Indicate the answer choice that best completes the statement or answers the question.

1. 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.

2. 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.

3. 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

4. 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. Which of the following
effects 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.

5. 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.

6. 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.

7. The likelihood of entry of new competitors is affected by __________ and __________.

  a. barriers to entry; the expected retaliation of current industry participants
  b. the power of existing suppliers; buyers

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  c. the profitability of the industry; the market share of its leading firm
  d. the demand for the product; the profitability of the competitors

8. 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.

9. Acme Valves, Inc., has been a successful player in the oil field supply industry in the last 15 years. Acme maintained its
strategy and product characteristics over this time period. However, the company 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.

10. 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.

11. The competition between firms within a strategic group is:

  a. greater than the competition a member of a strategic group and companies outside that strategic
group.
  b. less intense than 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.

12. 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.

13. The three parts of the external environment that 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.

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

15. 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

16. The observation that China reached automotive production overcapacity in 2015, and has a glut of extra cars, is an
aspect of the __________ segment of the general environment.
  a. demographic
  b. global
  c. physical
  d. technological

17. 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.

18. Which of the following would be an example of the application of the next major technological opportunity for
organizations?
  a. Boeing's 747
  b. Toyota's hybrid vehicles
  c. Budweiser’s non-alcoholic beer
  d. SpaceX’s reusable space
vehicle

19. 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.

20. The next critical technological opportunity for organizations is predicted to be:

  a. the Internet.
  b. multiphasic interventions.
  c. biological engineering.
  d. wireless communication.

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

22. Exit barriers to a firm include all of the following EXCEPT:

  a. generic assets.
  b. loyalty to employees.
  c. government concern about job loss.
  d. restrictive labor agreements.

23. 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.

24. 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 of the following segments of the environment did the store owners fail to take into
account when they began selling the lingerie? 
  a. Sociocultural 
  b. Economic 
  c. Demographic 
  d. Political/legal 

25. All of the following are examples of efforts by firms to address the physical segment of the general environment
EXCEPT the:
  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.

26. Counterfeiting goods and exporting them from China is: 

  a. ethical and legal.
  b. unethical but legal.
  c. ethical but illegal.
  d. unethical and illegal.

27. 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 set of data and information the firm gathers to better understand competitors' objectives, strategies,
assumptions, and capabilities.
  d. illegal to gather under the Sarbanes-Oxley Act.

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

29. 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 disadvantages independent of scale
  b. government policy
  c. capital requirements
  d. product differentiation

30. 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 the 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.

31. 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.

32. Blood banks are highly dependent on donors. In the terminology of industry analysis, which of the following
statements about 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.

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

34. 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 as well. The main barrier to entry that DWK is likely to encounter here is:
  a. government licensing and permits.
  b. access to distribution channels.
  c. consumers' switching costs.

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  d. cost disadvantages independent of scale.

35. All of the following are aspects of the political/legal segment of the general environment EXCEPT:
  a. antitrust laws.
  b. attitudes and values.
  c. taxation laws.
  d. deregulation philosophies.

36. 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

37. 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.

38. The technological segment of environmental analysis includes:

  a. institutions and activities involved in 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 used by a firm to gain a competitive advantage.
  d. places where a firm's technology will allow that firm to dominate a given market.

39. Which of the following is NOT an activity used in the external environmental analysis process?
  a. Scanning
  b. Decrypting
  c. Monitoring
  d. Assessing

40. 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.

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

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

43. 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.

44. Circuit Inc. 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 that is an essential differentiating feature for most of
its consumer products. The costs to manufacture this component have risen sharply in recent months. Internal estimates
now indicate the company is breaking even on the manufacture of this component. Which of the following is MOST
likely?
  a. Circuit Inc. will likely continue to manufacture the component, even at a loss, due to low supplier power.
  b. Circuit Inc. will likely continue to manufacture the component, even at a loss, due to high strategic
stakes.
  c. Circuit Inc. will likely discontinue manufacture of the component due to low strategic stakes.
  d. Circuit Inc. will likely discontinue manufacture of the component due to high supplier stakes.

45. 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.

46. Green design, sustainable packaging, waste management, and energy efficiency are aspects of the __________
segment of the general environment that companies have sought to address with environmental sustainability initiatives.
  a. technological
  b. political/legal
  c. global
  d. physical

47. 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.

48. 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

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  d. ethnic mix

49. 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.

50. 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

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Answer Key

1. c 40. c

2. c 21. d 41. c

3. b 22. a 42. d

4. a 23. b 43. c

5. c 24. a 44. b

6. c 25. d 45. d

7. a 26. d 46. d

8. c 27. c 47. a

9. c 28. b 48. b

10. a 29. b 49. c

11. a 30. a 50. d

12. d 31. b

13. b 32. a

14. b 33. a

15. a 34. b

16. b 35. b

17. d

18. d

19. d

20. d

36. d

37. c

38. a

39. b

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