Strategic Management & Business Policy, 13e (Wheelen/Hunger) Chapter 4 Environmental Scanning and Industry nalysis
1) Environmental scanning is the monitoring, evaluating, a nd disseminating of information from the external and internal environments to key people within the corporation. Answer: T!E "iff: 1 #age ef: $% Topic: Environmental &canning ') A corporation uses environmental scanning to avoid strategic surprise. Answer: T!E "iff: ' #age ef: $% Topic: Environmental &canning AA(&: Analytic &kills *) #olitical+legal forces regulate the values, mores, and customs of society. Answer: A-&E &ociocultural orces "iff: 1 #age ef: $$ Topic: Environmental &canning /) The task environment includes the economic, technological, political+legal, and sociocultural forces. Answer: A-&E natural environment "iff: ' #age ef: $$ Topic: Environmental &canning 0) ndustry analysis was populari2ed 3y 4ichael #orter. Answer: T!E "iff: ' #age ef: $$ Topic: Environmental &canning 5) n dynamic environments, the (E67s focus is on forces in the societal environment. Answer: A-&E "iff: 1 #age ef: $$ Topic: Environmental &canning 8) Today7s Today7s organi2ations must scan the natural environment for factors that might previously have 3een taken for granted. Answer: T!E "iff: 1 #age ef: $$ Topic: Environmental &canning %) The transferring of profits from a foreign su3sidiary to a corporation7s head9uarters is known as repatriation of profits. Answer: T!E "iff: 1 #age ef: 1 Topic: Environmental &canning 1
$) An example of an economic varia3le in the societal environment is antitrust regulation. Answer: A-&E political+legal political+legal environment "iff: ' #age ef: 1' Topic: Environmental &canning AA(&: Analytic &kills 1) The growing health consciousness is an example of a political+legal force. Answer: A-&E sociocultural force "iff: ' #age ef: 1/ Topic: Environmental &canning AA(&: Analytic &kills 11) 6ne of the demographic varia3les in the societal environment is the changing household composition. Answer: T!E "iff: ' #age ef: 10 Topic: Environmental &canning AA(&: Analytic &kills 1') 6ne of the 3reakthrough developments in technology is the porta3le information device. Answer: T!E "iff: 1 #age ef: 1' Topic: Environmental &canning AA(&: !se of T 1*) A multinational corporation is a company with significant assets and activities in multiple countries. Answer: T!E "iff: 1 #age ef: 10 Topic: Environmental &canning 1/) The origin of competitive advantage lies in the a3ility to identify and respond to environmental change well in advance of competition. Answer: T!E "iff: * #age ef: 1% Topic: Environmental &canning 10) The willingness to re;ect unfamiliar as well as negative information is called issues priority. Answer: A-&E strategic myopia "iff: ' #age ef: 1$ Topic: Environmental &canning
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15) A corporation7s internal strategic factors are those key environmental trends that are ;udged to have 3oth a medium to high pro3a3ility of occurrence and a medium to high pro3a3ility of impact on the corporation. Answer: A-&E "iff: * #age ef: 1$ Topic: Environmental &canning 18) An industry is a group of firms producing a similar product or service. Answer: T!E "iff: 1 #age ef: 1$ Topic: ndustry Analysis: Analy2ing the Task Environment 1%) According to 4ichael #orter, the weaker each of the competitive forces, the more limited companies are in their a3ility to raise prices and earn greater profits. Answer: A-&E "iff: * #age ef: 11 Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: eflective Thinking 1$) According to 4ichael #orter, a high force can 3e regarded as threat 3ecause it is likely to reduce profits. Answer: T!E "iff: ' #age ef: 11 Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: eflective Thinking ') An entry 3arrier is an o3struction that makes it difficult for a company to enter an industry. Answer: T!E "iff: 1 #age ef: 111 Topic: ndustry Analysis: Analy2ing the Task Environment '1) 6ne of the possi3le 3arriers to entry is product differentiation. Answer: T!E "iff: ' #age ef: 111 Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: Analytic &kills '') The need to invest huge financial resources in manufacturing facilities in order to produce large commercial airplanes creates a significant 3arrier to entry to any competitor for oeing and Air3us. Answer: T!E "iff: * #age ef: 111 Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: eflective Thinking
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costs a great deal. Answer: A-&E + supplier "iff: ' #age ef: 11* Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: eflective Thinking '5) A consolidated industry is dominated 3y a few large firms, each of which struggles to differentiate its products from the competition. Answer: T!E "iff: 1 #age ef: 11/ Topic: ndustry Analysis: Analy2ing the Task Environment '8) 4ultidomestic industries are specific to each country or group of countries. Answer: T!E "iff: 1 #age ef: 11/ Topic: ndustry Analysis: Analy2ing the Task Environment '%) The only factor used to determine whether an industry will 3e primarily multidomestic or primarily glo3al is the pressure for local responsiveness. Answer: A-&E "iff: ' #age ef: 110 Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: eflective Thinking '$) 4c"onald7s and 6live
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*1) n hypercompetitive industries, competitive advantage comes from an up+to+date knowledge of environmental trends and competitive activity coupled with a willingness to risk a current advantage for a possi3le new advantage. Answer: T!E "iff: 1 #age ef: 11% Topic: ndustry Analysis: Analy2ing the Task Environment *') ?ey success factors seldom vary from industry to industry. Answer: A-&E "iff: ' #age ef: 11% Topic: ndustry Analysis: Analy2ing the Task Environment **) An industry matrix summari2es the key success factors within a particular industry. Answer: T!E "iff: ' #age ef: 11$ Topic: ndustry Analysis: Analy2ing the Task Environment */) (ompetitive intelligence is an informal program of gathering information on a company7s competitors. Answer: A-&E + formal "iff: 1 #age ef: 1' Topic: (ompetitive ntelligence *0) usiness intelligence is one of the fastest growing fields within strategic management. Answer: T!E "iff: 1 #age ef: 1' Topic: (ompetitive ntelligence *5) A.(. =ielsen is an example of an outside organi2ation providing a firm with competitive intelligence. Answer: T!E "iff: ' #age ef: 1'1 Topic: (ompetitive ntelligence AA(&: Analytic &kills *8) To com3at the increasing theft of company secrets, the !.&. government passed the Economic Espionage Act. Answer: T!E "iff: ' #age ef: 1'' Topic: (ompetitive ntelligence *%) aulty underlying assumptions are the most fre9uent cause of forecasting errors. Answer: T!E "iff: ' #age ef: 1'* Topic: orecasting
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*$) Extrapolation rests on the assumption that the world is relatively d ynamic and changes 9uickly in the short run. Answer: A-&E + consistent "iff: ' #age ef: 1'/ Topic: orecasting /) &tatistical modeling is a 9uantitative forecasting techni9ue that attempts to discover c ausal or at least explanatory factors that link two or more time series together. Answer: T!E "iff: ' #age ef: 1'/ Topic: orecasting /1) An industry scenario is a forecasted description of a particular industry7s likely future. t is developed 3y analy2ing the pro3a3le impact of future societal forces on key groups in a particular industry. Answer: T!E "iff: ' #age ef: 1'0 Topic: orecasting /') The com3ination of the degree of complexity and the degree of change existing in an organi2ation7s external environment is@are called A) strategic factors. ) strategic issues. () environmental uncertainty. ") strategic fit. E) scenarios. Answer: ( "iff: 1 #age ef: $% /*) According to the text, one reason environmental uncertainty is a threat to strategic managers is 3ecause A) it is a costly and time consuming process. ) the strategic manager cannot control the environment. () it forces the strategic manager to 3e reactive. ") it hampers their a3ility to develop long+range p lans. E) there are too many uncontrolla3le varia3les. Answer: " "iff: ' #age ef:
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//) hich of the following is =6T descriptive of external environmental scanningB A) !sed as a tool to ensure a corporation7s long+term health. ) !sed to monitor, evaluate, and disseminate information from the external environment to key people within the corporation. () !sed to identify opportunities and threats. ") t is a tool that corporations use to avoid strategic surprise. E) !sed to identify strengths and weaknesses. Answer: E "iff: ' #age ef: $% Topic: Environmental &canning /0) The corporation7s task environment A) encompasses the physical working areas of the organi2ation. ) includes those elements or groups within an organi2ation7s industry. () is an advisory committee to top+management. ") is an accounting of the many ;o3s within an organi2ation. E) is the ;o3 re9uirement specification listing necessary skills and a3ilities. Answer: "iff: 1 #age ef: $$ Topic: Environmental &canning /5) hich of the following is =6T an element of the organi2ation7s task environmentB A) local communities ) trade associations () governments ") technological developments E) special interest groups Answer: " "iff: ' #age ef: $$ Topic: Environmental &canning AA(&: Analytic &kills /8) hich environment was generally perceived 3y 3usiness people to 3e a given until the 'th centuryB A) the task environment ) the natural environment () the industry ") the societal environment E) the external environment Answer: "iff: ' #age ef: $$ Topic: Environmental &canning AA(&: Ethical easoning
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/%) hich of the following is =6T a ma;or force in the societal environmentB A) political+legal forces ) la3or forces () economic forces ") technological forces E) sociocultural forces Answer: "iff: ' #age ef: 11 Topic: Environmental &canning /$) All of the following are technological 3reakthroughs already having a significant impact on many industries EC(E#T A) growing health consciousness. ) alternative energy sources. () genetically altered organisms. ") smart, mo3ile ro3ots. E) virtual personal assistants. Answer: A "iff: 1 #age ef: 1' Topic: Environmental &canning AA(&: Analytic &kills 0) hich societal force includes demographic trendsB A) political+legal forces ) la3or forces () economic forces ") technological forces E) sociocultural forces Answer: E "iff: ' #age ef: 1* Topic: Environmental &canning AA(&: Analytic &kills 01) hich of the following is =6T one of the eight sociocultural trends mentioned in the textB A) ncreasing environmental awareness. )
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0') hich is the largest of the current !& generationsB A) a3y oomers ) oofies () &ilent
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05) hat are the key environmental trends that are ;udged to have a medium to high pro3a3ility of occurrence and a medium to high pro3a3ility of impact on the corporationB A) external strategic factors ) scenarios () industry forces ") strategic issues E) historical concerns Answer: A "iff: ' #age ef: 1$ Topic: ndustry Analysis: Analy2ing the Task Environment 08) ndustry analysis is primarily concerned with a corporation7s A) societal environment. ) task environment. () sociocultural environment. ") economic environment. E) internal environment. Answer: "iff: ' #age ef: 1$ Topic: ndustry Analysis: Analy2ing the Task Environment 0%) According to #orter, the corporation is most concerned with A) the intensity of competition within its industry. ) the aggregate level of demand for a product line. () a market7s position on its life cycle. ") the amount of pressure from the societal environment. E) the level of government action in an industry. Answer: A "iff: ' #age ef: 11 Topic: ndustry Analysis: Analy2ing the Task Environment 0$) n addition to #orter7s ive orces, ano ther force added in the text is A) 3argaining power of unions. ) other stakeholders. () threat of prospects. ") threat of shareholders. E) 3argaining strength of employees. Answer: "iff: 1 #age ef: 11 Topic: ndustry Analysis: Analy2ing the Task Environment
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5) The collective strength of the interaction of potential entrants, 3uyers, su3stitutes, suppliers, firm rivalry, and other stakeholders determine A) the level of government action in an industry. ) the pro3a3le industry attractiveness and 3usiness strength position. () the ultimate profit potential in the industry measured in terms of long+run return on invested capital. ") the aggregate level of demand for a product line. E) the amount of pressure from the societal environment. Answer: ( "iff: * #age ef: 11 Topic: ndustry Analysis: Analy2ing the Task Environment 51) According to #orter7s model, a strong or high force is likely to reduce profits and can 3e regarded as an) A) 3enefit. ) opportunity. () advantage. ") threat. E) risk. Answer: " "iff: ' #age ef: 11 Topic: ndustry Analysis: Analy2ing the Task Environment 5') According to #orter7s model, a low force can ena3le the company to earn greater profits and can 3e regarded as an) A) 3enefit. ) opportunity. () advantage. ") threat. E) risk. Answer: "iff: ' #age ef: 11 Topic: ndustry Analysis: Analy2ing the Task Environment 5*) hich of the following is =6T descriptive of the Gthreat of new entrantsBG A) "epends on the presence of entry 3arriers. ) Have a desire to gain market share. () "epends on the reaction of existing competitors. ") "oes not impact industry attractiveness. E) rings new capacity and su3stantial resources. Answer: " "iff: ' #age ef: 111 Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: Analytic &kills
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5/) hich 3arrier to entry uses 3rand identification to force new entrants to spend heavily to overcome existing customer loyaltyB A) rivalry among existing firms ) switching costs () capital re9uirements ") product differentiation E) access to distri3ution channels Answer: " "iff: ' #age ef: 111 Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: Analytic &kills 50) hich 3arrier to entry uses cost advantages associated with large si2eB A) rivalry among existing firms ) switching costs () cost disadvantages independent of si2e ") capital re9uirements E) economies of scale Answer: E "iff: * #age ef: 111 Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: Analytic &kills I55) hich 3arrier to entry is demonstrated 3y 4icrosoft7s 4&+"6& operating systemB A) government policy ) switching costs () cost disadvantages independent of si2e ") capital re9uirements E) economies of scale Answer: ( "iff: * #age ef: 111 Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: Analytic &kills I58) ntel was a3le to gain a significant cost advantage over its competitors in the production and sale of microprocessors 3ecause of A) capital re9uirements. ) product differentiation. () switching costs. ") economies of scale. E) access to distri3ution. Answer: " "iff: * #age ef: 111 Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: eflective Thinking
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5%) hich of the following is =6T descriptive of intense rivalry among firmsB A) slow industry growth ) high fixed costs () high exit 3arriers ") few competitors or competitors that are roughly e9ual in si2e and power E) product offerings that are highly differentiated Answer: E "iff: * #age ef: 11' Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: Analytic &kills 5$) hich of the following is =6T descriptive of Gthreat of su3stitute products or servicesBG A) &u3stitute products appear to 3e different, 3ut satisfy the same need as another product. ) f the cost of switching is low, su3stitutes may have a strong effect on an industry. () dentifying su3stitutes is relatively easy since they look similar. ") #ossi3le su3stitute products or services may not appear to 3e easily su3stituta3le. E) &u3stitutes limit the potential returns of an industry. Answer: ( "iff: ' #age ef: 11' Topic: ndustry Analysis: Analy2ing the Task Environment 8) A sugar company that is worried that consumers may 3uy artificial sweetener instead of sugar is concerned a3out the A) threat of new entrants. ) rivalry among existing firms. () threat of su3stitute products. ") 3argaining power of suppliers. E) 3argaining power of 3uyers. Answer: ( "iff: ' #age ef: 11' Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: Analytic &kills 81) hich of the following is =6T descriptive of a high level of 3argaining powers of 3uyersB A) (hanging suppliers costs very little. ) Alternative suppliers are plentiful 3ecause of standardi2ation of the product. () The purchased product represents a high percentage of 3uyer7s costs. ") The 3uyer 3uys a large proportion of the seller7s product o r service. E) A 3uyer earns high profits and is very insensitive to costs and service differences. Answer: E
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I85) A relationship that illustrates the term complementor is A) 4icrosoft and ntel. )
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%) An industry dominated 3y a few large firms, all of which struggle with product differentiation, is known as A) multidomestic. ) consolidated. () glo3al. ") indigenous. E) worldwide. Answer: "iff: ' #age ef: 11/ Topic: ndustry Analysis: Analy2ing the Task Environment %1) n which type of international industry do corporations tailor their products to the specific needs of consumers in a particular countryB A) consortium industry ) glo3al industry () indigenous industry ") multidomestic industry E) worldwide industry Answer: " "iff: 1 #age ef: 11/ Topic: ndustry Analysis: Analy2ing the Task Environment %') hich type of international industry manufactures and sells the same products with only minor ad;ustments made for individual countries around the worldB A) consortium industry ) glo3al industry () indigenous industry ") multidomestic industry E) worldwide industry Answer: "iff: 1 #age ef: 110 Topic: ndustry Analysis: Analy2ing the Task Environment %*) hich of the following is an example of a glo3al industryB A) retailing ) 3anking () tires ") insurance E) health care Answer: ( "iff: ' #age ef: 110 Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: Analytic &kills
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%/) The two factors that tend to determine whether an industry will 3e primarily multidomestic or primarily glo3al are 1) the pressure for coordination within the 4=(s operating in that industry and '): A) the pressure for local responsiveness on the part of individual country markets. ) the power of the local country governments to restrict 4=( actions. () the need for 3rand management in the various 4=(s operating within that industry. ") the importance of differentiating with integrating mechanisms in regional cooperatives. E) the likelihood of terrorist activity impacting that industry. Answer: A "iff: * #age ef: 110 Topic: ndustry Analysis: Analy2ing the Task Environment %0) hen the pressure for coordination is strong and the pressure for local responsiveness is weak for multinational corporations within a particular industry, the industry will tend to 3ecome A) glo3al. ) consolidated. () multidomestic. ") risky. E) indigenous. Answer: A -ocal responsiveness
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%%) hich of the following is =6T one of the general strategic typesB A) initiators ) reactors () analy2ers ") prospectors E) defenders Answer: A !rospectors 3road product lines "e#enders limited product lines naly$ers ' product market %eactors lack a consistency strategy
%$) hich strategic orientation is demonstrated 3y companies that have a limited product line and focuses on improving the efficiency of their existing operationsB A) initiators ) reactors () analy2ers ") prospectors E) defenders Answer: E "iff: ' #age ef: 118 Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: Analytic &kills $) A company that operates in at least two different product+market areas in which one product is sta3le and the other one is varia3le, reflects which strategic orientationB A) initiators ) reactors () analy2ers ") prospectors E) defenders Answer: ( "iff: ' #age ef: 118 Topic: ndustry Analysis: Analy2ing the Task Environment $1) (ompanies with fairly 3road product lines that focus on product innovations and market opportunities, reflect which strategic orientationB A) initiators ) reactors () analy2ers ") prospectors E) defenders Answer: " "iff: ' #age ef: 118 Topic: ndustry Analysis: Analy2ing the Task Environment 1%
$') (orporations that lack a consistent strategy+structure+culture relationship reflect which strategic orientationB A) initiators ) reactors () analy2ers ") prospectors E) defenders Answer: "iff: ' #age ef: 118 Topic: ndustry Analysis: Analy2ing the Task Environment $*) To succeed in a hypercompetitive industry, companies must 3e willing to A) cut prices 3elow marginal costs. ) pursue market share instead of profits. () operate in the ethical gray 2one. ") canni3ali2e their own successful product lines. E) reduce spending on research and development. Answer: " "iff: * #age ef: 11% Topic: ndustry Analysis: Analy2ing the Task Environment AA(&: eflective Thinking $/) A ta3le which summari2es the key success factors within a particular industry is called an) A) EA& Ta3le. ) A& Ta3le. () &A& Ta3le. ") T6& 4atrix. E) industry matrix. Answer: E "iff: 1 #age ef: 11$ Topic: ndustry Analysis: Analy2ing the Task Environment $0) Those varia3les that can affect significantly the overall competitive positions of companies within any particular industry are known as A) external strategic factors. ) internal strategic factors. () matrix factors. ") key success factors. E) industry scenario. Answer: " "iff: 1 #age ef: 11% Topic: ndustry Analysis: Analy2ing the Task Environment
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$5) A formal program of gathering information on a company7s competitors is referred to as A) statistical modeling. ) competitive intelligence. () competitive strategy. ") 9uantitative forecasting. E) 9ualitative matrix. Answer: "iff: 1 #age ef: 1' Topic: (ompetitive ntelligence I$8) hich of the following is true in regards to competitive intelligenceB A) The Economic Espionage Act makes it illegal to steal any material that a 3usiness has taken Greasona3le effortsG to keep secret. ) The &ociety of (ompetitive ntelligence #rofessionals urges strategists to stay within the law and to act ethically when searching for information. () The &ociety of (ompetitive ntelligence #rofessionals states that illegal activities are foolish 3ecause the vast ma;ority of worthwhile competitive intelligence is availa3le pu3licly via annual reports, we3 sites, and li3raries. ") A num3er of firms hire consultants with 9uestiona3le reputations who do what is necessary to get information when the selected methods do not meet &#( ethical standards or are illegal. E) all of the a3ove Answer: E "iff: * #age ef: 1'' Topic: (ompetitive ntelligence $%) The primary activity of competitive intelligence is to A) monitor competitors. ) engage in corporate espionage () survey stakeholders ") determine industry J " statistics E) reverse engineer competitors7 products. Answer: A "iff: 1 #age ef: 1'' Topic: (ompetitive ntelligence $$) A study of nearly 0 of the world7s largest corporations indicated which o f the following to 3e the most widely practiced form of forecastingB A) statistical modeling ) scenario+writing () delphi techni9ue ") 3rainstorming E) trend extrapolation Answer: E "iff: 1 #age ef: 1'/ Topic: orecasting
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1) 6ver FFFFFFFF of large companies use trend extrapolation for forecasting. A) 'K ) *K () /K ") 0K E) 8K Answer: E "iff: 1 #age ef: 1'/ Topic: orecasting 11) Trend extrapolation is A) the process of converting intuition and hunches into reality. ) the extension of present trends into the future. () the process of asking some authorities in the area to make an Ginformed guessG a3out the future. ") given a large amount of historical data on certain interrelated factors, one attempts to conceptuali2e alternative futures. E) detecting faulty underlying assumptions 3efore forecasting errors can occur. Answer: "iff: ' #age ef: 1'/ Topic: orecasting 1') A non+9uantitative approach to forecasting that re9uires simply the presence of people with some knowledge of the situation to 3e predicted is called A) simulations. ) the delphi techni9ue. () signal monitoring. ") 3rainstorming. E) scenarios. Answer: " "iff: ' #age ef: 1'/ Topic: orecasting 1*) 6ne ground rule necessary for effective 3rainstorming is A) scrutini2e each idea generated. ) propose ideas without mentally screening them. () calculating future earnings of each idea. ") criti9ue each idea for rationality. E) forecast the success of each idea. Answer: "iff: ' #age ef: 1'/ Topic: orecasting
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1/) A forecasting techni9ue using 9uantitative measures that attempt to discover causal or at least explanatory factors that link two or more time series together is called A) the delphi techni9ue. ) statistical modeling. () trend extrapolation. ") trend+impact analysis. E) morphological analysis. Answer: "iff: ' #age ef: 1'/ Topic: orecasting 10) The most widely used forecasting techni9ue used after trend extrapolation is A) statistical modeling. ) simulations. () scenario+writing. ") expert opinion. E) 3rainstorming. Answer: ( "iff: 1 #age ef: 1'0 Topic: orecasting 15) hich one of the following is =6T part of the p rocess of industry scenariosB A) Examine possi3le shifts in societal varia3les. ) dentify uncertainties in each of the six forces in the task environment. ()
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1%) n the EA& Ta3le, the indicator of how well a particular company is responding to current and expected factors in its external environment is characteri2ed 3y the A) A&. ) industry matrix. () total weighted score. ") &..6.T. weighted score. E) &A& weighted score. Answer: ( "iff: * #age ef: 1'8 Topic: &ynthesis of External actors + EA& 1$) "escri3e the four general forces in the societal environment. Answer: The four general forces in the societal environment are economic, technological, political+legal, and sociocultural. Economic forces regulate the exchange of materials, money, energy, and information. Technological forces generate pro3lem+solving inventions. #olitical+ legal forces allocate power and provide constraining and protecting laws and regulations. &ociocultural forces regulate the values, mores, and cu stoms of society. "iff: 1 #age ef: $$ Topic: Environmental &canning 11) -ist eight current sociocultural trends in the !.&. that are transforming =orth America and the world. Answer: Eight current sociocultural trends in the !.&. that are transforming =orth American and the world are as follows: ncreasing environmental awareness
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111) "escri3e #orter7s approach to industry analysis. Answer: 4ichael #orter contends that a corporation is most concerned with the intensity of competition within its industry. The level of this intensity is determined 3y 3asic competitive forces. These are the threat of new entrants, rivalry among existing firms, threat of su3stitute products or services, 3argaining power of 3uyers, 3argaining power of suppliers, and relative power of other stakeholders added later 3y the authors). =ew entrants to an industry typically 3ring to it new capacity, a desire to gain market share, and su3stantial resources. The threat of entry depends on the presence of entry 3arriers and the reaction that can 3e expected from existing competitors. A competitive move 3y one firm can 3e expected to have noticea3le effect on its competitors and thus may cause retaliation or counter efforts. ntense rivalry is related to the presence of the num3er of competitors, rate of industry growth, product or service characteristics, the amount of fixed costs, capacity, the height of exit 3arriers, and the diversity of rivals. continued ) &u3stitute products are those products that appear to 3e different 3ut can satisfy the same need as another product. uyers affect an industry through their a3ility to force down prices, 3argain for higher 9uality or more services, and play competitors against each other. &uppliers can affect an industry through their a3ility to raise prices or reduce the 9uality of purchased goods and services. The sixth force includes a variety of stakeholder groups from the task environment. The importance of these stakeholder groups varies 3y industry. "iff: * #age ef: 11+11* Topic: ndustry Analysis: Analy2ing the Task Environment 11') "istinguish 3etween a fragmented and consolidated industry. Answer: A fragmented industry has no firm with a large market share and each firm serves only a small piece of the total market in competition with others. As new competitors enter the industry, prices drop as a result of competition. A consolidated industry is dominated 3y a few large firms, each of which struggles to differentiate its products from the competition. The automo3ile, petroleum, and ma;or home appliance industries are examples of mature, consolidated industries each controlled 3y a few large competitors. "iff: ' #age ef: 11/ Topic: ndustry Analysis: Analy2ing the Task Environment
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11*) hat are the two factors that tend to determine whether an industry will 3e primarily multidomestic or primarily glo3alB Answer: The factors that tend to determine whether an industry will 3e primarily multidomestic or primarily glo3al are pressure for coordination within the multinational operations operating in that industry and pressure for local responsiveness on the part of individual country markets. A multidomestic industry is one in which companies tailor their products to the specific needs of consumers in a particular country. A glo3al industry is one in which companies manufacture and sell the same products, with only minor ad;ustments made for individual countries around the world. "iff: * #age ef: 11/+110 Topic: ndustry Analysis: Analy2ing the Task Environment 11/) "escri3e the four strategic types of the 4iles and &now typology. Answer: According to 4iles and &now, there are four general types of firms 3ased on a common strategic orientation and a com3ination of structure, culture, and processes consistent with that strategy. "efenders are companies with a limited product line that focus on improving the efficiency of their existing operations. #rospectors are companies with fairly 3road product lines that focus on product innovation and market opportunities. Analy2ers are corporations that operate in at least two different product+market areas, one sta3le and one varia3le. eactors are corporations that lack a consistent strategy+structure+culture relationship. "iff: ' #age ef: 118 Topic: ndustry Analysis: Analy2ing the Task Environment 110) "efine competitive intelligence. Answer: (ompetitive intelligence is a formal program of gathering information on a company7s competitors. 6ften called 3usiness intelligence, it is one of the fastest growing fields within strategic management. 4ost companies use outside organi2ations such as A.(. =ielsen (o.) to provide them with environmental data. The nternet provides the 9uickest means to o3tain data. &ome companies choose to use industrial espionage or other intelligence+gathering techni9ues to get their information straight from their competitors. "iff: ' #age ef: 1'+1'1 Topic: (ompetitive ntelligence 115) "iscuss the most commonly practiced form of forecasting. Answer: Trend extrapolation is the most widely practiced form of forecasting with over 8K of the world7s largest firms using this techni9ue either occasionally or fre9uently. Extrapolation is the extension of present trends into the future. t rests on the assumption that the world is reasona3ly consistent and changes slowly in the short run. Time+series methods are approaches of this type: they attempt to carry a series of historical events forward into the future. The 3asic pro3lem with extrapolation is that a historical trend is 3ased on a series of patterns or relationships among so many different varia3les that a change in any one can drastically alter the future direction of the trend. As a rule of thum3, the further 3ack into the past you can find relevant data supporting the trend, the more confidence you can have in the prediction. "iff: * #age ef: 1'/ Topic: orecasting
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