Chapter 2—The External Environment: Opportunities, Threats, Industry Competition, and Competitor Ana
Chapter 2—The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis
MULTIPLE CHOICE
According to the chapter’s Opening Case on Philip Morris International, the company’s joint venture with Swedish Match to market smokeless tobacco is a move to address which segment of the general environment?
a. Political/legal.
b. Global.
c. Technological.
d. Sociocultural.
ANS: D PTS: 1 DIF: Medium REF: 36
OBJ: 02-01 TYPE: application
NOT: AACSB: Reflective Thinking Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
1. As the Opening Case in chapter 2 notes, Philip Morris International’s commitment to sustainable tobacco farming, efficient use of natural resources, reducing waste in manufacturing, eliminating child labor, and giving back to its communities is part of its actions in the ________________segment of the general environment. a. physical
b. political/legal
c. sociocultural
d. industry
ANS: A PTS: 1 DIF: Medium REF: 36
OBJ: 02-01 TYPE: application
NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing the task environment
2. Analysis of the _____________segment of the general environment led Philip Morris International to conclude that fewer people would risk disease by consuming tobacco products. a. political/legal
b. physical
c. demographic
d. sociocultural
ANS: D PTS: 1 DIF: Medium REF: 35
OBJ: 02-06 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Managing the task environment
3. 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. But, 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.
ANS: C PTS: 1 DIF: Hard REF: 36-37
OBJ: 02-01 TYPE: application
NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing strategy & innovation
4. The three parts of the external environment which affect a firms strategic actions are
a. economic, political, and legal
b. general, industry, and competitor
c. industry, business, and product
d. local, national, and global
ANS: B PTS: 1 DIF: Easy REF: 37
OBJ: 02-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing decision-making processes
5. 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
ANS: A PTS: 1 DIF: Medium REF: 37
OBJ: 02-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
6. The environmental segments that comprise the general environment typically will NOT include a. demographic factors.
b. sociocultural factors.
c. substitute products or services.
d. technological factors.
ANS: C PTS: 1 DIF: Hard REF: 38 (Table 2.1)
OBJ: 02-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
7. 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 effect the revenue of all products.
b. The company should monitor the general environment for changes that might effect the profitability of the most profitable products.
c. The company should monitor the general environment for changes that might effect the profitability of all products.
d. The company should monitor the general environment for changes that might effect the revenue and profitability of all products.
ANS: D PTS: 1 DIF: Medium REF: 37-39
OBJ: 02-02 TYPE: comprehension
NOT: AACSB: Reflective Thinking Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
8. Which of the following is NOT an activity used in the external environmental analysis process? a. Scanning
b. Decrypting
c. Monitoring
d. Assessing
ANS: B PTS: 1 DIF: Medium REF: 39 (Table 2.2) | 39-43
OBJ: 02-03 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing decision-making processes
9. 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
ANS: B PTS: 1 DIF: Hard REF: 40
OBJ: 02-03 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing decision-making processes
10. 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.
ANS: D PTS: 1 DIF: Medium REF: 40
OBJ: 02-03 TYPE: application
NOT: AACSB: Ethics | Management: Ethical Responsibilities | Dierdorff & Rubin: Managing the task environment
11. 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.
ANS: C PTS: 1 DIF: Medium REF: 41
OBJ: 02-03 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing decision-making processes
12. The Strategic Focus case notes that several companies have used the environmental analysis process (scanning, monitoring, forecasting, and assessing) to respond to customers’ desire for more value from brand-name products. All of the following are examples of “different” values that companies are providing as a result of this process EXCEPT
a. Frito-Lay added 20% more product to selected snack offerings without increasing prices.
b. Kohler provided energy efficient faucets, toilets, and showerheads at the same price as its
less efficient products.
c. GE’s efficient hybrid water heaters that reduced energy costs.
d. Premium-priced builders responded to the trend of buyers wanting larger houses.
ANS: D PTS: 1 DIF: Medium REF: 42
OBJ: 02-03 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing decision-making processes
13. 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.
ANS: A PTS: 1 DIF: Medium REF: 39-40
OBJ: 02-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing decision-making processes
15.
Chapter 2 notes that the European Union and South Korea remain committed to developing trade agreements that benefit both parties. In which segment of an analysis of the general environment would this appear? a. Political/legal.
b. Technological.
c. Global.
d. Physical.
ANS: C PTS: 1 DIF: Medium REF: 49
OBJ: 02-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing decision-making processes
16. 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.
ANS: D PTS: 1 DIF: Easy REF: 43-45
OBJ: 02-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
17. Which of the following identified in an analysis of the general environment is an opportunity for an entrepreneur who wishes to open a business doing “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
ANS: A PTS: 1 DIF: Medium REF: 44
OBJ: 02-04 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing strategy & innovation
18. Analyzing 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 U.S.
ANS: C PTS: 1 DIF: Hard REF: 45
OBJ: 02-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
19. Demographic changes include variations in income distribution. Which of the following statements is true?
a. Firms are most interested in the consumers comprising the top ten percent of the household income.
b. Consumers’ real income has been increasing steadily since 1976.
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.
ANS: C PTS: 1 DIF: Medium REF: 45
OBJ: 02-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
20. In the chapter discussion of the political legal segment of the general environment, it was noted that President Obama’s administration might form policies that would a. remove the U.S. 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.
ANS: D PTS: 1 DIF: Medium REF: 46
OBJ: 02-04 TYPE: comprehension
NOT: AACSB: Multicultural & Diversity | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
21. An analysis of the economic segment of the external environment would include all of the following
EXCEPT
a. interest rates.
b. international trade.
c. the strength of the U.S. dollar.
d. the move toward a contingent workforce.
ANS: D PTS: 1 DIF: Medium REF: 45
OBJ: 02-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
22. 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. inability of economists to provide valid and reliable predictions.
d. an expanding economy in Vietnam.
ANS: B PTS: 1 DIF: Medium REF: 45
OBJ: 02-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
23. 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.
ANS: A PTS: 1 DIF: Medium REF: 45
OBJ: 02-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
24. 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 due to an increase in oil prices.
b. The ability of Ford to issue new debt due to their recent financial performance.
c. The ability of BMW’s buyers to finance car purchases due to a change in interest rates.
d. The willingness of GM buyers to purchase new vehicles due to the threat of recession.
ANS: B PTS: 1 DIF: Hard REF: 45
OBJ: 02-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
25. 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.
ANS: C PTS: 1 DIF: Medium REF: 42
OBJ: 02-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Legal Responsibilities | Dierdorff & Rubin: Managing the task environment
26. All of the following are aspects of the political/legal segment of the general environment EXCEPT a. antitrust laws.
b. attitudes and values.
c. free trade agreements between nations.
d. industries chosen for deregulation.
ANS: B PTS: 1 DIF: Medium REF: 46
OBJ: 02-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
27. An analysis of society’s attitudes and values would be conducted when studying the ____ segment of the general environment. a. sociocultural
b. global
c. demographic
d. economic
ANS: A PTS: 1 DIF: Easy REF: 46
OBJ: 02-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
28. 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 owner fail to take into account when she began selling the lingerie? a. the sociocultural segment
b. the economic segment
c. the demographic segment
d. the political/legal segment
ANS: A PTS: 1 DIF: Medium REF: 46-47
OBJ: 02-04 TYPE: application
NOT: AACSB: Reflective Thinking Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
29. 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.
ANS: A PTS: 1 DIF: Medium REF: 47
OBJ: 02-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
30. 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
ANS: C PTS: 1 DIF: Easy REF: 47
OBJ: 02-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
31. The next critical technological opportunity for organizations is predicted to be a. the Internet.
b. multiphasic interventions.
c. biological engineering.
d. wireless communications.
ANS: D PTS: 1 DIF: Easy REF: 48
OBJ: 02-04 TYPE: knowledge
NOT: AACSB: Information Technology | Management: Information Technology | Dierdorff & Rubin: Managing the task environment
32. Which of the following would be an example of the application of 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.
ANS: D PTS: 1 DIF: Easy REF: 48
OBJ: 02-04 TYPE: knowledge
NOT: AACSB: Information Technology | Management: Information Technology | Dierdorff & Rubin: Managing the task environment
33. The observation that in mid-2009, the global automobile industry had the capacity to build 94 million vehicles per year, 34 million more than actually needed, is an aspect of the ____ segment of the general environment. a. demographic
b. global
c. physical
d. technological
ANS: B PTS: 1 DIF: Easy REF: 48
OBJ: 02-04 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
34. 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.
ANS: C PTS: 1 DIF: Hard REF: 49
OBJ: 02-04 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
35. 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.
ANS: B PTS: 1 DIF: Medium REF: 49
OBJ: 02-04 TYPE: knowledge
NOT: AACSB: Multicultural & Diversity | Management: Group Dynamics | Dierdorff & Rubin: Interpersonal orientation
36. 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
ANS: B PTS: 1 DIF: Easy REF: 49
OBJ: 02-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
37. 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. a. technological
b. political/legal
c. global
d. physical
ANS: D PTS: 1 DIF: Medium REF: 51
OBJ: 02-04 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
38. All of the following are examples of efforts by firms to address the physical segment of the general environment in the Chapter 2 Strategic Focus case EXCEPT a. Sustainable packaging by McDonald’s.
b. Reduction in carbon dioxide emissions by Procter & Gamble.
c. Reduction in water usage in plants by Unilever.
d. Hiring more women and minorities at Microsoft.
ANS: D PTS: 1 DIF: Medium REF: 51
OBJ: 02-04 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
39. The Strategic Focus case on firm’s efforts to take care of the physical environment noted that one popular approach was
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 benefit for employees.
ANS: A PTS: 1 DIF: Medium REF: 51
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |
Dierdorff & Rubin: Managing the task environment
40. 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.
ANS: D PTS: 1 DIF: Easy REF: 50
OBJ: 02-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
41. 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
ANS: A PTS: 1 DIF: Hard REF: 52
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
42. 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
ANS: D PTS: 1 DIF: Medium REF: 52-55
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
43. 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.
ANS: C PTS: 1 DIF: Medium REF: 52-55
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
44. Economies of scale refer 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.
ANS: C PTS: 1 DIF: Hard REF: 53
OBJ: 02-05 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
45. The large expenditures on 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.
ANS: D PTS: 1 DIF: Medium REF: 53-55
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
46. Product differentiation refers to the
a. ability of the buyers 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.
ANS: C PTS: 1 DIF: Medium REF: 53
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Managing strategy & innovation
47. Switching costs refer to the
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 costs suppliers incur when selling to a different customer.
d. one-time costs customers incur when buying from a different supplier.
ANS: D PTS: 1 DIF: Medium REF: 54
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
48. 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.”
ANS: C PTS: 1 DIF: Easy REF: 54
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
49. 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.
ANS: D PTS: 1 DIF: Medium REF: 54
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
50. 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.
ANS: B PTS: 1 DIF: Medium REF: 54
OBJ: 02-05 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
51. In the case of a retail business dependent on drive-in customers, the major cost disadvantage independent of scale would be
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.
ANS: A PTS: 1 DIF: Easy REF: 54
OBJ: 02-05 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
52. 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. The cost of the marble will be expensive because of the high strategic stakes involved.
ANS: A PTS: 1 DIF: Medium REF: 55
OBJ: 02-05 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
53. 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.
ANS: C PTS: 1 DIF: Hard REF: 55
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
54. In the airline industry, consolidation among fuel providers serving airport facilities would be considered as ____ factor in the five forces model of competition.
a. a reduction of the airlines’ abilities to enjoy economies of scale
b. an increase in switching costs because the airlines have no choice but to use jet fuel and other oil products
c. an increase in the bargaining power of suppliers of a critical input
d. an increase in the intensity of rivalry among airlines for scarce resources
ANS: C PTS: 1 DIF: Medium REF: 55
OBJ: 02-05 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
55. 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 due to the critical nature of what they provide to the blood bank.
b. Blood donors are suppliers and are powerful due to their concentration relative to the blood bank.
c. Blood donors are buyers and are not due to low switching costs needed to change to alternative inputs.
d. Blood donors are buyers and are powerful due to the volume of blood needed.
ANS: A PTS: 1 DIF: Medium REF: 55
OBJ: 02-05 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
56. 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.
ANS: A PTS: 1 DIF: Hard REF: 55-56
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
57. 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 socio-cultural environment
b. the demographics of the environment
c. the economy of the local area
d. the power of the customers/buyers
ANS: D PTS: 1 DIF: Hard REF: 56
OBJ: 02-05 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
58. 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.
ANS: C PTS: 1 DIF: Medium REF: 56
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
59. 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.
ANS: B PTS: 1 DIF: Medium REF: 56
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
60. 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.
ANS: B PTS: 1 DIF: Medium REF: 56
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
61. 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.
ANS: C PTS: 1 DIF: Medium REF: 57
OBJ: 02-05 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
62. The existence of high exit barriers such as ownership of specialized assets (e.g., large aircraft) in the airline industry indicates that
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.
ANS: C PTS: 1 DIF: Hard REF: 58
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
63. 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.
ANS: D PTS: 1 DIF: Hard REF: 57
OBJ: 02-05 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
64. 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.
ANS: C PTS: 1 DIF: Hard REF: 57
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
65. 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.
ANS: A PTS: 1 DIF: Medium REF: 57
OBJ: 02-05 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
66. Rivalry between Dell, Hewlett-Packard, and other computer manufacturers is intense in part because
a. low geographic saturation of the market.
b. the high differentiation among competing products.
c. the low threat of supplier forward integration.
d. lack of differentiation among competing products.
ANS: D PTS: 1 DIF: Hard REF: 57-58
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
67. 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 their 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 the component due to low strategic stakes.
d. Circuit will likely discontinue manufacture the component due to high supplier stakes.
ANS: B PTS: 1 DIF: Medium REF: 58
OBJ: 02-05 TYPE: application
NOT: AACSB: Reflective Thinking Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
68. 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.
ANS: A PTS: 1 DIF: Medium REF: 58
OBJ: 02-05 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
69. An owner of a stable of racehorses has been earning below-average returns for over 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.
ANS: A PTS: 1 DIF: Hard REF: 58
OBJ: 02-05 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
70. 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.
ANS: A PTS: 1 DIF: Hard REF: 59
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
71. 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.
ANS: B PTS: 1 DIF: Hard REF: 59
OBJ: 02-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
72. 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.
ANS: A PTS: 1 DIF: Easy REF: 59
OBJ: 02-06 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
73. Firms within strategic groups
a. follow dissimilar strategies.
b. follow similar strategies across certain dimensions.
c. typically engage in greater amounts of intergroup rivalry than intragroup rivalry.
d. exist almost exclusively in the manufacturing sector.
ANS: B PTS: 1 DIF: Medium REF: 59
OBJ: 02-06 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
74. All of the following are implications of strategic groups EXCEPT
a. the strength of the five forces differ 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.
ANS: B PTS: 1 DIF: Medium REF: 59
OBJ: 02-06 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment
75. 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.
ANS: A PTS: 1 DIF: Medium REF: 59