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CHAPTER 3 The External Assessment True/False Introduction
1.
Indus Industr try y anal analys ysis is is is also also ref refer erre red d to as as exte extern rnal al str strat ateg egic ic mana manage geme ment nt aud audit it.. Ans: T
2.
Page: 82
An ext exter ernal nal audi auditt focu focuse sess on ide ident ntif ifyi ying ng and and eval evalua uati ting ng tre trend ndss and and even events ts wit withi hin n the control of management. Ans: F
Page: 82
The Nature of an External Audit
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The The aim aim of an an exte extern rnal al aud audit it is is to dev devel elo! o! an an exha exhaus usti tive ve lis listt of ever every y !oss !ossi" i"le le fac facto torr that could influence the "usiness. Ans: F
#.
$xte $xtern rnal al audi audits ts att attem em!t !t to ide ident ntif ify y %ey var varia ia"l "les es tha thatt offer offer act actio iona" na"le le res! res!ons onses es.. Ans: T
&.
Page: 8
As many many man manag ager erss and and em!l em!loye oyees es as as !oss !ossi" i"le le sho shoul uld d "e invol involve ved d in the the !roc !roces esss of of !erformin !erforming g an externa externall audit. audit. Ans: T
,.
Page 8
Five Five ma' ma'or or cat categ egor orie iess of ext exter erna nall vari varia" a"le less are: are: (1) (1) eco econo nomi micc force forces* s* (2) (2) soc socia iall and and cultural forces* () !olitical* governmental and legal forces* (#) technological forces and (&) demogra!hic forces. Ans: F
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Page: 8
Page: 8
To !er !erfo form rm an an exte extern rnal al audi audit* t* a com! com!an any y firs firstt must must gat gathe herr com! com!et etit itiv ivee intel intelli lige genc ncee and information a"out social* cultural* demogra!hic* environmental* economic* !olitical !olitical** legal* legal* governmenta governmentall and technol technological ogical trends. trends. Ans: T
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##
8.
Freu Freund nd argue arguess tha thatt %ey %ey exte extern rnal al fact factor orss mus mustt not "e hier hierar arch chic ical al.. Ans: F
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The Industrial Organiation !I/O" #ie$
-.
ese esear arch ch fin findi dings ngs sugg sugges estt that that a great greater er !erc !ercen enta tage ge of a fir firm/ m/ss !rof !rofit ita" a"il ilit ity y can "e "e ex!lained "y the industry than can "e ex!lained "y the firm/s internal factors. Ans: F
Page: 8&
Economic Forces
10.
An econ economi omicc trend trend in in Ameri America ca is is the the incre increasi asing ng num"e num"ers rs of of twoi twoinco ncome me hous househo eholds lds.. Ans: T
11.
$conom $conomic ic fact factors ors do not not have have much much im!ac im!actt on the attrac attracti tivene veness ss of stra strateg tegies ies.. Ans: F
12.
Page 8+
The econom economic ic stan standar dard d of livin living g varie variess littl littlee "etwe "etween en cit cities ies and countr countries ies.. Ans: F
1,.
Page: 8+
In 200& 200&** the the 5en 5en rose rose to to a fiv five eye year ar hig high h agai agains nstt the the dol dolla lar. r. Ans: T
1+.
Page: 8+
A low low valu valuee of the the dol dolla larr mean meanss lowe lowerr ex!o ex!ort rtss and and high higher er im! im!or orts ts.. Ans: F
1&.
Page: 8&
otor otor vehic vehicle le firm firmss in the 3nited 3nited 4tates 4tates are vulner vulnera"l a"lee when when the the value value of of the the dollar dollar falls. Ans: F
1#.
Page: 8&
An incr increas easee in inte interes restt rates rates is is direc directly tly relate related d to an increa increase se in in discre discreti tiona onary ry incom incomee and an increase in the demand for discretionary goods. Ans: F
1.
Page: 8&
Page 8+
The cost cost of livin living g in 6ondon 6ondon is grea greater ter than than the the cost cost of of livi living ng in in 7ew 7ew 5or% 5or% it ity. y. Ans: T
Page 8,
#&
18.
The cost of living in 9oston is greater than the cost of living in 7ew 5or% ity. Ans: F
1-.
According to the all 4treet ;ournal* the !olitical "ureaucracy in ussia has "een a"le to stimulate economic !rogress* free enter!rise* and entre!reneurshi!. Ans: F
20.
Page 8,
Page 8,
ussian "usinesses are more li%ely to fall victim to illegal actions "y officials and !olicemen than "y criminals. Ans: T
Page 8,
%ocial& Cultural& 'emogra(hic and En)ironmental Forces
21.
The 3nited 4tates is getting older and less aucasian. Ans: T
22.
It is !redicted that* "y 202&* over 18< of the !o!ulation in the 3nited 4tates will "e over +& years old. Ans: T
2.
Page: 88
In the 3nited 4tates* the !o!ulation has "een moving from the south and west to the 7ortheast and idwest. Ans: F
2+.
Page 88
=is!anics are ex!ected to "ecome a larger minority grou! in the 3nited 4tates than African Americans "y 2021. Ans: T
2&.
Page 88
ecent consum!tion trends in the 3nited 4tates indicate that wine consum!tion is increasing at &< while "eer consum!tion is increasing at 10<. Ans: F
2#.
Page: 88
Page: 8-
In 200* hina re!laced exico as the largest ex!orter to the 3nited 4tates. Ans: T
Page 8-
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Political& *o)ernmental and +egal Forces
2,.
Political* governmental* and legal factors are considered %ey threats for most small and large organi>ations. Ans: F
28.
Political forecasts can "e the most im!ortant !art of an external audit for firms that de!end heavily on government contracts. Ans: T
2-.
Page -0
Page: 8
ithin the $uro!ean 3nion ($3)* tax rates have "een standardi>ed to end com!etitive tax "rea%s among mem"er countries. Ans: F
!age -0
Technological Forces
0.
The Internet is changing the very nature of many industries "y altering !roduct life cycles and changing the historical tradeoff "etween !roduction standardi>ation and flexi"ility. Ans: T
1.
Page: -
In !ractice* critical technology decisions are too often delegated to lower organi>ational levels or are made without an understanding of their strategic im!lications. Ans: T
Page: -#
Com(etiti)e Forces
2.
A characteristic that descri"es the most com!etitive com!anies in America is ?whether it/s "ro%e or not* fix it@ma%e it "etter not 'ust !roducts* "ut the whole com!any if necessary.B Ans: T
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Page: -+
?Innovate or eva!orate !articularly in technologydriven "usinesses* nothing Cuite recedes li%e success*B is a characteristic given that descri"es the most com!etitive com!anies in America. Ans: T
Page: -+
#,
#.
or!orate intelligence can "e defined as a systematic and ethical !rocess for gathering and analy>ing information a"out the com!etition/s activities and general "usiness trends to further a "usiness/s own goals. Ans: F
&.
Internal o!!ortunities can "e re!resented "y ma'or com!etitors/ wea%nesses. Ans: F
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Page -8
Learning from the partner is a ma'or reason why 3.4. firms enter into coo!erative agreements. Ans: F
#2.
Page: -,
9ecause com!anies are fearful of cor!orate es!ionage* coo!erative agreements "etween com!etitors are "ecoming less !o!ular. Ans: F
#1.
Page: -,
om!etitive intelligence is not considered cor!orate es!ionage "ecause -& !ercent of the information a com!any needs to ma%e strategic decisions is availa"le and accessi"le to the !u"lic. Ans: T
#0.
Page: -+
An effective I !rogram allows all areas of a firm to access consistent and verifia"le information in ma%ing decisions. Ans: T
-.
Page -+
According to Business Week * and - out of 10 large com!anies have em!loyees dedicated solely to gathering com!etitive intelligence. Ans: T
8.
Page: -+
According to Business Week * there are less than &00 cor!orate s!ies now actively engaged in intelligence activities. Ans F:
,.
Page -+
Page: --
ar%et commonality is the extent to which the ty!e and amount of a firm/s internal resources are com!ara"le to a rival. Ans: F
!age --
#8
Com(etiti)e Anal,sis- Porter.s Fi)eForces 0odel
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According to ichael Porter* five com!etitive forces create vital o!!ortunities and threats to organi>ations: (1) new entrants* (2) su"stitute !roducts or services* () "argaining !ower of su!!liers* (#) "argaining !ower of "uyers* and (&) rivalry among existing firms. Ans: T
##.
The first ste! for using Porter/s FiveForces odel is to evaluate the relative strength of each com!etitive force. Ans: F
#&.
Page 102
Forward integration is used "y firms to gain control or ownershi! of su!!liers. Ans: F
#-.
Page: 102
6aser eye surgery would "e considered a su"stitute !roduct for eyeglasses and contact lenses. Ans: T
#8.
Page: 101
4ignificant "arriers to entry are not always sufficient to %ee! some new firms from entering industries with higherCuality !roducts* lower !rices and su"stantial mar%eting resources. Ans: T
#,.
Page 101
9argaining !ower of consumers is usually the most !owerful of Porter/s five com!etitive forces. Ans: F
#+.
Page: 100
Page: 102
The "argaining !ower of consumers can "e the most im!ortant force im!acting com!etitive advantage. Ans: T
!age 10
Forecasting Tools and Techni1ues
&0.
Forecasts are educated assum!tions a"out future trends and events. Ans: T
Page: 10#
#-
&1.
Dualitative forecasts are most a!!ro!riate when historical data are availa"le and when the relationshi!s among %ey varia"les are ex!ected to remain the same in the future. Ans: F
&2.
!age 10#
Duantitative forecasts "ecome less accurate as historical relationshi!s "ecome less sta"le. Ans: T
&.
Page: 10#
6inear regression is "ased on the assum!tion that the future will "e different from the !ast. Ans: F
&#.
Page: 10#
6inear regression is a !o!ular techniCue for Cualitative forecasts. Ans: F
&&.
Page 10#
ithout reasona"le assum!tions* the strategyformulation !rocess could not !roceed effectively. a.
Ans: T
Page: 10#
The *lo2al Challenge
&+.
Elo"ali>ation is a !rocess of worldwide integration of strategy formulation* im!lementation and evaluation activities. Ans: T
&,.
A glo"al strategy see%s to meet the needs of customers worldwide with the lowest cost at the highest value. Ans: T
&8.
Page: 10+
am!ant corru!tion and the a"sence of a legal system are ris%s that still restrain firms from initiating "usiness with hina. Ans: T
&-.
Page: 10+
Page: 10+
hina is the world/s fastestgrowing economy. Ans: T
Page 10,
&0
+0.
=ong ong serves as the gateway to hina. Ans: T
Page: 108
Industr, Anal,sis- The EFE 0atrix
+1.
In an $F$ atrix* o!!ortunities often receive higher weights than threats* "ut threats too can receive high weights if they are es!ecially severe or threatening. Ans: T
+2.
Page: 10-
egardless of the num"er of %ey o!!ortunities and threats included in an $xternal Factor $valuation atrix* the highest !ossi"le total weighted score for an organi>ation is #.0* and the lowest !ossi"le total weighted score is 0.0. Ans: F
Page: 10-
The Com(etiti)e Profile 0atrix !CP0"
+.
9oth a om!etitive Profile atrix and an $F$ atrix have the same meaning in the weights* ratings and total weighted scores. a.
+#.
Ans: T
Page: 111
The critical success factors in a om!etitive Profile atrix are often the same as those in an $F$ atrix. a.
Ans: F
Page: 111
0ulti(le Choice The Nature of an External Audit
+&.
GGGGGGGGGG is not !art of an external audit. a. Analy>ing com!etitors ". Analy>ing financial ratios c. Analy>ing availa"le technologies d. 4tudying the !olitical environment e. Analy>ing social* cultural* demogra!hic and geogra!hic forces Ans: "
Page: 8
&1
++.
Identifying and evaluating %ey social* !olitical* economic* technological and com!etitive trends and events com!rise a. develo!ing an effective mission statement. ". conducting an internal audit. c. !erforming an external audit. d. formulating strategy. e. im!lementing strategy. Ans: c
+,.
The !rocess of !erforming an external audit needs to include: a. only to! level managers* as it/s a !lanning function. ". as many managers and em!loyees as !ossi"le. c. !rimarily frontline su!ervisors d. "etween 1& to 20 managers for it to "e valid e. stoc%holders and external government agencies Ans: "
+8.
Page: 8
To !erform an external audit* a com!any first must: a. get an a!!roval from the 4ecurities and $xchange ommission ". !erform an internal audit c. gather com!etitive intelligence and information a"out external trends d. hire a consultant to develo! a com!rehensive strategic !lan. e. all of these Ans: c
+-.
Page: 8
Page: 8#
Freund em!hasi>es that %ey external factors should "e all of theseexcept: a. im!ortant to achieving longterm and annual o"'ectives. ". measura"le. c. relatively few in num"er. d. a!!lica"le to all com!eting firms. e. hierarchical in the sense that some will !ertain to the overall com!any while others will "e more narrowly focused. Ans: c
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&2
The Industrial Organiation !I/O" #ie$
,0.
The IH a!!roach to com!etitive advantage advocates that external factors are GGGGGGGG internal factors in a firm achieving com!etitive advantage. a. less im!ortant than ". as im!ortant as c. more im!ortant than d. more common than e. less common than Ans: c
,1.
Page: 8#
According to IH theorists* which of the following contri"utes least to firm !erformanceJ a. $conomies of scale ". 9arriers to mar%et entry c. Product differentiation d. Internal resources e. 6evel of com!etitiveness Ans: d
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Economic Forces
,2.
hich ty!e of trend is exem!lified "y the increasing num"ers of twoincome households in AmericaJ a. social ". economic c. cultural d. technological e. historical Ans: "
,.
hat a. ". c. d. e.
Page: 8&
ha!!ens to the demand for discretionary goods when interest rates riseJ rises declines stays the same first rises then declines no way to tell
Ans: d
Page: 8&
&
,#.
hat effect do trends in the dollar/s value have on com!anies in different industries and in different locationsJ a. significant and eCual ". marginal and eCual c. significant and uneCual d. insignificant and uneCual e. no significant im!act Ans: c
,&.
In general* what ha!!ens to American goods in overseas mar%ets when there is a strong dollarJ a. less ex!ensive ". more attractive c. chea!er d. more ex!ensive e. desira"le Ans: d
,+.
Page: 8+
hich city has the highest cost of livingJ a. To%yo ". 9oston c. 7ew 5or% ity d. 4ydney e. Toronto Ans: a
,,.
Page: 8+
Page: 8,
In 200#* which country had the most foreign investment in ussiaJ a. 3nited 4tates ". 7etherlands c. 3nited ingdom d. Eermany e. y!rus Ans: e
Page: 8,
&#
%ocial& Cultural& 'emogra(hic and En)ironmental Forces
,8.
It is !redicted that the 3nited 4tates will have how many racial or ethnic ma'orities "y the year 20,&J a. none ". one c. two d. three e. five Ans: a
,-.
hich minority grou! is !redicted to "e the largest "y 2021J a. African Americans ". hites c. =is!anics d. Indians e. ;a!anese Ans: c
80.
Page: 88
ho are the world/s longestliving !eo!leJ a. Americans. ". exicans. c. Indians d. Fili!inos. e. ;a!anese. Ans: e
81.
Page: 88
Page: 88
Americans are on the move in a !o!ulation shift to a. the frost "elt ". the 4outh and est c. the 7ortheast and idwest d. the idwest and 4outh e. anada. Ans: "
Page: 8-
&&
82.
hat are assem"ly !lants on the exican side of the "order calledJ a. aCuiladoras ". Assem"ladoras c. Kes%els d. L6s e. Ti'uana Ans: a
8.
Page: 8-
ho is the largest ex!orter to the 3nited 4tatesJ a. exico ". hina c. anada d. 3nited ingdom e. ;a!an Ans: "
Page: 8-
Political& *o)ernmental and +egal Forces
8#.
hen an industry relies heavily on government contracts* which forecasts can "e the most im!ortant !art of an external audit. a. economic ". !olitical c. technological d. com!etitive e. multinational Ans: "
8&.
Page: -0
The world of "io!olitics includes a. assisted suicide. ". cloning. c. genetic engineering. d. a"ortion. e. All of the a"ove Ans: e
Page: -0
&+
8+.
hich country voted ?noB to the $uro!ean 3nion/s !ro!osed constitution in mid 200&J a. Eermany ". Portugal c. France d. The >ech e!u"lic e. Ereece Ans: c
8,.
Page: -0
The term that refers to the $3/s effort to end com!etitive tax "rea%s among mem"er countries is a. dou"le taxation. ". taxation "ias. c. eCuity taxation. d. tax reconciliation. e. tax harmoni>ation. Ans: e
Page: -0
Technological Forces
88.
Technological advancements can create new GGGGGG advantages that are more !owerful than existing advantages. a. economic ". social c. environmental d. com!etitive e. com!arative Ans: d
8-.
Page: -
hich sector of the economy would "e most im!acted "y technological develo!mentsJ a. forestry ". !harmaceuticals c. textiles d. metals e. !a!er Ans: "
Page: -#
&,
Com(etiti)e Forces
-0.
ollecting and evaluating information on com!etitors is essential for successful a. internal analysis. ". strategy evaluation. c. strategy formulation. d. strategy im!lementation. e. strategy management. Ans: c
-1.
In 200#* which com!any had the dominant mar%et share in the "everages industryJ a. Pe!sio ". ocaola $nter!rises c. Anheuser9usch d. Pe!si 9ottling Erou! e. olson 9rewing Ans: a
-2.
Page -&
hich of the following is not a characteristic that descri"es the most com!etitive com!anies in AmericaJ a. Mivestiture is essential to growth ". Peo!le ma%e a difference c. Innovate or eva!orate d. There is no su"stitute for Cuality and no greater threat than failing to "e cost com!etitive on a glo"al "asis. e. hether it/s "ro%e or not* fix it Ans: a
-.
Page: -&
Page: -+
A systematic and ethical !rocess for gathering and analy>ing information a"out the com!etition/s activities and general trends to further a "usiness/ own goals is called a. unethical "usiness !ractice. ". artificial intelligence. c. com!etitive intelligence. d. information sharing. e. com!etitive advantage. Ans: c
Page: -+
&8
-#.
GGGGGGGGGGG is not a "asic mission of a com!etitive intelligence !rogram. a. To !rovide a general understanding of an industry ". To !rovide a general understanding of a com!any/s com!etitors c. To identify industry executives who could "e hired "y the firm d. To identify areas where com!etitors are vulnera"le and to assess the im!act strategic actions would have on com!etitors e. To identify !otential moves a com!etitor might ma%e that would endanger a firm/s !osition in the mar%et Ans: c
-&.
hich statement a"out "usiness intelligence is least accurateJ a. Intelligence gathering is an unethical "usiness !ractice. ". unning an intelligence !rogram reCuires many !eo!le. c. unning an intelligence !rogram reCuires many com!uters and other resources. d. ollecting intelligence a"out com!etitors violates antitrust laws. e. 9usiness intelligence is not eCual to es!ionage. Ans: e
-+.
Page: -,
ee!ing strategies secret from em!loyees and sta%eholders can do all of the following except : a. inhi"it em!loyee and sta%eholder communication. ". inhi"it em!loyee and sta%eholder understanding. c. inhi"it em!loyee and sta%eholder commitment. d. !rovide com!etitive advantage to com!etitors. e. forego valua"le em!loyee or sta%eholder in!ut. Ans: d
-,.
Page: -,
Page: -,-8
Learning from the partner is a ma'or reason why GGGGGG firms enter into coo!erative agreements. a. Asian ". American c. African d. $uro!ean e. exican Ans: a
Page: -2
&-
Com(etiti)e Anal,sis- Porter.s Fi)eForces 0odel
-8.
Intensity of com!etition GGGGGGG in lowerreturn industries. a. is lowest ". is nonexistent c. is highest d. is not im!ortant e. fluctuates Ans: c
--.
hat is not one of ichael Porter/s five com!etitive forcesJ a. 7ew entrants ". ivalry among existing firms c. 9argaining !ower of unions d. 9argaining !ower of su!!liers e. 9argaining !ower of "uyers Ans: c
100.
Page: 100
According to Porter* what is usually the most !owerful of the five com!etitive forcesJ a. Potential develo!ment of su"stitute !roducts ". 9argaining !ower of su!!liers c. 9argaining !ower of consumers d. ivalry among com!eting firms e. Potential entry of new com!etitors Ans: d
101.
Page: --
Page: 101
henever new firms can easily enter a !articular industry* the intensity of com!etitiveness among firms a. stays the same. ". increases. c. decreases. d. neutrali>es. e. fluctuates. Ans: "
Page: 102
+0
102.
If su!!liers are unrelia"le or too costly* which of these strategies may "e a!!ro!riateJ a. =ori>ontal integration ". 9ac%ward integration c. ar%et !enetration d. Forward integration e. oncentric diversification Ans: "
10.
Page: 102
hat level of "argaining !ower do consumers have when the !roducts "eing !urchased are standard or undifferentiatedJ a. marginal ". low c. high d. negative e. not necessary Ans: c
Page: 10
%ources of External Information
10#.
9ecause of the Internet* "arriers to !ersonal and "usiness success are a. "eing eliminated. ". "eing "uilt. c. acting li%e glass walls. d. significantly enhanced. e. lower. Ans: a
Page: 10
Forecasting Tools and Techni1ues
10&.
hat are educated assum!tions a"out future trends and eventsJ a. Euesses ". Forecasts c. Facts d. 4tatistics e. Predictions Ans: "
Page: 10#
+1
10+.
Planning would "e im!ossi"le without a. assum!tions. ". em!loyees. c. data. d. com!etitive intelligence. e. intuition. Ans: a
Page: 10#
The *lo2al Challenge
10,.
The international challenge faced "y 3.4. "usiness is twofold: a. how to gain and maintain ex!orts to other nations and how to defend domestic mar%ets against im!orted goods. ". how to enhance im!orted goods in domestic mar%ets and minimi>e ex!orts to other nations. c. how to gain ex!orts to other nations and enhance mar%et share for im!orted goods in domestic mar%ets. d. how to defend domestic mar%ets against im!orted goods while minimi>ing ex!orts. e. how to increase ex!orts to other countries and how to increase im!orts from other countries. Ans: a
108.
hich of the following is a !rocess of worldwide integration of strategy formulation* im!lementation and evaluation activitiesJ a. ission develo!ment ". Elo"ali>ation c. 9rainstorming d. Industry analysis e. Industriali>ation Ans: "
10-.
Page: 10&
Page: 10+
Elo"ali>ation of industries is occurring for all of these reasons except : a. a worldwide trend toward similar consum!tion !atterns. ". the emergence of glo"al "uyers. c. a worldwide trend toward different consum!tion !atterns. d. ecommerce and the instant transmission of money and information across continents. e. the emergence of glo"al sellers. Ans: c
Page: 10+
+2
110.
All of these are ris%s that still restrain firms from initiating "usiness with hina except: a. a"sence of a legal system. ". severe human rights violations. c. freedom of !ress and religion. d. ram!ant corru!tion. e. little res!ect for !atents* co!yrights* "rands and logos. Ans: c
Page: 108
Industr, Anal,sis- The EFE 0atrix
111.
hat is the first ste! in designing an $F$ atrixJ a. Identifying %ey external factors in the industry ". 4umming the weighted score for each com!etitor c. alculating the sales of each com!etitor d. Mrawing the hori>ontal and vertical lines for the matrix e. Metermining four com!etitors Ans: a
112.
Page: 10-
hat is the range for a firm/s total weighted score in an $xternal Factor $valuation atrixJ a. 0 to & ". 0 to # c. 1 to & d. 1 to # e. 0 to 10 Ans: d
Page: 10-
The Com(etiti)e Profile 0atrix !CP0"
11.
ne difference "etween P and $F$ is that a. P includes "oth internal and external issues. ". the weight and total weighted score mean o!!osite. c. P ratings range from 1 to 10. d. P is !erformed only for the com!any* whereas $F$ is !erformed for "oth the com!any and the com!etitors. e. P is only used in small firms. Ans: a
Page: 111
+
Essa, uestions 11#.
hat are the five ma'or ty!es of external forces that should "e examined as !art of an external auditJ Eive an exam!le of each ty!e of force. $xternal forces can "e divided into five "road categories: (1) economic forces* (2) social* cultural* demogra!hic and environmental forces* () !olitical* governmental and legal forces* (#) technological forces and (&) com!etitive forces. elationshi!s among these forces and an organi>ation are de!icted in Figure 2. Page: 8
11&.
Miscuss the !rocess of !erforming an external audit. To !erform an external audit* a com!any first must gather com!etitive intelligence and information a"out economic* social* cultural* demogra!hic* environmental* !olitical* governmental* legal and technological trends. nce information is gathered* it should "e assimilated and evaluated. A meeting or series of meetings of managers is needed to collectively identify the most im!ortant o!!ortunities and threats facing the firm. These %ey external factors should "e listed on fli! charts or a "lac%"oard. A !rioriti>ed list of these factors could "e o"tained "y reCuesting that all managers to ran% the factors identified* from 1 for the most im!ortant o!!ortunityHthreat to 20 for the least im!ortant o!!ortunityHthreat. Page: 88#
11+.
Miscuss the IH a!!roach in relation to com!etitive advantage. The IH a!!roach to com!etitive advantage advocates that external factors are more im!ortant than internal factors in a firm achieving com!etitive ad vantage. Pro!onents of the IH view contend that organi>ational !erformance will "e !rimarily determined "y industry forces* rather than the firm/s internal functional decisions made. esearch findings suggest that a!!roximately 20 !ercent of a firm/s !rofita"ility can "e ex!lained "y the industry* whereas + !ercent of the variance in !rofita"ility is attri"uted to the firm/s internal factors. $ffective integration of "oth external and internal factors is the %ey to securing and %ee!ing a com!etitive advantage. Page: 8#8&
+#
11,.
Identify five %ey economic varia"les that could re!resent ma'or o!!ortunities or threats to a "an% in your town or city. 4tudent answers will vary. =owever* they should loo% at economic* socialHcultural* !oliticalHlegal* technological and com!etitive factors. efer to Ta"le 1 on !age 8&. Page: 8&8+
118.
6ist three o!!ortunities and three threats that could re!resent %ey factors facing your college or university. 4tudent answers will vary. =owever* they should loo% at economic* socialHcultural* !oliticalHlegal* technological and com!etitive factors. Page: 8&-2
11-.
$x!lain how the Internet is changing "usinesses around the world. The Internet is acting as a national and even glo"al economic engine that is s!urring !roductivity. The Internet is saving com!anies "illions of dollars in distri"ution and transaction costs from direct sales to selfservice systems. The Internet is changing the very nature of o!!ortunities and threats "y altering the life cycles of !roducts* increasing the s!eed of distri"ution* creating new !roducts and services* erasing limitations of traditional geogra!hic mar%ets and changing the historical tradeoff "etween !roduction standardi>ation and flexi"ility. It is also altering economies of scale* changing entry "arriers and redefining the relationshi! "etween industries and various su!!liers* creditors* customers and com!etitors. An emerging consensus holds that technology management is one of the %ey res!onsi"ilities of strategists. Page: -
120.
Agree or disagree with (and discuss) the following statement: ?or!orate intelligence is not cor!orate es!ionage "ecause -& !ercent of the information a com!any needs to ma%e strategic decisions is availa"le and accessi"le to the !u"lic.B Agree. Firms need an effective com!etitive intelligence (I) !rogram. The three "asic missions of a I !rogram are (1) to !rovide a general understanding of an industry and its com!etitors* (2) to identify areas in which com!etitors are vulnera"le and to assess the im!act strategic actions would have on com!etitors and () to identify !otential moves a com!etitor might ma%e that would endanger a firm/s !osition in the mar%et. An effective I !rogram allows all areas of a firm to access consistent and verifia"le information in ma%ing decisions. Page: -,
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121.
According to ichael Porter* what are the five com!etitive forces that create vital o!!ortunities and threats for organi>ationsJ hich force do you feel is most im!ortant in the com!uter industry todayJ hyJ The first one is rivalry among com!eting firms. The second is !otential entry of new com!etitors. The third is !otential develo!ment of su"stitute !roducts. The fourth is "argaining !ower of su!!liers. The last one is "argaining !ower of consumers. Page: --10
122.
Miscuss the following statement: ?Planning would "e im!ossi"le without assum!tions.B 9y identifying future occurrences that could have a ma'or effect on the firm and "y ma%ing reasona"le assum!tions a"out those factors* strategists can carry the strategicmanagement !rocess forward. Assum!tions are needed only for future trends and events that are most li%ely to have a significant effect on the com!any/s "usiness. Assum!tions can serve as chec%!oints on the validity of strategies. If future occurrences deviate significantly from assum!tions* strategists %now that corrective actions may "e needed. ithout reasona"le assum!tions* the strategy formulation !rocess could not !roceed effectively. Firms that have the "est information generally ma%e the most accurate assum!tions* which can lead to ma'or com!etitive advantages. Page: 10#10&
12.
Miscuss the o!!ortunities and threats hina !resents to an international firm interested in doing "usiness with hina. 3.4. firms increasingly are doing "usiness in hina as mar%et reforms create a more "usinessli%e arena daily. is%s that still restrain firms from initiating "usiness with hina include the following: (1) !oor infrastructure* (2) disregard for the natural environment* () a"sence of a legal system* (#) ram!ant corru!tion* (&) lac% of freedom of !ress* s!eech and religion* (+) severe humanrights violations* (,) little res!ect for !atents* co!yrights* "rands and logos* (8) counterfeiting* fraud and !irating of !roducts* (-) little res!ect for legal contracts and (10) no generally acce!ted accounting !rinci!les. 9oth the $uro!ean community and the 3.4. have a!!roved hina/s mem"ershi! in the T. This action integrated the world/s most !o!ulated country into the glo"al trading order. 4ome %ey changes resulting from this action are as follows: (1) foreign com!anies can ta%e increased sta%es in mo"ile !hone com!anies (2) tariffs on hightech !roducts will "e !hased out and eliminated "y 200& () im!ort tariffs on automo"iles will dro! to 2& !ercent "y mid200+ from -0 !ercent today (#) foreign "an%s may conduct domestic currency "usiness with hinese firms (&) foreign "an%s may do "usiness anywhere in hina "y 200+ (+) foreign firms will "e
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allowed a #- !ercent sta%e in securities 'oint ventures "y 200# (,) foreign insurance firms may own o!erations in hina and (8) retail oil distri"ution will o!en in hina "y 200#. Page: 10,1012#.
6ist five ste!s that com!rise an effective framewor% for conducting an $F$ atrix. $x!lain the details involved in !erforming any one of the ste!s. The $F$ atrix can "e develo!ed in five ste!s: 1) list %ey external factors as identified in the externalaudit !rocess with a total of from 10 to 20 factors* including "oth o!!ortunities and threats that affect the firm and its industry 2) assign to each factor a weight that ranges from 0.0 to 1.0 ) assign a 1 to # rating to each %ey external factor to indicate how effectively the firm/s current strategies res!ond to the factor* where # N the res!onse is su!erior* N the res!onse is a"ove average* 2 N the res!onse is average* and 1 N the res!onse is !oor #) multi!ly each factor/s weight "y its rating to determine a weighted score and &) sum the weighted scores for each varia"le to determine the total weighted score for the organi>ation. Page: 10-111
