Test Bank Strategic Management: Creating Competitive Advantages 9th Edition by Dess, McNamara, Eisner, Lee

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Strategic Management: Text and Cases, 9e (Dess) Chapter 2 Analyzing the External Environment of the Firm: Creating Competitive Advantages 1) Environmental scanning and competitor intelligence pr... ovide important inputs for forecasting activities. Answer: TRUE Explanation: Three important processes (scanning, monitoring, and gathering competitive intelligence) are used to develop forecasts. Difficulty: 2 Medium Topic: Understanding a Firm's External Environment Learning Objective: 02-01 The importance of developing forecasts of the business environment. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 2) Perceptual acuity, according to Ram Charan, is the ability to know for certain what will happen in the future. Answer: FALSE Explanation: Ram Charan defines perceptual acuity as the ability to sense what is coming before the fog clears. Difficulty: 2 Medium Topic: Understanding a Firm's External Environment Learning Objective: 02-01 The importance of developing forecasts of the business environment. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 3) Ted Turner saw the potential of 24-hour news before anyone else. This is an example of perceptual acuity. Answer: TRUE Explanation: Ram Charan defines perceptual acuity as the ability to sense what is coming before the fog clears. Turner saw the potential of 24-hour news before anyone else did. All the ingredients were there, but no others connected them until he created CNN. Difficulty: 2 Medium Topic: Understanding a Firm's External Environment Learning Objective: 02-01 The importance of developing forecasts of the business environment. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation   4) Environmental monitoring deals with tracking changes in environmental trends that are often uncovered during the environmental scanning process. Answer: TRUE Explanation: Environmental monitoring tracks the evolution of environmental trends, sequences of events, or streams of activities. Difficulty: 1 Easy Topic: Understanding a Firm's External Environment Learning Objective: 02-02 Why environmental scanning, environmental monitoring, and collecting competitive intelligence are critical inputs to forecasting. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 5) Competitive Intelligence (CI) is a tool that can provide management with early warnings about both threats and opportunities. Answer: TRUE Explanation: Competitive intelligence (CI) helps firms define and understand their industry and identify strengths and weaknesses of rivals. Done properly, competitive intelligence helps a company avoid surprises by anticipating competitor moves and decreasing response time. Difficulty: 1 Easy Topic: Understanding a Firm's External Environment Learning Objective: 02-02 Why environmental scanning, environmental monitoring, and collecting competitive intelligence are critical inputs to forecasting. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 6) Competitive intelligence generally does not benefit very much from gathering information on competitors from sources in the public domain. Answer: FALSE Explanation: Competitive intelligence is frequently done effectively through public sources of information. Examples are evident in daily newspapers and periodicals such as The Wall Street Journal, Bloomberg Businessweek, and Fortune. For example, banks continually track home loan, auto loan, and certificate of deposit (CD) interest rates charged by rivals. Major airlines change hundreds of fares daily in response to competitor tactics. Difficulty: 2 Medium Topic: Understanding a Firm's External Environment Learning Objective: 02-02 Why environmental scanning, environmental monitoring, and collecting competitive intelligence are critical inputs to forecasting. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation   7) Even with all 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. Answer: FALSE Explanation: Environmental forecasting involves the development of plausible projections about the direction, scope, speed, and intensity of environmental change. Its purpose is to predict change. Difficulty: 2 Medium Topic: Understanding a Firm's External Environment Learning Objective: 02-02 Why environmental scanning, environmental monitoring, and collecting competitive intelligence are critical inputs to forecasting. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 8) Scenario analysis is a superficial approach to forecasting that seeks to explore possible developments that many only be connected to the past. Answer: FALSE Explanation: Scenario analysis is a more in-depth approach to forecasting. It draws on a range of disciplines and interests, among them economics, psychology, sociology, and demographics. It does not rely on extrapolation of historical trends. Rather, it seeks to explore possible developments that may only be connected to the past. Difficulty: 2 Medium Topic: Understanding a Firm's External Environment Learning Objective: 02-03 Why scenario planning is a useful technique for firms competing in industries characterized by unpredictability and change. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 9) 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 because of its internal and external environmental scan. Answer: TRUE Explanation: Despite its apparent simplicity, the SWOT approach has been very popular. First, it forces managers to consider both internal and external factors simultaneously. Second, its emphasis on identifying opportunities and threats makes firms act proactively rather than reactively. Third, it raises awareness about the role of strategy in creating a match between the environmental conditions and the internal strengths and weaknesses of the firm. Difficulty: 2 Medium Topic: SWOT Analysis Learning Objective: 02-03 Why scenario planning is a useful technique for firms competing in industries characterized by unpredictability and change. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 10) In the SWOT framework, the Strengths and Weaknesses are external environmental factors to consider. Answer: FALSE Explanation: The Strengths and Weaknesses refer to the internal conditions of the firm in which a firm excels (strengths) and where it may be lacking relative to competitors (weaknesses). Difficulty: 2 Medium Topic: SWOT Analysis Learning Objective: 02-03 Why scenario planning is a useful technique for firms competing in industries characterized by unpredictability and change. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 11) In the SWOT framework, Opportunities and Threats are environmental conditions internal to the firm. Answer: FALSE Explanation: Opportunities and Threats are environmental conditions external to the firm. These could be factors in either the general or the competitive environment. Difficulty: 2 Medium Topic: SWOT Analysis Learning Objective: 02-03 Why scenario planning is a useful technique for firms competing in industries characterized by unpredictability and change. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 12) Although changes in the general environment may often adversely or favorably impact a firm, they seldom alter an entire industry. Answer: FALSE Explanation: The general environment is composed of factors that can have dramatic effects on firm strategy. Difficulty: 2 Medium Topic: Understanding a Firm's External Environment Learning Objective: 02-04 The impact of the general environment on a firm's strategies and performance. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation   13) A major sociocultural trend in the United States is the increased number of women in the workforce that has increased the need for business clothing but decreased the demand for baking product staples. Answer: TRUE Explanation: The increased number of women in the workforce has increased the need for business-clothing merchandise but decreased the demand for baking product staples (because people would have less time to cook from scratch). Difficulty: 2 Medium Topic: Understanding a Firm's External Environment Learning Objective: 02-04 The impact of the general environment on a firm's strategies and performance. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 14) Technological innovations can create entirely new industries and alter the boundaries of industries. Answer: TRUE Explanation: Developments in technology lead to new products and services and improve how they are produced and delivered to the end user. Innovations can create entirely new industries and alter the boundaries of existing industries. Difficulty: 2 Medium Topic: Understanding a Firm's External Environment Learning Objective: 02-04 The impact of the general environment on a firm's strategies and performance. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 15) The Porter five-forces model is designed to help us understand how social attitudes and cultural values impact U.S. businesses. Answer: FALSE Explanation: The five-forces model developed by Michael E. Porter has been the most commonly used analytical tool for examining the competitive environment. It describes the competitive environment in terms of five basic competitive forces. Difficulty: 2 Medium Topic: Five Forces Model of Industry Attractiveness Learning Objective: 02-05 How forces in the competitive environment can affect profitability, and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation   16) The five-forces model helps to determine both the nature of competition in an industry and the profit potential for the industry. Answer: TRUE Explanation: The five-forces model developed by Michael E. Porter describes the competitive environment in terms of five basic competitive forces that affect the ability of a firm to compete in a given market. Together, they determine the profit potential for a particular industry. Difficulty: 2 Medium Topic: Five Forces Model of Industry Attractiveness Learning Objective: 02-05 How forces in the competitive environment can affect profitability, and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 17) In some industries, low switching costs can act as an important barrier to entry. Answer: FALSE Explanation: A barrier to entry is created by the existence of one-time costs that the buyer faces when switching from one supplier product or service to another. Difficulty: 2 Medium Topic: Five Forces Model of Industry Attractiveness Learning Objective: 02-05 How forces in the competitive environment can affect profitability, and how a firm can improve its competitive position by increasing its power vis-à-vis these forces. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 18) In most industries, new entrants will not be a threat because the Internet lowers entry barriers. Answer: FALSE Explanation: In most industries, the threat of new entrants has increased because digital and Internet-based technologies lower barriers to entry. For example, businesses that reach customers primarily through the Internet may enjoy savings on other traditional expenses such as office rent, sales-force salaries, printing, and postage. This may encourage more entrants who, because of the lower start-up expenses, see an opportunity to capture market share by offering a product or performing a service more efficiently than existing competitors. Thus, a new cyber entrant can use the savings provided by the Internet to charge lower prices and compete on price despite the incumbent's scale advantages. Difficulty: 2 Medium Topic: Five Forces Model of Industry Attractiveness Learning Objective: 02-06 How the Internet and digitally based capabilities are affecting the five competitive forces and industry profitability. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 19) The Internet and digital technologies suppress the bargaining power of buyers by providing them with more information to make buying decisions. Answer: FALSE Explanation: The Internet and wireless technologies may increase buyer power by providing consumers with more information to make buying decisions and by lowering switching costs. Difficulty: 2 Medium Topic: Five Forces Model of Industry Attractiveness Learning Objective: 02-06 How the Internet and digitally based capabilities are affecting the five competitive forces and industry profitability. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 20) Reintermediation is responsible for an overall reduction in business opportunities. Answer: FALSE Explanation: Just as the Internet is eliminating some business functions, it is creating an opening for new functions. These new activities are entering the value chain by a process known as reintermediation. Difficulty: 2 Medium Topic: Five Forces Model of Industry Attractiveness Learning Objective: 02-06 How the Internet and digitally based capabilities are affecting the five competitive forces and industry profitability. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 21) 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: C Explanation: Three important processes (scanning, monitoring, and gathering competitive intelligence) are used to develop forecasts. Difficulty: 1 Easy Topic: Understanding a Firm's External Environment Learning Objective: 02-01 The importance of developing forecasts of the business environment. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation   22) 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) assessing internal strengths. C) environmental scanning. D) mission statement evaluation. Answer: C Explanation: Analyzing the external environment is a critical step in recognizing and understanding the opportunities and threats that organizations face. Difficulty: 2 Medium Topic: Understanding a Firm's External Environment Learning Objective: 02-01 The importance of developing forecasts of the business environment. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 23) Environmental analysis requires continual questioning of all these assumptions except A) a priori ideas about the structure of the relevant industry. B) continual updating of environmental knowledge. C) presuppositions about who is and is not a competitor. D) biases about how to make money in the industry. Answer: B Explanation: According to Hamel and Prahalad, every manager carries around in his or her head a set of biases, assumptions, and presuppositions about the structure of the relevant industry, about how one makes money in the industry, about who the competition is and is not, about who the customers are and are not, and so on. Environmental analysis requires you to continually question such assumptions. Difficulty: 2 Medium Topic: Understanding a Firm's External Environment Learning Objective: 02-01 The importance of developing forecasts of the business environment. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation [Show More]

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