Essentials of strategic management – evaluating a company’s external

Essentials of Strategic Management
Evaluating a Company’s External Environment- CH3
Your Results:
The answer for each question is indicated by a  .

 

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.
    

 

 

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