GEB4891 MIDTERM REVIEW CH. 1-6 (Chapter 3)

115) What is the range for a firm's total weighted score in an External Factor Evaluation Matrix?

1 to 4

5) Five major categories of external variables are

1) economic forces, 2) social, cultural, demographic, and natural environment forces, 3) political, governmental, and legal forces, 4) technological forces and 5) demographic forces. : TRUE

45) According to Michael Porter, five competitive forces create vital opportunities and threats to organizations

1) new entrants, 2) substitute products or services, 3) bargaining power of suppliers, 4) bargaining power of buyers, and 5) rivalry among existing firms. : TRUE

113) A total weighted score of _______ in an EFE Matrix indicates that the firm's strategies are NOT capitalizing on opportunities or avoiding external threats.

1.0

84) Japan's elderly population ratio is _______ percent.

17

80) The world population is expected to grow to an estimated ________ billion in 2054.

9

92) Which of the following sectors of the economy would be most impacted by technological developments?

Aeronautics

98) Which statement about business intelligence is accurate?

Business intelligence is not equal to espionage.

95) Which of the following is NOT a characteristic that describes the most competitive companies in America?

Divestiture is essential to growth.

11) Economic factors do not have much impact on the attractiveness of strategies.

FALSE

72) The I/O approach to competitive advantage advocates that external factors are ________ internal factors in a firm achieving competitive advantage.

more important than

68) Identifying and evaluating key social, political, economic, technological and competitive trends and events comprise

performing an external audit.

91) Not all sectors of the economy are equally affected by technological developments; the ________ industry is much more volatile than the ________ industry.

pharmaceutical; forestry

90) All of the following are political, governmental, and legal variables that can represent key opportunities or threats to organizations EXCEPT

population changes by race, age, sex, and level of affluence

86) Changes in which of the following can significantly affect firms?

All of the above

67) ________ is NOT part of an external audit.

Analyzing financial ratios

105) If suppliers are unreliable or too costly, which of these strategies may be appropriate?

Backward integration

102) What is NOT one of Michael Porter's five competitive forces?

Bargaining power of unions

116) One difference between CPM and EFE is that

CPM includes both internal and external issues.

12) An increase in interest rates is directly related to an increase in discretionary income and an increase in the demand for discretionary goods.

FALSE

13) Motor vehicle firms in the United States are vulnerable when the value of the dollar falls.

FALSE

14) A low value of the dollar means lower exports and higher imports.

FALSE

18) Remaining solely domestic is an increasingly safer strategy for U.S. companies.

FALSE

19) There is a trend of people moving to the West Coast from the Rocky Mountain states for more affordable living.

FALSE

2) An external audit focuses on identifying and evaluating trends and events within the control of management.

FALSE

21) There are now more American households consisting of married couples with children than of people living alone or with unrelated people.

FALSE

22) In the United States, the population has been moving from the South and West to the Northeast and Midwest.

FALSE

23) More Americans are moving than staying in place.

FALSE

24) The trend toward an older America is bad news for restaurants, hotels, airlines and home builders.

FALSE

3) The aim of an external audit is to develop an exhaustive list of every possible factor that could influence the business.

FALSE

30) The United States has been more active than other nations in protectionist measures and has engaged in many "Buy American" policies.

FALSE

36) Corporate intelligence can be defined as a systematic and ethical process for gathering and analyzing information about the competition's activities and general business trends to further a business' own goals.

FALSE

37) Internal opportunities can be represented by major competitors' weaknesses.

FALSE

42) Running a competitive intelligence program requires lots of people, computers, and other resources.

FALSE

43) Intelligence gathering is an unethical business practice.

FALSE

44) Market commonality is the extent to which the type and amount of a firm's internal resources are comparable to a rival.

FALSE

46) The first step for using Porter's Five-Forces Model is to evaluate the relative strength of each competitive force.

FALSE

47) Bargaining power of consumers is usually the most powerful of Porter's five competitive forces.

FALSE

50) A forward integration strategy is used by firms to gain control or ownership of suppliers.

FALSE

53) Qualitative forecasts are most appropriate when historical data are available and when the relationships among key variables are expected to remain the same in the future.

FALSE

55) Linear regression is based on the assumption that the future will be different from the past.

FALSE

56) Assumptions have no place in planning.

FALSE

58) While forecasts might not be perfect, they are never wildly inaccurate.

FALSE

59) Organizations never develop their own projections.

FALSE

61) A total weighted score of 1.0 for an EFE Matrix indicates that the firm is responding in an outstanding way to existing opportunities and threats in its industry.

FALSE

63) Regardless of the number of key opportunities and threats included in an External Factor Evaluation Matrix, the highest possible total weighted score for an organization is 4.0, and the lowest possible total weighted score is 0.0.

FALSE

64) A Competitive Profile Matrix allows strategists to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information.

FALSE

66) The critical success factors in a Competitive Profile Matrix are often the same as those in an EFE Matrix.

FALSE

8) Freund argues that key external factors must not be hierarchical.

FALSE

9) The I/O approach to competitive advantage advocates that internal factors are more important than external factors in a firm achieving competitive advantage.

FALSE

108) What are educated assumptions about future trends and events called?

Forecasts

106) What level of bargaining power do consumers have when the products being purchased are standard or undifferentiated?

High

112) Standard and Poor's Industry Surveys include all of the following sections EXCEPT

Historic Environment

97) ________ is not a basic mission of a competitive intelligence program.

Identifying industry executives who could be hired by the firm

114) What is the first step in designing an EFE Matrix?

Identifying key external factors in the industry

73) According to I/O theorists, which of the following contributes least to firm's performance?

Internal resources

82) Who are the world's longest-living people?

Japanese

81) Hawaii, California, and ________ already have no majority race or ethnic group.

New Mexico

78) It is predicted that the United States will have how many racial or ethnic majorities by the year 2075?

None

85) When an industry relies heavily on government contracts, which forecasts can be the most important part of an external audit?

Political

103) According to Porter, what is usually the most powerful of the five competitive forces?

Rivalry among competing firms

88) ________ perhaps has instituted the most protectionist measures in recent months by raising tariffs on most imports and subsidizing its own exports.

Russia

76) What effect do trends in the dollar's value have on companies in different industries and in different locations?

Significant and unequal

1) Industry analysis is also referred to as external strategic management audit.

TRUE

10) Consumer spending rebounded nicely in 2011 from 2010.

TRUE

15) The low value of the dollar benefits the U.S. economy in many ways.

TRUE

16) The United States is getting older and less white.

TRUE

17) It is predicted that, by 2025, over 18% of the population in the United States will be 65 years or older.

TRUE

20) By 2075, the United States will have no racial or ethnic majority.

TRUE

25) Apartment complexes for the elderly have increased across the United States.

TRUE

26) Political, governmental, and legal factors can represent key threats or opportunities for both small and large organizations.

TRUE

27) Political forecasts can be the most important part of an external audit for firms that depend heavily on government contracts.

TRUE

28) In the face of a deepening global recession, countries worldwide are resorting to protectionism to safeguard their own industries.

TRUE

29) India is increasing tariffs on foreign steel.

TRUE

31) The Internet is changing the very nature of many industries by altering product life cycles and changing the historical trade-off between production standardization and flexibility.

TRUE

32) In practice, critical technology decisions are too often delegated to lower organizational levels or are made without an understanding of their strategic implications.

TRUE

33) Walgreens and CVS pharmacies are located generally across the street from each other and battle each other every day on price and customer service.

TRUE

34) A characteristic that describes the most competitive companies in America is "whether it's broke or not, fix it - make it better; not just products, but the whole company if necessary."

TRUE

35) "Innovate or evaporate; particularly in technology-driven businesses, nothing quite recedes like success," is a characteristic that describes the most competitive companies in America.

TRUE

38) Major competitors' strengths may represent key threats.

TRUE

39) Hiring top executives from rival firms is a way companies obtain competitive intelligence.

TRUE

4) External audits attempt to identify key variables that offer actionable responses.

TRUE

40) An effective CI program allows all areas of a firm to access consistent and verifiable information in making decisions.

TRUE

41) Competitive intelligence is not considered corporate espionage because 95 percent of the information a company needs to make strategic decisions is available and accessible to the public.

TRUE

48) Significant barriers to entry are not always sufficient to keep some new firms from entering industries with higher-quality products, lower prices, and substantial marketing resources.

TRUE

49) Laser eye surgery would be considered a substitute product for eyeglasses and contact lenses.

TRUE

51) The bargaining power of consumers can be the most important force impacting competitive advantage.

TRUE

52) Forecasts are educated assumptions about future trends and events.

TRUE

54) Quantitative forecasts become less accurate as historical relationships become less stable.

TRUE

57) Without reasonable assumptions, the strategy-formulation process could not proceed effectively.

TRUE

6) As many managers and employees as possible should be involved in the process of performing an external audit.

TRUE

60) Wild guesses should never be part of the planning process.

TRUE

62) In an EFE Matrix, opportunities often receive higher weights than threats, but threats too can receive high weights if they are especially severe or threatening.

TRUE

65) The weights and total weighted scores in both a Competitive Profile Matrix and an EFE Matrix have the same meaning.

TRUE

7) To perform an external audit, a company first must gather competitive intelligence and information about social, cultural, demographic, environmental, economic, political, legal, governmental, and technological trends.

TRUE

75) What happens when interest rates rise?

The demand for discretionary goods decreases

77) In general, what happens to American goods in overseas markets when there is a strong dollar?

They are more expensive.

110) Unpublished sources of external strategic information include all of the following EXCEPT

abstracts

69) The process of performing an external audit needs to include

as many managers and employees as possible.

96) A systematic and ethical process for gathering and analyzing information about the competition's activities and general trends to further a business' own goals is called

competitive intelligence.

99) The responsibilities of a director of competitive analysis include all of the following EXCEPT

conducting corporate espionage

107) The Internet has made it _______ for firms to gather, assimilate, and evaluate information.

easier

74) The high unemployment rate in the U.S. is an example of a(n) ________ force affecting business.

economic

70) To perform an external audit, a company first must

gather competitive intelligence and information about external trends

79) The United States' population is ________.

getting older and less white

87) Many economists say the current rash of trade constraints will make it ________ for global economic growth to recover from the global recession.

harder

109) Without assumptions, planning would be

impossible.

104) Whenever new firms can easily enter a particular industry, the intensity of competitiveness among firms tends to

increase.B

94) Competition in virtually all industries is ________.

intense

101) Intensity of competition ________ in lower-return industries.

is highest

71) Freund emphasizes that key external factors should be all of these EXCEPT

relatively few in number

93) Collecting and evaluating information on competitors is essential for successful

strategy formulation.

111) Which of the following is not a published source of external strategic information?

television programs

83) Americans were on the move in a population shift to _______, but the recession and housing bust nationwide has slowed migration throughout the United States.

the South and West

89) Which of the following has largely refrained from protectionist measures?

the U.S.

100) Market commonality can be defined as

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