chapter 2 practice questions

Question 1

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

Answer 1

C) environmental scanning and competitive intelligence.

Question 2

Airbus launched the A380 in 2007 and after more than 17 billion USD invested in the project, it
announced in 2019 that it would discontinue the A380 production by 2021 because it had sold fewer
than half the A380s it expected to deliver. This is an example of poor

A) vision statement evaluation.
B) assessing internal strengths.
C) environmental scanning.
D) mission statement evaluation

Answer 2

C) environmental scanning.

Question 3

Firms that were successful in the past can fail today because

A) they keep pace with changes in the nature of competition.
B) the company strategy is outdated.
C) their financial situation is resilient.
D) management monitors the relevant environmental factors regular

Answer 3

B) the company strategy is outdated.

Question 4

Perceptual acuity requires all the following except

A) an ability to sense what is coming.
B) the ability to detect early warning signals of environmental changes.
C) a refusal to consult with others.
D) a strong commitment to external environmental monitoring

Answer 4

C) a refusal to consult with others.

Question 5

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

Answer 5

B) perceptual acuity.

Question 6

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.

Answer 6

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

Question 7

The failure of the A380 to reach its sales goals is due to

A) similar competitor offers.
B) the miscalculation of market demands.
C) a poor selection of hotel in the sky amenities.
D) a lack of production capacity

Answer 7

B) the miscalculation of market demands.

Question 8

Companies that are able to spot key trends in the environment know their business and most
importantly know their

A) suppliers.
B) employees.
C) customers.
D) competitors

Answer 8

C) customers.

Question 9

Scanning the general environment would identify information on

A) substitute goods.
B) customer and firm bargaining power.
C) the aging population and ethnic shifts.
D) competitive rivalry

Answer 9

C) the aging population and ethnic shifts.

Question 10

Which of the following is not an example of corporate competitive intelligence?

A) banks tracking home loans
B) airlines changing hundreds of fares daily in response to competitor tactics
C) consumers comparing product offers online
D) car manufacturers offering sales incentives based on rival offers

Answer 10

C) consumers comparing product offers online

Question 11

When investors examine the performance of beauty products like Olay moisturizers and
CoverGirl cosmetics, they are looking for

A) indicators of emerging trends.
B) accidental changes in behavior.
C) supplier preferences.
D) company management trends

Answer 11

A) indicators of emerging trends.

Question 12

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

Answer 12

C) Duolingo

Question 13

PPG Industries, the Pittsburgh-based manufacturer of paints, coatings, optical products, specialty materials, chemicals, glass, and fiber glass has paid dividends each year since 1899. It uses a technique to help it identify possible future strategies. What is it?

A) crowdsourcing
B) competitive intelligence
C) scenario analysis
D) monitoring

Answer 13

C) scenario analysis

Question 14

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

Answer 14

C) in-depth

Question 15

The aging of the population, changes in ethnic composition, and effects of the millennial
generation are ________ changes.

A) macroeconomic
B) global
C) sociocultural
D) demographic

Answer 15

D) demographic

Question 16

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

Answer 16

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

Question 17

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 firm’s suppliers
D) increased competitive intensity

Answer 17

B) higher unemployment rates

Question 18

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; positive
C) negative; negligible
D) positive; negative

Answer 18

C) negative; negligible

Question 19

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

A) aging population
B) greater disparities in income levels
C) changes in ethnic composition
D) more women in the workforce

Answer 19

D) more women in the workforce

Question 20

Research published in Personnel Psychology shows that older workers are slightly more willing
to implement organizational changes than younger workers. This is an example of which segment of the
general environment?

A) economic
B) demographic
C) sociocultural
D) political and legal

Answer 20

C) sociocultural

Question 21

The U.S. Congress passed the Sarbanes-Oxley Act in 2002, which greatly increases the
accountability of auditors, executives, and corporate lawyers. Sarbanes-Oxley has also created a
tremendous demand for professional accounting services. This is an example of which segment of the
general environment?

A) economic
B) sociocultural
C) political and legal
D) demographic

Answer 21

C) political and legal

Question 22

A bill passed by the U.S. Congress in October 2000 allowed 195,000 H-1B visas for each of the
following three years—up from a cap of 115,000. However, beginning in 2006 and continuing through
2019, the annual cap on H-1B visas has shrunk to only 65,000—with an additional 20,000 visas available
for foreigners with a masters or higher degree from a U.S. institution. This is an example of which
segment of the general environment?

A) economic
B) demographic
C) sociocultural
D) political and legal

Answer 22

D) political and legal

Question 23

Data Analytics are being used by corporations to understand their customer purchasing
patterns. This is an example of which segment of the general environment?

A) economic
B) demographic
C) technological
D) political and legal

Answer 23

C) technological

Question 24

Genetic engineering has had a positive impact on the pharmaceutical industry. This is an
example of which type of general environmental trend?

A) economic
B) demographic
C) technological
D) political and legal

Answer 24

C) technological

Question 25

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

Answer 25

D) rivalry among competing firms

Question 26

Airbnb, a room-sharing site, offers more rooms than Marriott. Goldman Sachs suggests that the
supply of new rooms over the next two years will outpace the previous five even though the growth of
American occupancy rates has begun to slow. Which competitive force is involved in this situation?

A) the threat of favorable government policies
B) the threat of new buyers
C) the threat of new entrants
D) the threat of proprietary products

Answer 26

C) the threat of new entrants

Question 27

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 competitor products and services.

Answer 27

B) low economies of scale.

Question 28

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

Answer 28

C) large economies of scale

Question 29

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

Answer 29

B) forward integration.

Question 30

Buyer power will be greater when

A) the products purchased are highly differentiated.
B) it is concentrated or when a buyer group purchases large volumes relative to seller sales.
C) the industry product is very important to the quality of the buyer end products or services.
D) there are high switching costs

Answer 30

B) it is concentrated or when a buyer group purchases large volumes relative to seller sales

Question 31

New communication technology can impact seemingly unrelated industries such as the airline
industry. This would be an example of a

A) threat of entry.
B) backward integration.
C) threat of substitute products.
D) forward integration.

Answer 31

C) threat of substitute products.

Question 32

The bargaining power of suppliers is enhanced under which following market condition?

A) no threat of forward integration
B) low differentiation of the supplier products
C) greater availability of substitute products
D) dominance by a few suppliers

Answer 32

D) dominance by a few suppliers

Question 33

In the five-forces model, conditions under which a supplier group can be powerful include all of
the following except

A) lack of importance of the buyer to the supplier group.
B) high differentiation by the supplier.
C) readily available substitute products.
D) dominance by a few suppliers

Answer 33

C) readily available substitute products.

Question 34

Because the Internet lowers barriers to entry in most industries, it

A) decreases the threat of new entrants.
B) increases supplier power.
C) makes it easier to build customer loyalty.
D) increases the threat of new entrants.

Answer 34

D) increases the threat of new entrants.

Question 35

Pittsburgh-based FreeMarkets has developed software enabling large industrial buyers to
organize online auctions for qualified suppliers of semistandard parts such as fabricated components,
and services. By aggregating buyers, FreeMarkets ________ the ________ bargaining power.

A) decreases; buyer
B) increases; buyer
C) increases; supplier
D) decreases; supplier

Answer 35

B) increases; buyer

Question 36

End users are not

A) the final consumers in a distribution channel.
B) the first customers in a distribution channel.
C) likely to have greater bargaining power because of the Internet.
D) usually the C in B2C.

Answer 36

B) the first customers in a distribution channel

Question 37

In general, the threat of substitutes is heightened because the Internet

A) lowers switching costs.
B) lowers barriers to entry.
C) introduces new ways to accomplish the same task.
D) increases output per unit of cost

Answer 37

C) introduces new ways to accomplish the same task.

Question 38

Nintendo built a security chip into its game console hardware and then licensed the right to
develop games to outside firms. These firms paid a royalty to Nintendo for each copy of the game sold.
This is an example of Nintendo using ________ products.

A) substitute
B) complement
C) unrelated
D) differentiated

Answer 38

B) complement

Question 39

Strategic groups consist of a group of

A) top executives that makes strategies for a company.
B) executives drawn from different companies within an industry that makes decisions on
industry standards.
C) firms within an industry that decides to collude rather than compete with each other so that
they can increase their profits.
D) firms within an industry that follows similar strategies

Answer 39

D) firms within an industry that follows similar strategies

Question 40

Referring to the textbook Exhibit 2.7 The World Automobile Industry: Strategic Groups, which
strategic group is the largest in terms of breadth of product line?

A) Ferrari, Lamborghini, Porsche
B) Toyota, Ford, General Motors, Chrysler, Honda, Nissan
C) Chery, Geely, Tata Motors
D) Mercedes, BMW, Audi

Answer 40

B) Toyota, Ford, General Motors, Chrysler, Honda, Nissan

Question 41

In 2014, Audi introduced the Q3 SUV at a base price of only $32,500. And BMW, with its 1-
series, is another well-known example. Such cars, priced in the low $30,000s, compete more directly
with products from broad-line manufacturers like Ford, General Motors, and Toyota. This suggests that
members of a strategic group can overcome ________ barriers and migrate to other groups that they
find attractive if they are willing to commit time and resources.

A) mobility
B) competitive
C) pricing
D) cost

Answer 41

A) mobility

Question 42

Michael Porter, the originator of the five-forces model suggests that an improved understanding
of the root causes of profitability depends upon two critical issues when conducting an industry analysis.
One of these is

A) a quick overview of the forces involved.
B) the selection of an appropriate time frame.
C) qualitative analysis of the forces involved.
D) the selection of a short time frame

Answer 42

B) the selection of an appropriate time frame.

Question 43

Delta Pride Catfish, a supplier group of catfish farmers in Mississippi, formed a cooperative to
process their own fish, thus bypassing ConAgra and Farm Fresh, their previous processing contractors.
By 2014, Delta Pride Catfish controlled over 40 percent of the U.S. catfish market. This is an example of the

A) bargaining power of competitors.
B) bargaining power of suppliers
C) threat of substitute products.
D) backward integration of services.

Answer 43

B) bargaining power of suppliers

Question 44

Medical monitoring through wearable devices has been approved by the U.S. Food and Drug
Administration for offers from Apple. This is an important development of which factor of the general environment?

A) technological
B) sociocultural
C) demographic
D) economic

Answer 44

A) technological

Question 45

Grocery stores in California charge money for their plastic bags. This is a response to
environmental sustainability concerns and is part of the considerations under which general
environment factor?

A) technological
B) sociocultural
C) demographic
D) economic

Answer 45

B) sociocultural

Question 46

Changes in the U.S. national debt can have a big impact on the ability of the country to compete
in world markets. This is an example of which factor in the general environment.

A) technological
B) sociocultural
C) demographic
D) economic

Answer 46

D) economic