Evaluating a Company's External Environment

Evaluating a Company's External Environment

1 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

2 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.

3 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) Existing industry members are looking to expand their market reach by entering product segments or geographic areas where they do not have a presence yet.

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.

4 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, and difficulties in building a network of distributors-retailers and securing adequate space on retailers' shelves,

E) The industry is not characterized by scale economies and/or sizable learning/experience curve effects and few firms in the industry hold key patents and/or possess significant proprietary technology not readily available to a newcomer

5 Competitive pressures stemming from substitute products are weaker when

A) 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 similar in 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 buyers' costs of switching to substitutes are relatively low.

6 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 and whether the item being supplied is a standard commodity that is readily available from many suppliers at the going market price

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 industry members are major customers of suppliers and whether suppliers' sales to members of this one industry constitute a big percentage of their total sales

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

7 Whether the buyers of an industry's product have strong or weak bargaining leverage over the terms and conditions of sale depends on

A) how often that 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) the frequency with which rival firms change strategies and the amount of advertising that sellers utilize.

C) whether all buyers have the same degree of negotiating power, whether the item carries a high or low price tag, and whether there are many or few collaborative partnerships between sellers and buyers.

D) whether buyers purchase in relatively large or small quantities, and how well informed buyers are about sellers' prices, products, and costs.

E) whether buyer demand is seasonal or year-round, whether entry barriers are high or low, and whether competitive pressures from substitutes are strong or weak.

8 The task of driving forces analysis is to

A) identify all the underlying factors that can cause industry and company 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 and to assess the impact on the company.

D) identify which companies are being driven to move from one strategic group to another strategic group.

E) determine how the collective impact of the driving forces will change market demand, competition and industry profitability.

9 Strategic group mapping 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) revealing the market positions of key industry competitors.

E) pinpointing which of the five competitive forces is the strongest and which is the weakest.

10 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) are so important to competitive success that all firms in the industry must pay close attention to them or risk becoming an industry laggard or failure.

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.