CHAPTER 3

Question 1

it is not the strongest of the species that survive, nor the most intelligent, but the one most
responsive to change.

Answer 1

Charles Darwin

Question 2

“Nothing focuses the mind better than the constant sight of a competitor who wants to wipe you
off the map.”

Answer 2

Wayne Calloway, Former CEO, PepsiCo

Question 3

The inventory of forces in the outside universe that influence the mission of an organization.

Answer 3

External Assessment

Question 4

EXTERNAL STRATEGIC MANAGEMENT AUDIT

Answer 4

1. Environmental Scanning
2. Monitoring
3. Forecasting

Question 5

identifies external factors (opportunities and threats) that
could influence future decisions.

Answer 5

Environmental Scanning

Question 6

the process of carefully tracking and observing the environmental changes
and seeing their effects

Answer 6

Monitoring

Question 7

the result of scanning and monitoring.

Answer 7

Forecasting

Question 8

APPROACHES and FRAMEWORKS IN ENVIRONMENTAL SCANNING:

Answer 8

1. SWOT Analysis
2. PESTEL
3. Porter’s Five Forces Model

Question 9

a framework for assessing and understanding the internal and external
factors that can impact an organization’s current and future strategic position.

Answer 9

SWOT Analysis

Question 10

are internal factors that give an organization an advantage over others.
Identifying strengths helps organizations leverage their competitive advantages and build on
areas of excellence. (e.g. Strong brand reputation, skilled workforce, efficient processes, or
unique products.)

Answer 10

Strengths

Question 11

Internal factors that place an organization at a disadvantage relative to
others.

Answer 11

Weaknesses

Question 12

are external factors that an organization could exploit to its advantage.

Answer 12

Opportunities

Question 13

are external factors that could pose challenges or risks to an organization.
Recognizing threats allows organizations to develop strategies to mitigate risks and navigate
external challenges.

Answer 13

Threats

Question 14

provides a framework for analyzing and understanding the external
environmental factors that can impact an organization.

Answer 14

PESTEL Framework

Question 15

these refer to the influence of government policies, political stability, and
the overall political climate of an organization.

Answer 15

Political Factors

Question 16

Focuses on societal and cultural influences that can affect an organization,
including demographics, lifestyle changes, and cultural attitudes.

Answer 16

Social Factors

Question 17

Encompasses the impact of economic conditions, such as inflation, exchange rates, interest rates, and overall economic stability.

Answer 17

Economic Factors

Question 18

this refers to the process of examining the impact of technology
on the industry and how innovation can affect an organization’s competitiveness.

Answer 18

Technological Factors

Question 19

these refer to factors related to the natural environment, including
sustainability, climate change, and ecological considerations.

Answer 19

Environmental Factors

Question 20

these encompass the impact of laws and regulations on business
operations.

Answer 20

Legal Factors

Question 21

is a framework used for analyzing the competitive
forces within an industry. The model helps assess the attractiveness and profitability of an
industry by examining five key factors that influence competition.

Answer 21

Porter’s Five Forces Model

Question 22

five key factors that influence competition.

Answer 22

1) The Threat of New Entrants
(2) Intensity of Competitive Rivalry
(3) The Threat of Substitute Products or Services
(4) Bargaining Power of Suppliers
(5) Bargaining Power of Buyers

Question 23

assesses the degree of difficulty for new companies to
enter a particular industry and potentially compete with existing businesses. Understanding the
threat of new entrants is crucial for existing firms to anticipate and respond to potential changes
in their competitive environment.

Answer 23

THE THREAT OF NEW ENTRANTS

Question 24

STRATEGIES TO AVOID THE THREAT OF NEW ENTRANTS:

Answer 24

1. Economies of Scale
2. Product Differentiation
3. Capital Requirements
4. Access to Distribution Channel
5. Government Regulations

Question 25

this refers to the marginal improvement in efficiency that the firm experiences as it incrementally increases in size. When the quantity of product produced over time increases, the cost of production per unit decreases.

Answer 25

Economies of Scale

Question 26

Customers perceive that the products that enter the market capture customers’ loyalty and patronage.

Answer 26

Product Differentiation

Question 27

industries with high initial investment requirements act as a barrier to entry. New entrants may find it difficult to secure the necessary capital.

Answer 27

Capital Requirement

Question 28

existing companies may have well-established distribution networks. New entrants might face challenges in securing shelf space or distribution agreements.

Answer 28

Access to Distribution Channel

Question 29

industries with stringent regulations or licensing requirements can limit the entry of new competitors. Compliance with regulations may pose a significant barrier.

Answer 29

Government Regulations

Question 30

IMPACT ON INDUSTRY:

Answer 30

Low Threat of New Entrants High Threat of New Entrants

Question 31

Industries with high barriers to entry are less susceptible to new competition. Existing firms may focus on maintaining their advantages and investing in innovation

Answer 31

Low Threat of New Entrants

Question 32

Industries with low barriers may experience increased competition. Existing firms need to continually innovate, enhance customer loyalty, and strengthen their competitive position to counter the threat.

Answer 32

High Threat of New Entrants

Question 33

This force measures the level of competition among existing firms in an industry.

Answer 33

Intensity of Competitive Rivalry

Question 34

FACTORS INFLUENCING THE INTENSITY OF RIVALRY:

Answer 34

1. Number of Competitors 2. Rate of Industry Growth 3. Product Differentiation 4. Exit Barriers 5. Brand Loyalty

Question 35

The more competitors in an industry, the higher the intensity of rivalry.

Answer 35

Numbers of Competitors

Question 36

slow industry growth often leads to more competition for market share.

Answer 36

Rate of Industry Growth

Question 37

If products are similar, competition is usually more intense.

Answer 37

Product Differentiation

Question 38

High exit barriers (difficulty in leaving the industry) can increase rivalry.

Answer 38

Exit Barriers

Question 39

Strong brand loyalty can mitigate rivalry as customers may stick with a particular brand.

Answer 39

Brand Loyalty

Question 40

This force assesses the likelihood of other products or services replacing those of the industry.

Answer 40

THREAT OF SUBSTITUTE PRODUCTS OR SERVICES