic group.

a

The economic environment refers to a. the nature and direction of the economy in which a firm competes or may compete. b. the economic outlook of the world provided by the World Bank. c. an analysis of how the environmental movement and world economy interact. d. an analysis of how new environmental regulations will affect the U.S. economy.

a

The likelihood of entry of new competitors is affected by and a. barriers to entry; expected retaliation of current industry organizations. b. the power of existing suppliers; buyers. c.the profitability of the industry; the market share of its leading firm. d.the demand for the product;the profitability of the competitors

a

The technological segment of environmental analysis includes a. institutions and activities involved with creating new knowledge and translating that knowledge into new outputs. b. the determination of when machinery will need to be replaced in a given firm. c. the need for new technology in order for a firm to gain a competitive advantage. d. places where a firm's technology will allow that firm to dominate a given market.

a

Which of the following, identified in an analysis of the general environment, is an opportunity for an entrepreneur who wishes to open a business providing "Fitness for Life" physical conditioning services (strength, balance, and flexibility training) in a city of 100,000 people? a. The average age of the population in his community is high. b. The level of unemployment in his community is high. c. A chiropractor and two independent physical therapists are located in his community. d. The average education level of the population in his community is low.

a

According to the five forces model, an unattractive industry would include all of the following characteristics EXCEPT a. low economies of scale needed for new firms to enter. b. low supplier power due to commodity inputs. c. high threat of substitute products due to a large number of low-cost alternatives. d. high bargaining power of buyers due to low switching costs.

b

All of the following are aspects of the political/legal segment of the general environment EXCEPT a. lobby groups. b. attitudes and values. c. taxation laws. d. industries chosen for deregulation.

b

All of the following are implications of strategic groups EXCEPT a. the strength of the five forces differs across strategic groups. b. the strength of the five forces is the same across strategic groups. c. competitive rivalry within strategic groups is greater than between strategic groups. d. the closer the strategic groups are in terms of strategies, the greater is the likelihood of rivalry.

b

Characteristics of the current economic segment include all of the following EXCEPT a. general uncertainty. b. a clear understanding of future economic opportunities and threats. c. the inability of economists to provide valid and reliable predictions. d. an expanding economy in Vietnam.

b

Circuit Corp. is a manufacturer of a broad range of consumer electronics products. These consumer products are all highly profitable. The firm also manufactures a low-cost component which is an essential differentiating feature for most of its consumer products. The costs to manufacture this component have risen sharply in recent months. Internal cost accounting estimates now indicate the company is breaking even on the manufacture of this component. Which of the following is most likely? a. Circuit will likely continue to manufacture the component, even at a loss, due to low supplier power. b. Circuit will likely continue to manufacture the component, even at a loss, due to high strategic stakes. c. Circuit will likely discontinue manufacture of the component due to low strategic stakes. d. Circuit will likely discontinue manufacture of the component due to high supplier stakes.

b

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. The main barrier to entry DWK is likely to encounter here is a. government licensing and permits. b. access to distribution channels. c. consumers' switching costs. d. cost disadvantages independent of scale.

b

Environmental scanning would be most important for which of the following organizations? a. a provider of hospice services for the terminally ill b. a web design company catering to small businesses c. a neighborhood sewer and water utility d. a manufacturer of household linens

b

Firms within strategic groups a. follow dissimilar strategies. b. follow similar strategies across certain dimensions. c. typically engage in greater intergroup rivalry than intragroup rivalry. d. exist almost exclusively in the manufacturing sector.

b

Global warming and energy consumption trends are aspects of the segment of the general environment that firms should monitor. a. technological b. physical c. sociocultural d. economic

b

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? a. buyers b. substitutes c. entry barriers d. suppliers

b

New Jersey and New York have the highest state taxes in the United States. They also have high ratios of people moving out compared to people moving into the state. This impacts the aspect of demographic analysis. a. age structure b. geographic distribution c. income distribution d. ethnic mix

b

The Department of Defense buys aircraft from U.S. companies for national security reasons. This is an example of a barrier to entry. a. cost disadvantage independent of scale b. government policy c. capital requirements d. product differentiation

b

The concepts of Guanxi, Wa, and Inhwa all convey the general idea of a. entrepreneurial risk-taking. b. interpersonal relationships. c. the value of hard work. d.personal achievement

b

The highest amount a firm can charge for its products is most directly affected by a. expected retaliation from competitors. b. the cost of substitute products. c. variable costs of production. d. customers' high switching costs.

b

The observation that China, despite a 37 percent surge in car sales in 2010, is expected to reach production overcapacity by 2015 and have a glut of extra cars, is an aspect of the _____ segment of the general environment. a. demographic b. global c. physical d. technological

b

The threat from substitutes is high when a. switching costs are high. b. the substitute product's price is lower than the industry product's price. c. the quality of the substitute product is lower than the quality of the industry's product. d. the substitute product stimulates new process innovations within the industry.

b

The three parts of the external environment which affect a firm's strategic actions are a. economic, political, and legal. b. general, industry, and competitor. c. industry, business, and product. d. local, national, and global.

b

Which of the following is NOT an activity used in the external environmental analysis process? a. scanning b. decrypting c. monitoring d. assessing

b

Which of the following represents a competitive intelligence practice that is both legal and ethical? a. A firm hires a competitor's employees and asks them to share the names and addresses of business contacts from their previous company. b. An executive attends a trade show solely to obtain a competitor's brochures, listen to sales pitches, and ask questions about the competitor's products. c. A city council member shares information about the decision process for selecting a contractor to build a new library wing with his wife, an executive with a construction firm bidding on the contract. d. A marketing manager at Smith-Phillips, Inc., sells confidential plans for the company's expansion into the Far East to a firm that is not a direct competitor.

b

Which of the following would NOT be identified in an analysis of the economic portion of the general environment? a. the willingness of Chrysler's buyers to purchase large vehicles in light of an increase in oil prices b. the ability of Ford to issue new debt in light of its recent financial performance c. the ability of BMW's buyers to finance car purchases in light of a change in interest rates d. the willingness of GM buyers to purchase new vehicles in light of the threat of recession

b

Acme Valves, Inc., has been a successful player in the oil field supply industry in the last 15 years. Acme maintained its traditional strategy and product characteristics over this time period. However, Acme has experienced declines in sales and profits over the last four quarters. The CEO of Acme should a. continue with the proven strategy because its returns over the long run are important. b. focus on improving efficiency of production and cost control. c. conduct an analysis of the external environment. d. immediately begin making incremental adjustments to the traditional business strategy in an effort to improve sales.

c

All of the following are forces that create high rivalry within an industry EXCEPT a. numerous or equally balanced competitors. b. high fixed costs. c. fast industry growth. d. high storage costs.

c

An analysis of income distribution would include all of the following EXCEPT a. the purchasing power of various age groups. b. the discretionary income of various ethnic groups. c. wage differentials between male and female employees working for a large manufacturer. d. how income is distributed among regions of the United States.

c

Because of threats and risks in the global environment, some firms choose to take a more cautious approach by a. avoiding global markets altogether. b. expanding only to developed countries. c. focusing on global niche markets. d. acquiring already established firms in foreign markets.

c

Buyers are powerful when a. there is a threat of forward integration. b. they purchase a small proportion of the supplier's output. c. switching costs are low. d. the buyers' industry is fragmented.

c

Clarissa is a sales representative for a large pharmaceutical firm. While calling on one of her major clients, the purchasing director of a hospital, the client told her confidential information that a sales representative from a competing firm had passed on to him. The information completely contradicts Clarissa's firm's understanding of the competitor's business strategy, and would allow Clarissa's employer to gain many of the competitor's clients. What ethical implications may result from this situation? a. There is no ethical or legal concern here for Clarissa. b. The ethical dilemma is not Clarissa's but her client's, since he passed on confidential information to her voluntarily. c. The ethical dilemma here is the right of competitors not to reveal certain information. d. This is an example of ethical competitor intelligence obtained as eavesdropping.

c

Competitor intelligence is a. legally or illegally gained data about competitors' internal strategic processes and competitive decisions. b. strategic information gained from industrial espionage targeting international competitors. c. the data that the firm gathers to understand competitors' objectives, strategies, assumptions, and capabilities. d. illegal to gather under the Sarbanes-Oxley Act.

c

Customer loyalty programs such as airline frequent-flyer miles are an attempt to a. decrease competitors' access to distribution channels. b. develop a cost advantage independent of scale. c. increase customers' switching costs. d. overcome the perishability of the hotel "product."

c

Demographic changes include variations in income distribution. Which of the following statements is true? a. Firms are most interested in the consumers in the top 10 percent of household income. b. In general, living standards have deteriorated over time. c. The general loss in real income has been somewhat offset by the increase in dual-career couples. d. Workforce diversity is making the concept of average income obsolete.

c

Economies of scale refers to the fact that as the a. quantity of product produced in a given time period increases, the cost of manufacturing each unit increases. b. quantity of product produced in a given time period increases, the cost of manufacturing each unit remains constant. c. quantity of product produced in a given time period increases, the cost of manufacturing each unit decreases. d. quantity of product produced in a given time period decreases, the cost of manufacturing each unit decreases.

c

High-level maintenance on aircraft is performed by the manufacturer. This service after the sale means that in the aircraft industry a. customers are relatively weak because of the high switching costs created by frequent-flyer programs. b. the industry is moving toward differentiation of services. c. the competitive rivalry in the industry is severe. d. the economic segment of the external environment has shifted, but airline strategies have not changed.

c

How is consolidation among fuel providers serving airport facilities viewed in the five forces model of competition? a. as a reduction of the airlines' ability to benefit from economies of scale. b. as an increase in switching costs because the airlines have no choice but to use jet fuel and other oil products. c. as an increase in the bargaining power of suppliers of a critical input. d. as an increase in the intensity of rivalry among airlines for scarce resources.

c

New entrants to an industry are more likely when a. it is difficult to gain access to distribution channels. b. economies of scale in the industry are high. c. product differentiation in the industry is low. d. capital requirements in the industry are high.

c

Once a firm has determined its competitors' future objectives, current strategy, assumptions, and strengths and weaknesses, its next step is to develop a. an environmental assessment. b. a marketing plan. c. a response profile. d. a task force to implement the plan.

c

Product differentiation refers to the a. ability of the buyer of a product to negotiate a lower price. b. response of incumbent firms to new entrants. c. belief by customers that a product is unique. d. fact that as more of a product is produced the cheaper it becomes per unit.

c

Suppliers are powerful when a. satisfactory substitutes are available. b. they sell a commodity product. c. they offer a credible threat of forward integration. d. they are in a highly fragmented industry.

c

The communications industry is broadly defined as encompassing all of the following EXCEPT a. media companies. b. smartphone producers. c. book retailers. d. entertainment companies.

c

The environmental segments that make up the general environment typically will NOT include a. demographic factors. b. sociocultural factors. c. substitute products or services. d. technological factors.

c

The political/legal segment of an environment represents a. the political preferences of different ethnic groups in the society. b. the technological values of different political entities in society. c. how organizations and governments mutually try to influence each other. d. the system of regulations governments at all levels place on businesses.

c

Understanding how new knowledge can develop new products, processes, or materials is a result of analyzing the segment of the general environment. a. economic b. political/legal c. technological d. global

c

When analysts develop feasible projections of future events and how quickly they will occur based on observed changes and trends, they are engaged in a. scanning. b. monitoring. c. forecasting. d. assessing.

c

When rival firms compete aggressively by trying to attract competitors' customers, this might be an indication of a. an industry with low exit barriers. b. increasing economies of scale. c. slow industry growth. d. high bargaining power among buyers.

c

Which of the following pairs of companies would be least likely to be examined together as part of competitive analysis? a. Wendy's and Taco Bell b. Sony and Apple c. Dell and Microsoft d. Coca-Cola and PepsiCo

c

A competitor analysis includes all of the following about competitors EXCEPT a. future objectives. b. current strategy. c. assumptions. d. traditions.

d

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 a. raise prices on washing machines to offset lost sales. b. be vulnerable to new entrants to an attractive market. c. suffer from intense rivalry from international manufacturers. d.offer rebates and incentives for customers who purchase washing machines

d

Aardvark Corp. has three products. Two products together make up two-thirds of revenues and constitute 50 percent of company profits. Aardvark's third product makes up one-third of sales. With profitability far above the industry average, this product is responsible for one-half of Aardvark's profits. Which of the following statements regarding assessment of the general environment is accurate for Aardvark? a. The company should monitor the general environment for changes that might affect the revenue of all products. b. The company should monitor the general environment for changes that might affect the profitability of the most profitable products. c. The company should monitor the general environment for changes that might affect the profitability of all products. d. The company should monitor the general environment for changes that might affect the revenue and profitability of all products.

d

All of the following are ethical sources of data for external analysis EXCEPT a. trade shows. b. a competitor's annual reports. c. a competitor's help-wanted advertisements. d. a competitor's confidential memos.

d

All of the following are examples of efforts by firms to address the physical segment of the general a. development of sustainable packaging by McDonald's. b. reduction in carbon dioxide emissions by Procter & Gamble. c. reduction in water usage in plants by Unilever. d. increase in hiring of women and minorities at Microsoft.

d

An analysis of the economic segment of the external environment would include all of the following EXCEPT a. interest rates. b. trade deficits or surpluses. c. inflation rates. d. income distribution.

d

An industry is defined as a. a group of firms producing the same products or services. b. firms producing items that sell through the same distribution channels. c. firms that sell the same products or services to the same customer base. d. a group of firms producing products that are close substitutes.

d

Applications developed for iPhones make the phone more valuable to iPhone users. App developers are to Apple. a. suppliers b. customers c. competitors d. complementors

d

As customers come to believe that a firm's product is unique, this allows the firm to a. decrease its advertising expenditures. b. customize its product. c. force other companies out of the market by lowering prices. d. obtain loyal customers.

d

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. a. economic b. political/legal c. technological d. sociocultural

d

Competitor intelligence could ethically come from all of the following EXCEPT a. court records. b. financial reports. c. trade show discussions. d. eavesdropping.

d

Counterfeiting goods and exporting them from China is a. ethical and legal. b. unethical but legal. c. ethical but illegal. d. unethical and illegal.

d

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? a. the sociocultural environment b. the demographics of the environment c. the economy of the local area d. the power of the customers/buyers

d

Green restaurant design, sustainable packaging, waste management, and energy efficiency are aspects of the segment of the general environment that McDonald's has sought to address (Chapter 2 Strategic Focus). a. technological b. political/legal c. global d. physical

d

In analyzing the demographic segment of the general environment, one typically examines all of the following factors EXCEPT a. age structure. b. ethnic mix. c. distribution of income. d. cultural values.

d

The Obama administration sought to pursue policies that would a. remove the United States from NAFTA. b. abolish antitrust laws. c. increase the amount of work U.S. companies outsource to firms in other nations. d. reduce the amount of work U.S. companies outsource to firms in other nations.

d

The U.S. Hispanic market is the third-largest "Latin American" economy behind Brazil and Mexico. This impacts the aspect of demographic segment analysis. a. age structure b. geographic distribution c. income distribution d. ethnic mix

d

The large amount of advertising by firms such as Procter & Gamble and Colgate-Palmolive is an example of what kind of barrier to entry? a. access to distribution channels b. capital requirements c. economies of scale d. product differentiation

d

The next critical technological opportunity for organizations is predicted to be a. the Internet. b. multiphasic interventions. c. biological engineering. d. wireless communications.

d

The recent joint ventures formed by BP with Russian and Indian partners show the importance of the segment of the general environment that BP and other integrated oil firms have to manage when contending with scarce resources. a. political/legal b. physical c. demographic d. global

d

The use of the Internet by Netflix to collect data on customer preferences is an example of a. assessing. b. monitoring. c. forecasting. d. scanning.

d

When consumers change phone service providers they are frequently required to maintain service with the provider for a specified time period. This is an example of a a. cost to a producer to exchange equipment in a facility when new technologies emerge. b. cost of changing the firm's strategic group. c. one-time cost suppliers incur when selling to a different customer. d. one-time cost customers incur when buying from a different supplier.

d

Which of the following explains, in part, why rivalry among McDonald's, Wendy's, and Burger King is intense? a. There is low geographic saturation of the market. b. There is high differentiation among competing products. c. The threat of supplier forward integration is low. d. These companies are trying to find ways to differentiate their products.

d

Which of the following intelligence-gathering techniques is most likely to be legal and ethical? a. hiring investigators to examine the competitor's trash b. entering a competitor's production plant without authorization c. redirecting a competitor's emails to one's own company d. attending trade show presentations given by a competitor's employees

d

Which of the following is NOT an entry barrier to an industry? a. expected competitor retaliation b. economies of scale c. customer product loyalty d. bargaining power of suppliers

d

Which of the following would be an example of the application of the next major technological opportunity for organizations? a. Boeing's Dreamliner b. Toyota's hybrid vehicles c. Philip Morris International's smokeless tobacco d. Amazon's Kindle

d