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A series of multiple-choice questions and answers related to the external environment analysis in strategic management. It covers various aspects of the general environment, including demographic, economic, political/legal, sociocultural, technological, and global factors. The questions are designed to test understanding of key concepts and their application in business decision-making.
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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. - ✔✔C 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 - ✔✔B 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 - ✔✔A The environmental segments that comprise the general environment typically will NOT include a. demographic factors. b. sociocultural factors. c. substitute products or services.
Which of the following is NOT an activity used in the external environmental analysis process? a. Scanning b. Decrypting c. Monitoring d. Assessing - ✔✔B 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 - ✔✔B 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. - ✔✔D 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. - ✔✔C A general environmental analysis can be expected to produce all of the following EXCEPT a. objective answers. b. recognition of environmental trends.
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 - ✔✔A 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. - ✔✔C 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. In general, living standards have deteriorated over time.
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. - ✔✔C An analysis of the economic segment of the external environment would include all of the following EXCEPT a. interest rates. b. trade deficits or surpluses. c. inflation rates. d. the move toward a contingent workforce. - ✔✔D 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.
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. - ✔✔B 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. - ✔✔C 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. industries chosen for deregulation. - ✔✔B 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 - ✔✔A 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. political/legal c. technological d. global - ✔✔C The next critical technological opportunity for organizations is predicted to be a. the Internet. b. multiphasic interventions. c. biological engineering. d. wireless communications. - ✔✔D 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. - ✔✔D The observation that in China, even though car sales surged 37% in 2010, it is expected that by 2015 they will reach production overcapacity and have a glut of extra cars is an aspect of the segment of the general environment. a. demographic b. global c. physical d. technological - ✔✔B 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. - ✔✔C
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. - ✔✔D 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 - ✔✔A 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 - ✔✔D 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. - ✔✔C 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.
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. - ✔✔D 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." - ✔✔C 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. - ✔✔D 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. - ✔✔B In the case of a retail business dependent on drive-in customers, the major cost disadvantage independent of scale would be