MGT 4350: Chapter 3 Evaluating a Company's External Environment


Which of the following components form part of a company's macro-environment? (select all that apply)
A. legal/regulatory conditions
B. political factors
C. ancillary communications
D. historical incentives
E. sociocultural forces

A, B, E

What acronym serves as a reminder of the components of a company's macro-environment?


Which of the following are examples of economic conditions that affect companies? (select all that apply)
A. the inflation rate
B. congressional elections
C. the per-capita domestic product
D. climate change
E. trade surpluses

A, C, E

Which of the following concepts are analytic tools for assessing a company's industry and competitive environment? (select all that apply)
A. strategic group mapping
B. share ratio transfer
C. driving forces
D. the value net

A, C, D

Which of the following are outlined in the five forces model of competition?
A. competition from rival sellers
B. supplier bargaining power
C. customer bargaining power
D. government regulation

A, B ,C

All companies operate in a broad ______-environment that is made up of six components, including political factors and technological factors.
A. meso
B. micro
C. macro
D. para

C. macro

The "L" in PESTEL analysis stands for
A. labor unions.
B. local conditions.
C. legal/regulatory conditions.
D. logistical considerations.

C. legal/regulatory conditions.

Which of the following are factors that affect the strength of rivalry among competing sellers?
A. substitutes
B. suppliers
C. government regulation
D. new entrants

A, B, D

Which of the following is an example of a sociocultural force that affects companies?
A. changes in the stock and bond market
B. banking deregulation
C. the emergence of the delivery drone industry
D. the trend towards healthier lifestyles

D. the trend towards healthier lifestyles

If it becomes more costly for a buyer to switch brands, then rivalry between competitors will
A. stay the same
B. increase
C. decrease

C. decrease

Which of the following are concepts or analytic tools for assessing a company's industry and competitive environment?
A. multitiered analytics
B. local dynamics
C. competitor analysis
D. the five forces framework

C, D

The most powerful tool for diagnosing the principal competitive pressure in a market is known as the
A. seven-point competitive analysis.
B. five forces model of competition.
C. diagnostic triangle.
D. KSF approach.

B. five forces model of competition.

Rivalry among industry members will be high when
A. the products have low storage costs.
B. the demand for the products is high.
C. fixed unit costs are very low.
D. there is excess supply in the market.

D. there is excess supply in the market.

Which conditions increase rivalry among competing sellers?
A. When buyer demand is growing rapidly.
B. When buyer demand is growing slowly.
C. When the cost of switching brands is low.

B, C

If products offered by competing companies are ______, it will be easier for rivals to convince buyers to switch.
A. identical
B. unique
C. strongly differentiated

A. identical

Rival sellers may try to differentiate their products from those of competitors by
A. providing improved customer service.
B. introducing new products less frequently.
C. reducing KSF levels.
D. building higher-performance products.

A, D

Which of the following concepts are analytic tools for assessing a company's industry and competitive environment?
A. driving forces
B. the value net
C. strategic group mapping
D. share ratio transfer

A. B, C

Which of the following tend to reduce competitive activity among sellers?
A. when rivals are of comparable size
B. having many competitors in a market
C. when there are few competitors in a market
D. fear of retaliation

C, D

What factors determine how serious the threat of entry is for a particular market?
A. the effect of barriers to entry
B. the likelihood that existing firms will retaliate against new entrants
C. the PESTEL factor
D. the value-price-cost framework

A, B

The advantage gained from a "wall of patents" is a form of
A. intellectual property protection.
B. network effect.
C. regulatory trade policy.
D. capital requirement.

A. intellectual property protection.

Which of the following are types of marketing tactics?
A. per capita offers
B. rebates
C. sales promotions
D. tariffs

B, C

New brands typically "buy" their way into a wholesale or retail investment network
A. by cutting their prices.
B. by giving dealers large promotional allowances.
C. by reducing their capital requirements.
D. by granting intellectual property rights.

A, B

Which of the following are examples of trade restrictions?
A. network effects
B. high capital requirements
C. local content requirements
D. tariffs
E. antidumping rules

C, D, E

The threat of ______ increases competitive pressure on incumbent firms.
A. a new entrant in an industry
B. industry-wide regulation
C. a firm's departure from an industry
D. new complementary products

A. a new entrant in an industry

What factor allowed Honda to successfully enter the U.S. lawn mower market despite local competition?
A. government regulation targeting domestic gasoline engine manufacturers
B. its reputation and its expertise with gasoline engines
C. the collapse of Sn

B. its reputation and its expertise with gasoline engines

Which of the following is an example of something that establishes a network effect in customer demand?
A. video game systems
B. walls of patents
C. lawn mowers
D. gas utilities

A. video game systems

When two industries are closely related to one another, companies can be threatened by the competitive pressure produced by ______ products.
A. differential
B. regulated
C. complementary
D. substitute

D. substitute

High ______ deter buyers from purchasing substitute products.
A. macro-environments
B. switching costs
C. industrial rivalries
D. buyer/seller ceilings

B. switching costs

The total dollar investment needed to enter a market successfully is known as the requirement. (Remember to type only one word per blank.)


Powerful ______ can end up eroding industry profitability by ______ higher prices.
A. new entrants; introducing
B. buyers; paying
C. government agencies; negotiating
D. suppliers; charging

D. suppliers; charging

Which of the following are examples of regulated industries that require government-controlled entry?
A. fashion retailing
B. railroads
C. telecommunications
D. liquor retailing
E. software development

B, C, D

Which of the following factors would lead to higher entry barriers for new industry entrants?
A. weak brand preferences
B. easy access to distribution channels
C. high capital requirements
D. relaxed government policies
E. restrictive trade policies

C, E

Supplier power is greatest when demand for their products is ______ and the products are ______.
A. low; in short supply
B. high; in short supply
C. low; plentiful
D. high; plentiful

B. high; in short supply

Examples of substitute products that lead to competitive pressure between industries include
A. sugar and Sweet 'N Low.
B. newspapers and cable news
C. Netflix movie services and Honda lawn mowers.
D. contact lenses and nonprescription sunglasses.

A, B

When the supplier industry is more highly ______ than the industry it sells to, it is generally able to deny requests for lower prices.
A. regulated
B. concentrated
C. dispersed
D. homogenized

B. concentrated

The competitive pressure created by the presence of substitute products increases when the substitutes are
A. readily available and attractively priced.
B. seen as comparable in terms of quality and performance.
C. costly for the buyer to switch over to a

A, B

Suppliers' bargaining power increases when
A. the well-being of suppliers is tied to the well-being of the suppliers' major customers.
B. industry members are not major customers of those suppliers.
C. they bargain with major customers.
D. sales to the in

B. industry members are not major customers of those suppliers.

The suppliers of any given industry must have sufficient _____, power in order to influence the terms of supply in their favor.


Buyers with strong bargaining power can exert strong ______ pressures and reduce industry profitability by demanding price concessions and additional features.
A. regulatory
B. competitive
C. macro
D. legal

B. competitive

Suppliers of ______ are in a weak bargaining position because there is no reason to choose the product of one supplier over that of another except for price.
A. manufactured goods
B. differentiated inputs
C. commodities
D. skilled labor

C. commodities

Lowered switching costs ______ supplier bargaining power.
A. dramatically increase
B. moderately increase
C. limit
D. stabilize

C. limit

The scarcity of substitute inputs ______ the bargaining power of suppliers by increasing the ______ of industry members.
A. decreases; regulation
B. increases; regulation
C. decreases; dependence
D. increases; dependence

D. increases; dependence

The ability of sellers to raise prices without losing sales is restricted by
A. growing consumer demand.
B. customer promotions.
C. the advertising effect.
D. buyer price sensitivity.

D. buyer price sensitivity.

Which of the following would likely have the greatest bargaining power over the sellers who supply them?
A. a newly established company
B. a small business owner
C. Best Buy stores
D. a local restaurant chain

C. Best Buy stores

True or false: All buyers of a product generally have equal bargaining power with sellers.


Anheuser-Busch has partially ______ into metal-can manufacturing to gain bargaining power over manufacturers.
A. standardized differentiation
B. slotted fees
C. integrated backward
D. switched brands

C. integrated backward

______ rarely have much bargaining power when negotiating price concessions, but ______ can have considerable bargaining power.
A. Business buyers; individual consumers
B. Business buyers; new entrants
C. New entrants; individual consumers
D. Individual c

D. Individual consumers; business buyers

Intense competitive pressure from ______ of the five competitive forces is sufficient to destroy the conditions for good profitability.
A. at least two
B. at least three
C. all five
D. just one

D. just one

Big apparel retailers like Target and L. L. Bean wield significant ______ when they are buying products from manufacturers.
A. price sensitivity
B. manufacturing quality
C. discretionary sensitivity
D. bargaining power

D. bargaining power

To match a business strategy to prevailing competitive conditions, companies must initiate actions that alter the underlying factors driving the
A. four "golden" principles.
B. six market segments.
D. five competitive forces.

D. five competitive forces.

Which circumstances would increase the bargaining power of buyers?
A. when the cost for buyers to switch brands is low
B. when buyers pose a threat of forward integration
C. when industry goods are not standardized
D. when the differentiation of industry

A, E

List the three steps of driving-forces analysis in order, from the first step to the last.

1. identify what the driving forces are
2. Assess whether the driving forces are acting to make an industry more or less attractive
3. determine what strategy changes are needed to prepare for the effects of the driving forces

How do product innovations affect the pattern of competition within an industry?
a. Companies are forced to revise their vision statements.
b. More first-time buyers become interested in the products.
c. The industry tends to grow less rapidly.
d. Product

b. More first-time buyers become interested in the products.

When all five types of competitive forces are exerting strong pressure on an industry, the industry is said to be
a. financially over-determined.
b. over-regulated.
c. insufficiently fluid.
d. competitively unattractive.

d. competitively unattractive.

To develop a sound business strategy to combat competitive conditions, companies must
a. prioritize the eight substrategies.
b. circumvent or violate legal barriers.
c. identify competitive pressures.
d. gauge the strength of the five competitive forces.

C, D

True or false: In a given industry, all the driving forces push change in the same direction but by different amounts.


The change agents with the biggest influence in reshaping the industry landscape are known as _____ forces.


What forces drive change within an industry?
a. Technological advancement
b. Market stability
c. Shifts in who buys products
d. Product innovation

A, C, D

When analyzing industry dynamics, before taking action to prepare for industry and competitive changes, companies must first diagnose
a. R&D possibilities.
b. the forces driving industry change.
c. short-term profit opportunities.
d. stock-market volatili

b. the forces driving industry change.

Understanding the ______ of driving forces requires looking at the effects of each factor separately.
a. collective impact
b. ATF
c. minor determinants
d. changing uncertainty

a. collective impact

Industry members with similar competitive approaches and positions in the market are known as a(n) group.


On a map of strategic groups, why are some groups more favorably positioned than others?
a. The position of some strategic groups requires that they apply for government subsidies.
b. The position of some strategic groups leaves them facing stronger compe

c. Industry driving forces favor some strategic groups and hurt others.

When undertaking the third step in a strategic analysis of industry dynamics, managers must decide what strategy adjustments are needed to deal with the effects of
a. driving forces.
b. the macro-environment.
c. new entrants.
d. suppliers.

a. driving forces.

True or false: Key success factors are so important that all firms in a given industry must pay attention to them or else jeopardize their competitive success.


When evaluating strategy options, companies must determine whether a competitive ______ exists where competitors are able to create and capture new demand.
a. "product vacuum"
b. "blue ocean"
c. "headwind"
d. "white space

d. "white space

In the retail industry, competition between ______ is more intense than the rivalry among ______.
a. Versace and Prada; large retailers
b. Gucci and Walmart; suppliers
c. Walmart and Target; high-end fashion retailers

c. Walmart and Target; high-end fashion retailers

Which of the following are examples of key success factors?
a. a strong regulatory regime that limits profits
b. superior firm branding capabilities
c. a low barrier to competitive entry
d. superior product differentiation
e. strong network of wholesale d

B, D, E

The competitive factors that most affect industry members' ability to prosper in the marketplace are known as ______ factors.
a. key success
b. competitive-value
c. profit-margin
d. priority

a. key success

Which of the following is true of key success factors (KSFs)?
a. KSFs are only valuable to certain industries.
b. Even factors that are of minor importance can be labeled as KSFs.
c. There are typically many more than five KSFs.
d. Usually two or three KS

d. Usually two or three KSFs outrank the others in terms of importance.