Evaluating a Company's External Environment- CH3
1 Which of the following is not one of the
questions that needs to be answered in thinking strategically about a company's
external environment?
A) What kinds of competitive forces are
industry members facing, and how strong is each force?
B) What market positions do industry rivals
occupy—who is strongly/weakly positioned and who is not?
C) What are the strategically relevant factors
in the company's macro-environment?
D) What are the company's competitively
valuable resources and capabilities that can be used to form the foundation of
its competitive approach?
E) What forces are driving changes in the
industry, and what impact will these changes have on competitive intensity and
industry profitability?
2 In identifying a company's broader
macro-environment, the following have strategic significance _______________
A) market size and growth rate, the number of
buyers, the scope of competitive rivalry, the number of rivals, demand-supply
conditions, product innovation, the presence of scale economies and/or learning
or experience curve effects, and the pace of technological change.
B) the threat of additional entry into the
industry and what the industry's key success factors are.
C) the strength of competitive pressures from
producers of substitute products and which competitors are in which strategic
groups.
D) the extent and importance of
seller-supplier collaborative partnerships, the extent and importance of
seller-buyer collaborative partnerships, and the bargaining leverage of sellers
and buyers.
E) general economic conditions, societal
values and cultural norms, political and legal/regulatory factors,
technological factors, and ecological considerations.
3 Which of the following is not a relevant
factor in conducting a PESTEL analysis?
A) how often sellers alter their prices, how
sensitive buyers are to price differences among sellers, whether the item being
purchased is a good or a service, and whether buyers buy frequently or
infrequently.
B) interest rates, exchange rates,
unemployment rates, inflation rates, and economic growth.
C) cultural, lifestyle, and demographic
changes.
D) the birth of new industries, new knowledge,
and disruptive technologies.
E) weather, climate change, and water
shortages.
4 Based on both the chapter discussion and the
summary in Figure 3.4, competitive pressures stemming from substitute products
are weaker when _______________
A) substitutes are higher-priced, buyers don't
believe substitute products have equal or better features, and buyers' costs of
switching to substitutes are relatively high.
B) the industry consists of a relatively large
number of rival sellers that are fairly equal in size and competitive
capability.
C) entry barriers are moderately high but by
no means prohibitive and there is a fairly small pool of entry candidates.
D) a number of customers buy in large volumes
and are in a strong bargaining position to win concessions from sellers.
E) buyer loyalty to the products they are
currently purchasing is relatively low.
5 Which of the following is not a factor in
determining whether the suppliers to an industry are a source of strong,
moderate, or weak competitive pressures?
A) Whether certain needed inputs are in short
supply.
B) Whether it is difficult or costly for
industry members to switch their purchases from one supplier to another or to
switch to attractive substitute inputs.
C) Whether the item being supplied is a
standard commodity that is readily available from many suppliers at the going
market price.
D) Whether the industry supply chain is global
or mostly national, whether suppliers have a wide or narrow product line, and
whether industry members place orders frequently or infrequently with
suppliers.
E) Whether certain suppliers provide a
differentiated input that enhances the performance or quality of the industry's
product.
6 Which of the following is not a reason that
industry rivals are often motivated to enter into strategic partnerships with
key suppliers?
A) To enhance the quality of parts and
components being supplied and/or to reduce defect rates.
B) To speed the availability of
next-generation components.
C) To reduce the bargaining power they face
from buyers of their products.
D) To squeeze out important cost savings for
both themselves and their suppliers.
E) To reduce inventory and logistics costs.
7 According to both the text discussion and the
summary in Figure 3.6, competitive pressures associated with the threat of new
entrants grow stronger when _______________
A) buyer demand is growing slowly and the pool
of entry candidates is small.
B) the number of customers for the industry's
product is large and the product offerings of rival sellers are strongly
differentiated.
C) industry members are looking to expand
their market reach by entering product segments or geographic areas where they
currently do not have a presence, when current industry members are unable or
unwilling to strongly contest the entry of newcomers, and when a newcomer can
reasonably expect to earn attractive profits.
D) there are not many competitors already in
the industry, their products are highly differentiated, and buyers are brand
loyal.
E) a small percentage of companies in the
industry are currently earning above-average profits, entry barriers are high,
and buyers are not brand loyal.
8 Which of the following conditions generally
raise the barriers to entering an industry?
A) Low levels of brand loyalty on the part of
customers and the presence of more than 20 rivals in the industry.
B) Rapid market growth, low buyer switching
costs, and weak brand preferences and customer loyalty.
C) Product offerings that are pretty much
standardized from rival to rival.
D) High capital requirements, difficulties in
building a network of distributors-retailers and securing adequate space on
retailers' shelves, and the likelihood that industry incumbents will strongly
contest the efforts of new entrants to gain a market foothold.
E) The industry is not characterized by scale
economies and/or sizable learning or experience curve effects and few firms in
the industry hold key patents and/or possess significant proprietary technology
not readily available to a newcomer.
9 According to both the text discussion and the
summary in Figure 3.7, which of the following is not among the factors that
determine whether competitive rivalry among industry members is strong,
moderate, or weak?
A) Whether buyer demand for the product is
growing rapidly or slowly.
B) Whether customers' costs to switch brands
is low or high.
C) How active industry rivals are in
initiating fresh competitive moves and in using the various weapons of
competition to improve their market standing and business performance.
D) Whether there are few or many rival sellers
and whether there are big differences in their sizes and competitive
capabilities.
E) Whether industry members are vertically
integrated and whether the industry is characterized by significant scale
economies and rapid technological change.
10 The rivalry among competing sellers in an
industry intensifies _______________
A) when buyer demand for the product is
growing rapidly.
B) when customers are brand loyal and their
costs to switch to competing brands or substitute products are relatively high.
C) when buyer demand is strong and sellers
have little or no excess capacity and only minimal inventories.
D) as the number of rivals increases and as
they become more equal in size and competitive capability.
E) when the products of rival sellers are
highly differentiated products and the industry consists of so many rivals that
any one company's actions have little direct impact on rivals' business.
11 Factors that cause the rivalry among competing
sellers to be weak include _______________
A) low buyer switching costs.
B) slow growth in buyer demand.
C) rapid growth in buyer demand, buyer costs
to switch brands are high, and so many industry rivals that any one company's
actions have little impact on the businesses of its rivals.
D) standardized or else weakly differentiated
products among rival sellers.
E) the presence of one or more rivals that are
dissatisfied with their current position and market share.
12 As a rule, the stronger the collective impact
of the five competitive forces, _______________
A) the more strategic groups there are in an
industry.
B) the lower the number of industry key
success factors.
C) the lower the combined profitability of
industry participants and the more "competitively unattractive" is
the industry environment.
D) the weaker the industry's driving forces.
E) the higher the barriers to entry and the
less likely it is that industry members will make fresh strategic moves very
frequently.
13 The task of driving forces analysis is to
_______________
A) identify all the underlying factors that
can cause industry profitability to rise or fall in the years ahead.
B) predict what new forces of competitive and
market change will emerge next.
C) determine which of the five competitive
forces is the biggest driver of industry change.
D) identify which companies are being driven
to move from one strategic group to another strategic group.
E) (1) identifying what the driving forces
are, (2) assessing whether the drivers of change are, individually or
collectively, acting to make the industry more or less attractive, and (3)
determining what strategy changes are needed to prepare for the impact of the
driving forces.
14 Which of the following is not among the most
common types of driving forces?
A) Product innovation, marketing innovation,
and increasing globalization of the industry.
B) Changes in the long-term industry growth
rate, changes in who buys the product and how they use it, and growing buyer
preferences for differentiated products.
C) Ups and downs in interest rates, changes in
the number of seller-supplier collaborative alliances, and changes in overall
industry profitability.
D) Emerging new Internet applications and
capabilities, technological change, and the diffusion of technical know-how
across more companies and more countries.
E) Changes in cost and efficiency, the entry
or exit of major firms, and changing societal concerns, attitudes, and
lifestyles.
15 The procedure for constructing a strategic
group map involves _______________
A) identifying the competitive characteristics
that differentiate firms' market positions and competitive approaches.
B) selecting variables for the map's axes that
are highly correlated.
C) using only variables for the map's axes
that are quantitative in nature (qualitative measures of market positions and
competitive approaches are too subjective and unreliable).
D) plotting the firms on a two-variable or
two-dimensional map, drawing circles around those firms occupying about the
same strategy space, and making the size of the circles for each strategic
group proportional to the size of its members' share of total industry sales
revenues.
E) Both A and D.
16 A strategic group map is a helpful analytical
tool for _______________
A) assessing why competitive pressures and
driving forces usually impact the biggest strategic groups more so than the
smaller groups.
B) determining which companies have how big a
competitive advantage and how good their prospects are for increasing their
market shares.
C) determining which company is the most
profitable in the industry and why it is doing so well.
D) determining who competes most closely with
whom; evaluating whether industry driving forces and competitive pressures
favor some strategic groups and hurt others; and ascertaining whether the
profit potential of different strategic groups varies due to the strengths and
weaknesses in each group's respective market positions.
E) pinpointing which of the five competitive
forces is the strongest and which is the weakest.
17 Trying to determine what strategic moves
rivals are likely to make next _______________
A) is interesting but usually has little
bearing on a company's own best strategic moves.
B) usually requires evaluating the industry's
key success factors as well as determining how many driving forces are present.
C) is best done by monitoring each rival's
market share, earnings per share, and stock price—adverse changes in these
measures signal the coming of a fresh move but as long as a company's
performance on these measures is satisfactory the chance of fresh moves is
slim.
D) cannot be done effectively without first
drawing a strategic group map.
E) entails each rival's situation,
understanding the thinking of their managers, and evaluating the relative
merits of their strategic options.
18 An industry's key success factors
_______________
A) can best be determined by studying the
strategies of those companies in the industry's best strategic group and those
in the worst strategic group.
B) concern the particular product attributes,
competencies, competitive capabilities, and intangible assets with the greatest
impact on future success in the industry.
C) are mainly a function of an industry's
macro-environment and dominant economic features.
D) can best be determined by identifying the
similarities in the strategies of rival companies—those strategy elements that
are most commonly found in the strategies of rivals can be considered key
success factors.
E) usually relate to technology and
manufacturing-related capabilities and rarely to distribution or marketing
capabilities.
19 Which of the following is not a good example
of a marketing-related key success factor?
A) A well-known and well-respected brand name.
B) Breadth of product line and product
selection.
C) Product innovation capabilities.
D) Clever advertising.
E) Courteous, personalized customer service.
20 Which of the following is not an important
factor for company managers to consider in drawing conclusions about whether
the industry presents an attractive opportunity?
A) Whether powerful competitive forces are
squeezing industry profitability to subpar levels and whether competition
appears destined to grow stronger or weaker.
B) The industry's growth potential.
C) Whether industry profitability will be
affected favorably or unfavorably by the prevailing driving forces.
D) How many of the industry's key success
factors do companies in the industry typically incorporate into their
strategies.
E) The company's competitive position in the
industry relative to rivals.
