Chapter 3

Question 1

focuses on identifying and evaluating trends and events beyond the control of a single firm

Answer 1

External audit

Question 2

reveals key opportunities and threats confronting an organization so that managers can formulate strategies to take advantage of the opportunities and avoid or reduce the impact of threats

Answer 2

External audit

Question 3

This chapter examines the tools and concepts needed to conduct an external strategic management audit (sometimes called ________________).

Answer 3

environmental scanning or industry analysis

Question 4

is aimed at identifying key variables that offer actionable responses

Answer 4

The external audit

Question 5

Firms should be able to respond either offensively or defensively to the factors by formulating strategies that __________________ of external opportunities or that _________ the impact of potential threats.

Answer 5

take advantage; minimize

Question 6

The purpose of an external audit is to ________________________ that could benefit a firm as well as threats that should be avoided.

Answer 6

develop a finite list of opportunities

Question 7

As the term finite suggests, the external audit is not aimed at developing an exhaustive list of every possible factor that could influence the business; rather, it is aimed at _____________________ that offer actionable responses.

Answer 7

identifying key variables

Question 8

A Comprehensive Strategic-Management Model

Answer 8

chapter 2 - develop vision and mission statements
chapter 3 - perform external audit
chapter 4 - perform internal audit
chapter 5 - establish long-term objectives
chapter 6 - generate, evaluate, and select strategies
chapter 7 - implement strategies; management issues
chapter 8 - implement strategies; marketing, finance, accounting, R&D, and MIS issues
chapter 9 - manage and evaluate performance

Question 9

is a process that systematically surveys and interprets relevant data to identify external opportunities and threats that could influence future decisions. It is closely related to a S.W.O.T. analysis and should be used as part of the strategic planning process.

Answer 9

Environmental scanning

Question 10

Components of external scanning

Answer 10

-trends
-competition
-technology
-customers
-economy
-labor supply
-political/legislative arena

Question 11

What trends are occurring in the marketplace or industry that could affect the organization either positively or negatively?

Answer 11

trends

Question 12

What is your competition doing that provides them an advantage?
Where can you exploit your competition’s weaknesses?

Answer 12

competition

Question 13

What developments in technology may impact your business in the future?
Are there new technologies that can make your organization more efficient?

Answer 13

technology

Question 14

How is your customer base changing?
What is impacting your ability to provide top-notch customer service?

Answer 14

customers

Question 15

What is happening in the economy that could affect future business?

Answer 15

economy

Question 16

What is the labor market like in the geographies where you operate?
How can you ensure ready access to high-demand workers?

Answer 16

labor supply

Question 17

What impact will election outcomes have on your business?
Is there impending legislation that will affect your operations?

Answer 17

political/legislative arena

Question 18

key external forces

Answer 18

-economic forces
-social, cultural, demographic, and natural environment forces
-political, government, and legal forces
-technological forces
-competitive forces

Question 19

Important Note: When identifying and prioritizing key external factors in strategic planning, make sure the factors selected are

Answer 19

(1) specific (i.e., quantified to the extent possible);
(2) actionable (i.e., meaningful in terms of having strategic implications); and
(3) stated as external trends, events, or facts rather than as strategies the firm could pursue.

Question 20

external indicators (mcsteep)

Answer 20

M – MARKET (demand; market share)
C - COMPETITION
S – SOCIO-CULTURAL
T - TECHNOLOGY
E - ECONOMIC
E - ENVIRONMENTAL
P – POLITICAL / LEGAL

Question 21

Shift to service economy
Availability of credit
Level of disposable income
Propensity of people to spend
Interest rates
Inflation rates
GDP trends
Consumption patterns
Unemployment trends
Value of the dollar
Import/Export factors
Demand shifts for different goods and services
Income differences by region and consumer group
Price fluctuations
Foreign countries’ economic conditions
Monetary and Fiscal policy
Stock market trends
Tax rate variation by country and state
European Economic Community (EEC) policies
Organization of Petroleum Exporting Countries (OPEC) policies

Answer 21

Economic Forces

Question 22

Be mindful that in strategic planning and case analysis, _____________________ such as those listed must be quantified and actionable to be useful.

Answer 22

relevant economic variables

Question 23

Population changes by race, age, and geographic area
Regional changes in tastes and preferences
Number of marriages
Number of divorces
Number of births
Number of deaths
Immigration and emigration rates
Social Security programs
Life expectancy rates
Per capita income
Social media pervasiveness
Attitudes toward retirement
Energy conservation
Attitudes toward product quality
Attitudes toward customer service
Pollution control
Attitudes toward foreign peoples
Energy conservation
Social programs
Number of churches
Number of church members
Social responsibility issues

Answer 23

Key Social, Cultural, Demographic, and Natural Environmental Variables

Question 24

Be mindful that in strategic planning and case analysis, __________________________________ for a particular business must be quantified and actionable to be useful.

Answer 24

relevant social, cultural, demographic, and natural environment factors

Question 25

The increasing **global interdependence** among economies, markets, governments, and organizations makes it imperative that firms consider the possible impact of political variables on the formulation and implementation of competitive strategies.

Answer 25

Political, Governmental, and Legal Forces

Question 26

____________________ are major regulators, deregulators, subsidizers, employers, and customers of organizations. ________________, therefore, can represent major opportunities or threats for both small and large organizations.

Answer 26

Federal, state, local, and foreign governments; Political, governmental, and legal factors

Question 27

Environmental regulations Number of patents Changes in patent laws Equal employment laws Level of defense expenditures Unionization trends Antitrust legislation USA vs. other country relationships Political conditions in foreign countries Global price of oil changes Local, state, and federal laws Import–export regulations Tariffs Local, state, and national elections

Answer 27

Political, Government, and Legal Variables

Question 28

Some __________________ that can represent key opportunities or threats to organizations are provided on this slide, but in stating these for a particular company, the factors should be both quantitative and actionable.

Answer 28

political, governmental, and legal variables

Question 29

the Internet of Things 3D printing the cloud mobile devices biotech analytics autotech robotics and artificial intelligence are fueling innovation in many industries, and impacting strategic-planning decisions.

Answer 29

Technological Forces

Question 30

No company or industry today is insulated against emerging technological developments. In high-tech industries, __________________________opportunities and threats can be the most important part of the external strategic-management audit.

Answer 30

dentification and evaluation of key technological

Question 31

An important part of an external audit is identifying rival firms and determining their strengths, weaknesses, capabilities, opportunities, threats, objectives, and strategies

Answer 31

Competitive Forces

Question 32

1. Major opportunities and threats that must be considered in formulating strategies. 2. Can affect organizations’ products, services, markets, suppliers, distributors, competitors, customers, manufacturing processes, marketing practices, and competitive position. 3. Can create new markets, result in new and improved products, change the relative competitive cost positions, and render existing products and services obsolete. 4. Can reduce or eliminate cost barriers between businesses, create shorter production runs, create shortages in technical skills, and result in changing values and expectations of employees, managers, and customers. 5. Can create new competitive advantages that are more powerful than existing advantages.

Answer 32

Results of Technological Advances

Question 33

________________________________ is essential for successful strategy formulation. Identifying major competitors is not always easy because many firms have divisions that compete in different industries.

Answer 33

Collecting and evaluating information on competitors

Question 34

Strive to continually increase market share Use the vision/mission as a guide for all decisions Whether it's broke or not, fix it–make it better Continually adapt, innovate, improve Acquisition is essential to growth Hire and retain the best employees and managers possible Strive to stay cost-competitive on a global basis

Answer 34

Competitive Forces (Characteristics)

Question 35

What are the strengths of our major competitors? What are the weaknesses of our major competitors? What are the objectives and strategies of our major competitors? How will our major competitors most likely respond to current economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive trends affecting our industry? How vulnerable are the major competitors to our alternative company strategies? How vulnerable are our alternative strategies to successful counterattack by our major competitors? How are our products or services positioned relative to major competitors? To what extent are new firms entering and old firms leaving this industry? What key factors have resulted in our present competitive position in this industry? How have the sales and profit rankings of our major competitors in the industry changed over recent years? Why have these rankings changed that way? What is the nature of supplier and distributor relationships in this industry? To what extent could substitute products or services be a threat to our competitors?

Answer 35

Key Questions About Competitors

Question 36

Addressing questions about ________, such as those presented on this slide, is important in performing an external audit.

Answer 36

competitors

Question 37

is a market evaluation tool companies use to assess the level and intensity of competition in a specific industry.

Answer 37

Industry Analysis

Question 38

Demand-supply statistics Degree of competition within the industry State of competition between the industry and emerging industries Future prospects based on things like technological advances Credit systems Influence of other external factors in the past and possibly the future

Answer 38

Aspects of Industry Analysis

Question 39

is a widely used approach for developing strategies in many industries.

Answer 39

Porter’s Five-Forces Model of competitive analysis

Question 40

Identify key aspects or elements of each competitive force that impact the firm. Evaluate how strong and important each element is for the firm. Decide whether the collective strength of the elements is worth the firm entering or staying in the industry.

Answer 40

The Five-Forces Model of Competition

Question 41

Most powerful of the five forces Focus on the competitive advantage of strategies over other firms

Answer 41

Rivalry among competing firms

Question 42

The_____________________________ tends to increase as the number of competitors increases, as competitors become more equal in size and capability, as demand for the industry’s products declines, and as price cutting becomes common.

Answer 42

intensity of rivalry among competing firms

Question 43

1. When the number of competing firms is high 2. When competing firms are of similar size 3. When competing firms have similar capabilities 4. When the demand for an industry’s products is falling 5. When the product or service prices in the industry are falling 6. When consumers can switch brands easily 7. When barriers to leaving the market are high 8. When barriers to entering the market are low 9. When fixed costs are high among competing firms 10. When the product is perishable 11. When rivals have excess capacity 12. When consumer demand is falling 13. When rivals have excess inventory 14. When rivals sell similar products/services 15. When mergers are common in the industry

Answer 43

Conditions That Cause High Rivalry Among Competing Firms

Question 44

Barriers to entry are important Quality, pricing, and marketing can overcome barriers

Answer 44

Potential Entry of New Competitors

Question 45

Whenever new firms can ________________, the intensity of competitiveness among firms increases.

Answer 45

easily enter a particular industry

Question 46

Need to gain economies of scale quickly Need to gain technology and specialized know-how Lack of experience Strong customer loyalty Strong brand preferences Large capital requirements Lack of adequate distribution channels

Answer 46

Barriers to Entry

Question 47

_______________ however, can include the need to gain economies of scale quickly, the need to gain technology and specialized know-how, the lack of experience, strong customer loyalty, strong brand preferences, large capital requirements, lack of adequate distribution channels, government regulatory policies, tariffs, lack of access to raw materials, possession of patents, undesirable locations, counterattack by entrenched firms, and potential saturation of the market._

Answer 47

Barriers to Entry

Question 48

Government regulatory policies Tariffs Lack of access to raw materials Possession of patents Undesirable locations Counterattack by entrenched firms Potential saturation of the market

Answer 48

Barriers to Entry

Question 49

Pressure increases when: Prices of substitutes decrease Consumers' switching costs decrease

Answer 49

Potential development of substitute products

Question 50

In many industries, firms are in close ____________________ in other industries. The presence of substitute products puts a ceiling on the price that can be charged before consumers will switch to the substitute product.

Answer 50

competition with producers of substitute products

Question 51

is increased/high when there are: Few suppliers Few substitutes Costs of switching raw materials are high Backward integration is gaining control or ownership of

Answer 51

Bargaining Power of Suppliers

Question 52

It is often in the best interest of both suppliers and producers to assist each other with reasonable prices, improved quality, development of new services, just-in-time deliveries, and reduced inventory costs, thus enhancing long-term profitability for all concerned. true or false

Answer 52

true

Question 53

Customers being concentrated or buying in volume affects intensity of competition Consumer power is higher where products are standard or undifferentiated

Answer 53

Bargaining power of consumers

Question 54

When customers are _______________________ , their bargaining power represents a major force affecting the intensity of competition in an industry.

Answer 54

concentrated or large in number or buy in volume

Question 55

If buyers can inexpensively switch If buyers are particularly important If sellers are struggling in the face of falling consumer demand If buyers are informed about sellers' products, prices, and costs If buyers have discretion in whether and when they purchase the product

Answer 55

Conditions Where Consumers Gain Bargaining Power

Question 56

The ___________________ can be the most important force affecting competitive advantage.

Answer 56

bargaining power of consumers

Question 57

Sources of External Information

Answer 57

unpublished and published

Question 58

sources include customer surveys, market research, speeches at professional and shareholders' meetings, television programs, interviews, and conversations with stakeholders.

Answer 58

Unpublished

Question 58

sources of strategic information include periodicals, journals, reports, government documents, abstracts, books, directories, newspapers, and manuals.

Answer 58

Published

Question 59

A ________________ is available to organizations from both published and unpublished sources.

Answer 59

wealth of strategic information