Strategic Management 8Th Ed By Dess -Test Bank

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Strategic Management 8Th Ed By Dess -Test Bank



Strategic Management 8Th Ed By Dess -Test Bank

Chapter 02

Analyzing the External Environment of the Firm: Creating Competitive Advantages


True / False Questions

1. Environmental scanning and competitor intelligence provide important inputs for forecasting activities.

True    False


2. Perceptual acuity, according to Ram Charan, is the ability to know for certain what will happen in the future.

True    False


3. Ted Turner saw the potential of 24-hour news before anyone else. This is an example of perceptual acuity.

True    False


4. Perceptual acuity can be improved by sitting alone and not consulting others.

True    False


5. One CEO gets together with his critical people for half a day every eight weeks to discuss whats new and whats going on in the world. The setting is informal, and outsiders often attend. This is an example of how not to improve perceptual acuity.

True    False


6. A CEO meets four times a year with about four other CEOS of large, but noncompeting, diverse global companies. This is an example of how to improve perceptual acuity.

True    False


7. Two companies ask outsiders to critique strategy during their boards strategy sessions. Such input typically leads to spirited discussions that provide valued input on the hinge assumptions and options that are under consideration. This is an example of how to improve perceptual acuity.

True    False


8. Scenario planning is useful for anticipating major future changes in the external environment.

True    False


9. Environmental monitoring is not an input to forecasting.

True    False


10. When management assumptions, premises, or beliefs are incorrect or when internal inconsistencies among them render the overall theory of the business invalid, the strategy of the firm needs to be updated.

True    False


11. Consider the example of Salemi Industries and the launch of its product, Cell Zone, in 2005. Although it tried to carefully analyze its potential market, it misread the market demand for the product and paid a steep price for its mistake. This is an example of internal forecasting.

True    False


12. If companies miscalculate the market, opportunities will be lost.

True    False


13. Blockbuster, Borders, Circuit City, and Radio Shack are examples of firms that did not have good perceptual acuity.

True    False


14. Environmental monitoring deals with tracking changes in environmental trends that are often uncovered during the environmental scanning process.

True    False


15. Competitor Intelligence (CI) is a tool that can provide management with early warnings about both threats and opportunities.

True    False


16. Competitive intelligence generally does not benefit very much from gathering information on competitors from sources in the public domain.

True    False


17. Even with all of the advances in recent years, forecasting is typically considered more of an art than a science and it is of little use in generating accurate predictions.

True    False


18. Environmental scanning involves surveillance of the internal environment of a firm to predict environmental changes and detect changes already under way.

True    False


19. Scenario analysis is a superficial approach to forecasting that seeks to explore possible developments that many only be connected to the past.

True    False


20. SWOT analysis is useful in part because it obliges the firm to act proactively by putting an emphasis on identifying opportunities and threats that constrain the action choices a firm might make as a result of its internal and external environmental scan.

True    False


21. In the SWOT framework, the Strengths and Weaknesses are external environmental factors to consider.

True    False


22. In the SWOT framework, Opportunities and Threats are environmental conditions internal to the firm.

True    False


23. A Motel 6 executive indicates that he regularly reviews the number of rooms in the budget segment of the industry in the United States and the difference between the average daily room rate and the consumer price index (CPI). This is an example of Competitive Intelligence.

True    False


24. Keeping track of competitors has become more difficult today with the amount of information that is available on the Internet.

True    False


25. Code of Ethics guidelines can assist companies in avoiding aggressive competitive intelligence gathering that results from illegal behaviors.

True    False


26. Even with all of the advances in recent years, forecasting is typically considered more of an art than a science and it is of little use in generating accurate predictions.

True    False


27. Scenario planning is usually concerned with short-term forecasts.

True    False


28. The strengths and weaknesses of a SWOT analysis refer to the external conditions of the firm.

True    False


29. The opportunities and threats of a SWOT analysis refer to the internal conditions of the firm.

True    False


30. To understand the business environment of a particular firm, you need to analyze both the general environment and the firm industry and competitive environment.

True    False


31. Underestimating uncertainty can lead to strategies that neither defend against threats nor take advantage of opportunities.

True    False


32. PPG Industries has developed four alternative futures based on differing assumptions about two key variables: the cost of energy and the extent of opportunity for growth in emerging markets. This is called demand monitoring.

True    False


33. The SWOT analysis framework leads to a conceptually simple approach to identifying the important factors that constrain strategic choices without sacrificing analytical rigor.

True    False


34. Steve Jobs, the former chairman of Apple, used intuition and judgment to forecast the future.

True    False


35. Scenario analysis is a form of environmental forecasting.

True    False


36. Scenario analysis relies on the extrapolation of historical trends.

True    False


37. An industry is composed of a set of firms that produce similar products or services, sell to similar customers, and use similar methods of production.

True    False


38. Only one scenario is considered in a scenario analysis in order to envision possible future outcomes.

True    False


39. Although changes in the general environment may often adversely or favorably impact a firm, they seldom alter an entire industry.

True    False


40. The impact of a demographic trend varies across industries.

True    False


41. A major sociocultural trend in the United States is the increased educational attainment by women.

True    False


42. Technological innovations can create entirely new industries and alter the boundaries of industries.

True    False


43. There is generally a weak relationship between equity markets (e.g., New York Stock Exchange) and economic indicators.

True    False


44. The Internet is a leading component in the rising emergence of digital technology.

True    False


45. Globalization provides opportunities to access larger potential markets and a narrow base of production factors such as raw materials, labor, skilled managers, and technical professionals.

True    False


46. A demographic trend in the United States, the aging of the population, has important implications for the economic segment (in terms of tax policies to provide benefits to increasing numbers of older citizens).

True    False


47. Crowdsourcing is used by companies to develop products.

True    False


48. By inviting customers to write online reviews, Amazon used crowdsourcing to build value to its offer.

True    False


49. Research shows that many immigrants to the United States are prodigious job creators. This supports legislative battles to increase the number of H-1B visas for foreign workers.

True    False


50. It is not important to consider the potential impact of government regulation when developing new innovations.

True    False


51. Developments in technology and other innovations can create new industries and alter the boundaries of existing industries.

True    False


52. The competitive environment consists of many factors that are particularly relevant to company strategy. This includes competitors, customers, and suppliers.

True    False


53. The Porter five-forces model is designed to help us understand how social attitudes and cultural values impact U.S. businesses.

True    False


54. The five-forces model helps to determine both the nature of competition in an industry and the profit potential for the industry.

True    False


55. In some industries, high switching costs can act as an important barrier to entry.

True    False


56. Industries characterized by high economies of scale typically attract fewer new entrants.

True    False


57. The power of a buyer group is increased if the buyer group has less concentration than the supplier group.

True    False


58. Buyer power tends to be higher if suppliers provide undifferentiated or standard products.

True    False


59. Supplier power tends to be highest in industries where products are vital to buyers, where switching from one supplier to another is very costly, and where there are many suppliers.

True    False


60. The power of suppliers will be enhanced if they are able to maintain a credible threat of forward integration.

True    False


61. The more attractive the price/performance ratio of substitute products, the tighter it constrains the ability of an industry to charge high prices.

True    False


62. Rivalry is most intense when there are high exit barriers and high industry growth.

True    False


63. Rivalry will be most intense when there is a lack of differentiation or switching costs.

True    False


64. Rivalry is not always cutthroat; sometimes, it can be gentlemanly.

True    False


65. In most industries, new entrants will not be a threat because the Internet lowers entry barriers.

True    False


66. The Internet and digital technologies suppress the bargaining power of buyers by providing them with more information to make buying decisions.

True    False


67. Switching costs for an end user are likely to be much higher because of the Internet.

True    False


68. Because of the Internet and digital technologies, it is very difficult for suppliers to create purchasing techniques that lower switching costs.

True    False


69. Reintermediation is responsible for an overall reduction in business opportunities.

True    False


70. The Internet heightens the threat of substitutes because it creates new ways to accomplish the same task.

True    False


71. Five-forces analysis implicitly assumes a zero-sum game, a perspective that can be short-sighted.

True    False


72. Michael Porters five-forces Analysis is a dynamic tool for analyzing industry attractiveness.

True    False


73. Complement products typically have no impact on the value of products and services of the firm.

True    False


74. The Nintendo success story in the early 1990s was a result of its ability to manage its relationship with its complementors, such as the licensee rights given to outside firms to develop games using the Nintendo game console.

True    False


75. Apple used complementors to gain market share in the digital music business.

True    False


76. Establishing long-term mutually beneficial relationships with suppliers improves the company ability to implement just-in-time (JIT) inventory systems, which let it manage inventories better and respond quickly to market demands.

True    False


77. In conducting a good industry analysis that will yield an improved understanding of the root causes of profitability, rigorous quantification of the five forces is not necessary.

True    False


78. Competition tends to be more intense among firms within a strategic group than between strategic groups.

True    False


79. The same environmental trend or event may have a very different impact on different strategic groups within the same industry.

True    False


80. The use of the strategic group concept is generally not helpful in charting the future directions of the strategies of a firm.

True    False


81. Strategic groupings help a firm identify barriers to mobility that protect a group from attacks by other groups.

True    False


82. Another value of strategic grouping is that it helps a firm identify groups whose competitive position may be marginal or tenuous.

True    False


83. Strategic groupings are of no assistance in charting the future direction of company strategy.

True    False


84. Strategic groups are helpful in thinking through the implications of each industry trend for the strategic group as a whole.

True    False


85. A sharp increase in interest rates, for example, tends to have more impact on providers of higher-priced goods (e.g., Porsches) than on providers of lower-priced goods (e.g., Chevrolet Cobalt), whose customer base is much more price-sensitive.

True    False


86. If all strategic groups are moving in a similar direction, this could indicate a high degree of future volatility and intensity of competition.

True    False


87. The strategic groups concept is valuable for determining mobility barriers across groups, identifying groups with marginal competitive positions, charting the future directions of firm strategies, and assessing the implications of industry trends for the strategic group as a whole.

True    False


88. The concept of strategic groups is also important to the external environment of a firm.

True    False


89. The strategic groups concept is valuable for identifying groups with marginal competitive positions.

True    False



Multiple Choice Questions

90. Two of the key inputs to developing forecasts discussed in the text are

A. environmental scanning and stakeholder identification.


B. assessing internal strengths and environmental scanning.


C. environmental scanning and competitive intelligence.


D. environmental scanning and a SWOT analysis.


91. Salemi Industries launched Cell Zone unsuccessfully in 2005 because it did not understand the market demand for its new product. This is an example of

A. vision statement evaluation.


B. environmental scanning.


C. assessing internal strengths.


D. mission statement evaluation.


92. Environmental analysis requires continual questioning of all of these assumptions except

A. a priori ideas about the structure of the relevant industry.


B. biases about how to make money in the industry.


C. presuppositions about who is and is not a competitor.


D. continual updating of environmental knowledge.


93. Firms that were successful in the past can fail today because

A. they keep pace with changes in the nature of competition.


B. their financial situation is resilient.


C. the company strategy is outdated.


D. management monitors the relevant environmental factors regularly.


94. Examples of how to improve perceptual acuity include:

A. A CEO meets with other CEOs of non-competing companies to examine the world from multiple perspectives and then shares the results with his own management team.


B. A CEO meets with the company management team regularly to analyze current world events and their potential impact on the company.


C. A CEO meets with direct competitors to analyze current industry trends. The CEOs share their conclusions with their respective companies.


D. Outsiders are brought in to the board meeting to critique the company strategy, which considers the new information in its potential revamping of the strategy.


95. Perceptual acuity requires all of the following except

A. an ability to sense what is coming.


B. the ability to detect early warning signals of environmental changes.


C. a compulsive fixation on external environmental monitoring.


D. a refusal to consult with others.


96. Two non-competing global firms meet quarterly to discuss multiple perspectives on world trends. This is an example of how to improve

A. stakeholder management.


B. perceptual acuity.


C. internal scanning.


D. financial returns.


97. Which of the following is not an input to develop forecasts?

A. environmental scanning


B. competitor intelligence


C. environmental monitoring


D. stakeholder management


98. Boards of directors use outsiders to critique their strategy. This is necessary to improve mostly

A. financial returns.


B. organizational hierarchy.


C. perceptual acuity.


D. employee relations.


99. When the management frame of reference gets out of touch with the realities of the actual business situation, what can happen to the firm?

A. The company business strategy no longer works.


B. Management gets across-the-board raises.


C. Management perceptual acuity improves.


D. It becomes easier to maintain competitive advantage.


100. Corporate retreats do not

A. permit companies to discuss larger marketplace trends.


B. guarantee positive consumer response to new products.


C. give companies an opportunity to look beyond their own industries.


D. oblige management to automatically change strategy.


101. Why must successful managers recognize opportunities and threats in their company external environment?

A. If they miscalculate the market, opportunities will be lost.


B. If they misread the market, they are likely to become rich.


C. If they identify all of the environmental threats, they are guaranteed to acquire large market share.


D. If they identify all of the environmental opportunities, they are guaranteed to acquire large market share.


102. _____________ tracks the evolution of environmental trends, sequences of events, or streams of activities.

A. Environmental scanning


B. Environmental monitoring


C. Environmental surveying


D. Competitive intelligence


103. Taking advantage of the increasing penetration of personal computers in American homes, the Mayo Clinic transformed itself as a provider of health-related knowledge and expertise. It took advantage of the ______ trends of the _______ in the prices of PCs and the ____________ presence of PCs in virtually every home in the United States.

A. soft; increase; increasing


B. soft; decrease; decreasing


C. hard; decrease; decreasing


D. hard; decrease; increasing


104. Scanning the general environment would identify information on

A. substitute goods.


B. the aging population and ethnic shifts.


C. customer and firm bargaining power.


D. competitive rivalry.


105. Which of the following is not an example of corporate competitive analysis?

A. banks tracking home loans


B. airlines changing hundreds of fares daily in response to competitor tactics


C. car manufacturers offering sales incentives based on rival offers


D. consumers comparing product offers online


106. Gathering competitive intelligence

A. is good business practice.


B. is illegal.


C. is considered unethical.


D. minimizes the need to obtain information in the public domain.


107. Environmental forecasting does not involve plausible projections about the ________ of environmental change.

A. direction


B. scope


C. speed


D. lack of intensity


108. Which of the following websites is not an example of one used routinely for corporate competitive intelligence gathering?

A. Slideshare


B. Quora


C. Duolingo


D. YouTube


109. Executives must be careful to avoid spending so much time and effort tracking the actions of ___________ that they ignore ____________.

A. competitors; customers


B. customers; competitors


C. existing customers; existing competitors


D. traditional competitors; new competitors


110. Banks and airlines are examples of two industries that track competitor offers continually. This is called the process of gathering

A. consumer responses.


B. competitive intelligence.


C. past decisions.


D. mainline information.


111. Which of the following would not lead a manager to believe that an ethical concern exists?

A. Have I done anything that coerced somebody to share this information?


B. Is the contemplated technique for gathering information relevant?


C. Have I done something to circumvent a system intended to secure or protect information?


D. Have I misled anybody in order to gain access?


112. In 1977, Kenneth H. Olsen, then president of Digital Equipment Corp., announced that there was no reason for individuals to have a computer in their home. Long since disproven, this is an example of

A. overestimation of uncertainty.


B. excellent forecasting.


C. underestimation of uncertainty.


D. good prediction skills.


113. It is important to question the reliability of forecasts because

A. if predictions are too low, a company like Motel 6 might build too many units and thus have a surplus of capacity.


B. uncertainty is black and white and therefore the gray areas are unimportant.


C. underestimating uncertainty can lead to good competitive strategies.


D. the growth new industries, such as that of telecommunications, cannot be predicted.


114. A danger of forecasting discussed in the text is that

A. in most cases, the expense of collecting the necessary data exceeds the benefit.


B. the retrospective nature of forecasting provides little information about the future.


C. managers may view uncertainty as black and white while ignoring important gray areas.


D. it can create legal problems for the firm if regulators discover the company is making forecasts.


115. PPG Industries, the Pittsburgh-based manufacturer of paints, coatings, optical products, specialty materials, chemicals, glass, and fiber glass suffered serious failures in 1986 and 1987 when it attempted to diversify its offers. It used a technique to help it identify possible future strategies. What was it?

A. crowdsourcing


B. scenario analysis


C. competitive intelligence


D. monitoring


116. SWOT analysis is a framework for analyzing the internal and external environment of a company. It consists of strengths, weaknesses, opportunities, and threats. According to a SWOT analysis, which of the following is not an aspect that the strategy of the firm must follow?

A. build on its weaknesses


B. remedy the weaknesses or work around them


C. take advantage of the opportunities presented by the environment


D. protect the firm from the threats


117. Scenario planning is a useful technique for firms competing in industries characterized by __________ and ____________.

A. predictability; stability


B. low profit margins; stability


C. unpredictability; change


D. high profit margins; stability


118. Scenario analysis draws on a range of disciplines and interests. It is a more _______ approach to forecasting.

A. basic


B. fundamental


C. in-depth


D. superficial


119. In the SWOT framework, ______________ are the same for all firms in the same competitive environment.

A. strengths and weaknesses


B. strengths and opportunities


C. weaknesses and threats


D. opportunities and threats


120. In the SWOT framework, ______________ are internal factors that are specific to the company.

A. strengths and opportunities


B. strengths and threats


C. threats and weaknesses


D. strengths and weaknesses


121. Heightened concern with fitness might be a threat to some companies and an opportunity to others. In the SWOT framework, these are

A. internal environmental factors.


B. external environmental factors.


C. both internal and external environmental factors.


D. not relevant external environmental factors.


122. By emphasizing the importance of identifying opportunities and threats, the SWOT framework makes firms act ________ rather than ___________.

A. quickly; slowly


B. immediately; eventually


C. proactively; reactively


D. intelligently; uninformed


123. SWOT analysis raises awareness about the role of strategy in creating a match between the environmental conditions and ______________ of the firm.

A. internal opportunities and threats


B. internal strengths and weaknesses


C. internal strengths and opportunities


D. internal weaknesses and opportunities


124. Steve Jobs, former chairman of Apple, demonstrated that ___________ also are important in forecasting.

A. character and ability


B. intuition and judgment


C. training and experience


D. imagination and training


125. Which of the following is not a correct usage of the SWOT framework?

A. build on its strengths


B. remedy the weaknesses or work around them


C. take advantage of the opportunities presented by the environment


D. protect the firm from environmental weaknesses


126. The aging of the population, changes in ethnic composition, and effects of the baby boom are __________ changes.

A. macroeconomic


B. demographic


C. global


D. sociocultural


127. Larger numbers of women entering the work force since the early 1970s is an example of

A. demographic changes.


B. political and legal environmental changes.


C. sociocultural changes.


D. technological developments.


128. Emerging sociocultural changes in the environment include

A. changes in the ethnic composition.


B. the increasing educational attainment of women in the past decade.


C. progressively less disposable income by consumers.


D. changes in the geographic distribution of the population.


129. All of the following are important elements of the political and legal segment of the general environment except

A. the deregulation of utilities.


B. the Americans with Disabilities Act (ADA).


C. the increased use of Internet technology.


D. increases in the federally mandated minimum wage.


130. Which of the following would be considered part of the general environment of a firm?

A. decreased entry barriers


B. higher unemployment rates


C. increased bargaining power of the firms suppliers


D. increased competitive intensity


131. Interest-rate increases have a __________ impact on the residential home construction industry and a __________ effect on industries that produce consumer necessities such as prescription drugs or basic grocery items.

A. positive; negligible


B. negative; negligible


C. negative; positive


D. positive; negative


132. In the general environment, many relationships exist among the various elements. General environmental trends can have positive and negative impacts on various industries. For example, the aging population might have a ______ impact on the health care industry and a ______ impact on the baby product industry. These are called _____________ impacts.

A. negative; positive; demographic


B. positive; negative; technological


C. negative; positive; sociocultural


D. positive; negative; demographic


133. In the general environment, which of the following is not a demographic trend?

A. aging population


B. greater disparities in income levels


C. more women in the workforce


D. changes in ethnic composition


134. Lowes has found that women prefer to do larger home-improvement projects with a man, whether a boyfriend, husband, or neighbor. As a result, in addition to its recipe card classes (that explain various projects that take only one weekend), Lowes offers co-ed store clinics for projects like sink installation. This is an example of which segment of the general environment?

A. economic


B. sociocultural


C. political and legal


D. demographic


135. Doctors and other health professionals say it is becoming harder to stay on the right side of the rules as billing requirements grow more convoluted. This is an example of which segment of the general environment?

A. economic


B. sociocultural


C. demographic


D. political and legal


136. Crowdsourcing is one form of technology that affects multiple segments of the general environment. Which of the following is not an example of crowdsourcing?

A. The Linus open-source operating system


B. Yelp online customer comments


C. Wikipedia


D. The New York Times online


137. Using the Cuusoo System, Lego develops ideas that are generated by the many children and adults who create a model, take photos, write project descriptions, and submit their idea on the Lego website. This is an example of using __________ to develop new products.

A. sociocultural data


B. demographic data


C. technological data


D. crowdsourcing


138. Which is considered a force in the five-forces model?

A. increased deregulation in an industry


B. the threat of government intervention


C. recent technological innovation


D. rivalry among competing firms


139. Which of the following firms would likely pose the least competitive threat?

A. a firm in the same industry and in the same strategic group


B. a competitor to your product where a high switching cost exists


C. a firm that produces substitute goods to your product line


D. a firm in the same industry and in the nearest strategic group looking to join your group


140. The threat of new entrants is high when there are

A. high capital requirements.


B. low economies of scale.


C. high switching costs.


D. high differentiation among competitors products and services.


141. Product differentiation by incumbents act as an entry barrier because

A. new entrants cannot differentiate their products.


B. incumbents will take legal action if new entrants do not differentiate their products.


C. it helps a firm to derive greater economies of scale.


D. new entrants will have to spend heavily to overcome existing customer loyalties.


142. Which of the following would be an entry barrier?

A. easy access to raw materials


B. low switching costs


C. large economies of scale


D. low capital requirements


143. An automobile manufacturer acquires a rental car company. This is an example of

A. backward integration.


B. forward integration.


C. economies of scale.


D. product differentiation.


144. The bargaining power of the buyer is greater than that of the supplier when

A. volume of purchase is low.


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B. the buyer profit margin is low.