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CHAPTER 04
ENVIRONMENTAL SCANNING AND INDUSTRY ANALYSIS
True/False
1.
Environmental scanning is the monitoring, evaluating, and disseminating of information from the
external and internal environments to key people within the corporation.
Answer: T
2.
Political-legal forces regulate the values, mores, and customs of society.
Answer: F
The transferring of profits from a foreign subsidiary to a corporations headquarters is known as
repatriation of profits.
Answer: T
(p.52)
(p.52)
3.
(p.53)
4.
One of the breakthrough developments in technology is the portable information device.
Answer: T
(p.54)
5.
An example of an economic variable in the societal environment is antitrust regulation.
Answer: F
(p.53)
6.
One of the demographic variables in the societal environment is the changing household
competition.
Answer: T
A multinational corporation is a company with significant assets and activities in multiple
countries.
Answer: T
(p.53)
7.
A corporations internal strategic factors are those key environmental trends that are judged to
have both a medium to high probability of occurrence and a medium to high probability of impact
on the corporation.
Answer: F
(p.56)
8.
(p.59)
9.
An entry barrier is an obstruction that makes it difficult for a company to enter an industry.
Answer: T
(p.61)
10.
One of the possible barriers to entry is product differentiation.
Answer: T
(p.61)
11.
Exit barriers keep a company from entering an industry.
Answer: F
(p.61)
12.
Nutrasweet can serve as a substitute for sugar.
Answer: T
(p.62)
13.
Multidomestic industries are specific to each country or group of countries.
Answer: T
(p.64)
14.
The only factor used to determine whether an industry will be primarily multidomestic or
primarily global is the pressure for local responsiveness.
Answer: F
15.
Reactors are companies with a limited product line that focus on improving the efficiency of their
existing operations.
133
(p.65)
(p.67)
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Answer: F
16.
An industry matrix summarizes the key success factors within a particular industry.
Answer: T
Competitive intelligence is an informal program of gathering information on a companys
competitors.
Answer: F
(p.69)
17.
18.
Brainstorming is a quantitative approach.
Answer: F
(p.70)
(p.72)
19.
23.
24.
c.
d.
e.
(p.52)
(p.52)
(p.52)
What are the two interacting environments that provide the variables and forces affecting how an
organization operates and exists?
a.
b.
c.
d.
e.
(p.72)
strategic factors.
strategic issues.
environmental uncertainty.
strategic fit.
scenarios.
According to the text, one reason environmental uncertainty is a threat to strategic managers is
because
a.
b.
c.
d.
e.
(p.72)
134
(p.52)
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25.
26.
29.
30.
31.
(p.54)
(p.54)
Precision farming
A virtual personal assistant
A genetically altered organism
Alternative energy
Specific farming
(p.54)
10%
20%
30%
50%
60%
(p.53)
repatriation of profits.
expatriation of profits.
transfer of income.
property transfer.
repatriation of revenue.
By the end of the decade, fuel-cells and alternative energy sources will be used at about a level of
____.
a.
b.
c.
d.
e.
28.
27.
(p.53)
(p.53)
local communities
trade associations
governments
technological developments
special interest groups
135
(p.53)
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d.
e.
32.
Which societal force regulates the values, mores, and customs of society?
a.
b.
c.
d.
e.
33.
(p.52)
political-legal forces
labor forces
economic forces
technological forces
sociocultural forces
34.
technological forces
sociocultural forces
(p.52)
political-legal forces
labor forces
economic forces
technological forces
sociocultural forces
Which of the following is NOT one of the seven sociocultural trends mentioned in the text?
(p.54)
a.
b.
c.
d.
e.
35.
According to the U.S Census Bureau, by the year 2050 the percentage of Hispanics in the U.S.
population should reach
a.
b.
c.
d.
e.
36.
38.
(p.56)
multinational corporation
repatriated corporation
transferable corporation
duplicate corporation
emancipated corporation
(p.56)
Whites.
Blacks.
Hispanics.
American Indians.
Asians.
A company with significant assets and activities in multiple countries is known as a(n) _____.
a.
b.
c.
d.
e.
(p.56)
75%.
15%.
9%.
50%.
25%.
37.
136
(p.56)
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b.
c.
d.
e.
39.
One variable that is present in the international societal environment which is not present in the
domestic societal environment is
a.
b.
c.
d.
e.
40.
b.
c.
d.
e.
42.
43.
44.
(p.59)
(p.60)
The issues priority matrix used in environmental scanning is composed of two axis or dimensions
which are labeled
a.
b.
c.
d.
e.
(p.59)
There are too many uncontrollable and extenuating factors which affect the
external environment.
The personal values of a corporation's top managers bias their perception of the external
environment.
Different companies often respond differently to the same environmental changes.
Different ability of their strategic managers to recognize and understand strategic issues
and factors.
Different interpretation of what their strategic managers perceive to be important in the
external environment.
What are the environmental strategic issues that are judged to have a high probability of
occurrence and a high probability of impact on the corporation?
a.
b.
c.
d.
e.
(p.57)
tax laws.
protectionist sentiment.
demographics.
wage levels.
GDP trends.
According to the text, which one of the following is NOT a factor in why few firms successfully
monitor strategic issues?
a.
41.
(p.60)
societal environment.
task environment.
sociocultural environment.
economic environment.
internal environment.
137
(p.60)
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a.
b.
c.
d.
e.
45.
In addition to Porters Five Forces Model, another force added in the text is
a.
b.
c.
d.
e.
46.
d.
e.
48.
49.
50.
(p.61)
Which barrier to entry uses brand identification to force new entrants to spend heavily to
overcome existing customer loyalty?
a.
b.
c.
d.
(p.60)
benefit.
opportunity.
advantage.
threat.
risk.
(p.60)
benefit.
opportunity.
advantage.
threat.
risk.
(p.60)
(p.60)
The collective strength of the interaction of potential entrants, buyers, substitutes, suppliers, firm
rivalry, and other stakeholders determine
a.
b.
c.
47.
138
(p.61)
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e.
51.
Which barrier to entry uses cost advantages associated with large size?
a.
rivalry among existing firms
b.
switching costs
c.
cost disadvantages independent of size
d.
capital requirements
e.
economies of scale
52.
Which barrier to entry uses cost advantages NOT easily imitated by new entrants such as patents
on proprietary product knowledge or government subsidies?
a.
b.
c.
d.
e.
53.
54.
55.
b.
c.
d.
e.
56.
57.
(p.62)
(p.62)
(p.61)
capital requirements.
product differentiation.
switching costs.
economies of scale.
access to distribution.
When one corporation follows the actions of other companies due to competitive activity such as
price reduction, this increases the
a.
b.
c.
d.
e.
(p.62)
government policy
switching costs
cost disadvantages independent of size
capital requirements
economies of scale
Intel was able to gain a significant cost advantage over its competitors because of
a.
b.
c.
d.
e.
(p.61)
(p.62)
Substitute products appear to be different, but satisfy the same need as another product.
If the cost of switching is low, substitutes may have a strong effect on an industry.
Competition occurs only with those corporations within an industry.
Possible substitute products or services may not appear to be easily substitutable.
Substitutes limit the potential returns of an industry.
A sugar company worried that consumers may buy artificial sweetener instead of sugar is
concerned about the
139
(p.62)
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58.
a.
threat of new entrants.
b.
rivalry among existing firms.
c.
threat of substitute products.
d.
bargaining power of suppliers.
e.
bargaining power of buyers.
Which of the following is NOT descriptive of the "bargaining powers of buyers?"
a.
b.
c.
d.
e.
59.
60.
e.
62.
63.
(p.63)
A company or an industry whose product works well with a firms product and without which the
product would lose much of its value is considered to be a(n)
a.
b.
c.
(p.63)
Other software companies could not compete with Microsoft based on the hesitation of buyers to
try a new software, which resulted in the
a.
b.
c.
d.
e.
(p.63)
Which force places a ceiling on the price firms in an industry can probably charge?
a.
b.
c.
d.
e.
(p.63)
61.
When General Motors considers making its own automotive parts, Delphi Automotive Supply
Company would be concerned with the
a.
b.
c.
d.
e.
(p.63)
complementor.
oligopoly.
strategic group.
140
(p.64)
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d.
e.
64.
The relationship that was discussed in the text that used to illustrate the term complementor is
a.
b.
c.
d.
e.
65.
67.
68.
69.
(p.64)
multidomestic.
consolidated.
global.
indigenous.
worldwide.
In which type of international industry do corporations tailor their products to the specific needs
of consumers in a particular country?
a.
b.
c.
d.
e.
(p.64)
An industry dominated by a few large firms, all of which struggle with product differentiation, is
known as
a.
b.
c.
d.
e.
(p.64)
decrease in costs.
decrease in prices.
the integration of companies.
product differentiation.
All of the above are correct.
The U.S. major home appliance industry, including the companies of Maytag, Whirlpool, General
Electric, and Electrolux, is an example of an industry
a.
b.
c.
d.
e.
(p.64)
(p.64)
According to the text, the strength of each of the six driving forces of industry competition varies
according to the
a.
b.
c.
d.
e.
66.
industry leader.
staggered company.
consortium industry
global industry
indigenous industry
multidomestic industry
worldwide industry
141
(p.64)
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70.
Which type of international industry manufactures and sells the same products with only minor
adjustments made for individual countries around the world?
a.
b.
c.
d.
e.
71.
72.
74.
75.
(p.65)
global.
consolidated.
multidomestic.
risky.
indigenous.
What is a set of business units or firms that "pursue similar strategies with similar resources?"
a.
b.
c.
d.
e.
(p.65)
global.
consolidated.
multidomestic.
risky.
indigenous.
When the pressure for local responsiveness is strong and the pressure for coordination is weak for
multinational corporations in an industry, the industry will be
a.
b.
c.
d.
e.
(p.65)
the pressure for local responsiveness on the part of individual country markets.
the power of the local country governments to restrict MNC actions.
the need for brand management in the various MNCs operating within that industry.
the importance of differentiating with integrating mechanisms in regional cooperatives.
the likelihood of terrorist activity impacting that industry.
When the pressure for coordination is strong and the pressure for local responsiveness is weak for
multinational corporations within a particular industry, the industry will be
a.
b.
c.
d.
e.
(p.65)
retailing
banking
tires
insurance
health care
The two factors that tend to determine whether an industry will be primarily multidomestic or
primarily global are (1) the pressure for coordination within the MNCs operating in that industry
and (2):
a.
b.
c.
d.
e.
73.
consortium industry
global industry
indigenous industry
multidomestic industry
worldwide industry
(p.65)
strategic group
collective collaboration
cooperative
integral association
strategic assembly
142
(p.66)
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76.
Plotting the market position of industry competitors on a two-dimensional graph using two
strategic variables as the vertical and horizontal axes, is a process called
a.
b.
c.
d.
e.
77.
78.
80.
81.
(p.67)
initiators
reactors
analyzers
prospectors
defenders
(p.67)
initiators
reactors
analyzers
prospectors
defenders
Companies with fairly broad product lines that focus on product innovations and market
opportunities, uses which method of strategic orientation?
a.
b.
c.
d.
e.
(p.66)
initiators
reactors
analyzers
prospectors
defenders
A company that operates in at least two different product-market areas in which one product is
stable and the other one is variable, uses which method of strategic orientation?
a.
b.
c.
d.
e.
(p.67)
initiators
reactors
analyzers
prospectors
defenders
Which strategic orientation do companies have that has a limited product line and focuses on
improving the efficiency of their existing operations?
a.
b.
c.
d.
e.
79.
correlation.
ranking.
charting.
association.
mapping.
(p.66)
initiators
reactors
analyzers
prospectors
defenders
143
(p.67)
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82.
83.
84.
86.
87.
88.
(p.70)
statistical modeling.
competitive intelligence.
competitive strategy.
quantitative forecasting.
qualitative matrix.
A study of nearly 500 of the world's largest corporations indicated which of the following to be
the most widely practiced form of forecasting?
a.
b.
(p.70)
7%.
27%.
57%.
77%.
97%.
(p.70)
100%.
80%.
50%.
0%.
20%.
The percentage of large U.S. companies having fully developed intelligence programs is
a.
b.
c.
d.
e.
(p.69)
EFAS Table.
IFAS Table.
SFAS Table.
TOWS Matrix.
industry matrix.
A study of product innovation in the scientific instrument field and machine tool industries found
the percentage of all new product innovations being initiated by customers in the form of inquiries
and complaints to be
a.
b.
c.
d.
e.
(p.68)
A table which summarizes the strategic factors facing a particular industry is called a(n)
a.
b.
c.
d.
e.
85.
(p.68)
statistical modeling
scenario-writing
144
(p.72)
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c.
d.
e.
89.
90.
d.
e.
92.
(p.72)
simulations.
the delphi technique.
signal monitoring.
brainstorming.
scenarios.
(p.72)
When managers have more faith in gut feel than number crunching, it is better to use the
forecasting technique of
a.
b.
c.
d.
e.
(p.72)
iterative modeling.
time series methods.
repeated processes.
time extrapolation.
rotating time methods.
94.
A non-quantitative approach to forecasting that requires simply the presence of people with some
knowledge of the situation to be predicted is called
a.
b.
c.
d.
e.
93.
(p.72)
(p.72)
20%
30%
40%
50%
70%
91.
delphi technique
brainstorming
trend extrapolation
brainstorming.
expert opinion.
trend extrapolation.
statistical modeling.
time series modeling.
145
(p.72)
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95.
A forecasting technique using quantitative measures that attempt to discover causal or at least
explanatory factors that link two or more time series together is called
a.
b.
c.
d.
e.
96.
97.
99.
100.
(p.73)
IFAS.
industry matrix.
total weighted score.
S.W.O.T. weighted score.
SFAS weighted score.
(p.73)
IFAS.
EFAS.
SFAS.
S.W.O.T..
the issues priority matrix.
The indicator of how well a particular company is responding to current and expected factors in
its external environment is characterized by the
a.
b.
c.
d.
e.
(p.72)
The technique recommended by the text to summarize an analysis of external strategic factors is
called
a.
b.
c.
d.
e.
(p.72)
statistical modeling.
simulations.
scenario-writing.
expert opinion.
brainstorming.
98.
The most widely used forecasting technique used after trend extrapolation is
a.
b.
c.
d.
e.
(p.72)
146
(p.75)
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101.
A term which describes when strategic managers fail to perceive the significance of changing
external conditions because they are partially blinded by strongly held common beliefs is called
(p.59)
a.
b.
c.
d.
e.
strategic paralysis.
corporate inertia.
management indifference.
strategic myopia.
corporate apathy.
147