Professional Documents
Culture Documents
4) The task environment includes the economic, technological, political-legal, and sociocultural
forces.
Answer: FALSE natural environment
Diff: 2 Page Ref: 99
Topic: Environmental Scanning
7) Today's organizations must scan the natural environment for factors that might previously
have been taken for granted.
Answer: TRUE
Diff: 1 Page Ref: 99
Topic: Environmental Scanning
11) One of the demographic variables in the societal environment is the changing household
composition.
Answer: TRUE
Diff: 2 Page Ref: 105
Topic: Environmental Scanning
AACSB: Analytic Skills
12) One of the breakthrough developments in technology is the portable information device.
Answer: TRUE
Diff: 1 Page Ref: 102
Topic: Environmental Scanning
AACSB: Use of IT
13) A multinational corporation is a company with significant assets and activities in multiple
countries.
Answer: TRUE
Diff: 1 Page Ref: 105
Topic: Environmental Scanning
14) The origin of competitive advantage lies in the ability to identify and respond to
environmental change well in advance of competition.
Answer: TRUE
Diff: 3 Page Ref: 108
Topic: Environmental Scanning
15) The willingness to reject unfamiliar as well as negative information is called issues priority.
Answer: FALSE strategic myopia
Diff: 2 Page Ref: 109
Topic: Environmental Scanning
2
16) A corporation's internal strategic factors are those key environmental trends that are judged to
have both a medium to high probability of occurrence and a medium to high probability of
impact on the corporation.
Answer: FALSE
Diff: 3 Page Ref: 109
Topic: Environmental Scanning
18) According to Michael Porter, the weaker each of the competitive forces, the more limited
companies are in their ability to raise prices and earn greater profits.
Answer: FALSE
Diff: 3 Page Ref: 110
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking
19) According to Michael Porter, a high force can be regarded as threat because it is likely to
reduce profits.
Answer: TRUE
Diff: 2 Page Ref: 110
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking
20) An entry barrier is an obstruction that makes it difficult for a company to enter an industry.
Answer: TRUE
Diff: 1 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment
22) The need to invest huge financial resources in manufacturing facilities in order to produce
large commercial airplanes creates a significant barrier to entry to any competitor for Boeing and
Airbus.
Answer: TRUE
Diff: 3 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking
3
23) Governments can do little to erect barriers to entry in an industry.
Answer: FALSE
Diff: 2 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment
24) NutraSweet can serve as a product substitute for sugar satisfying the same need.
Answer: TRUE
Diff: 2 Page Ref: 112
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills
25) A buyer may be powerful when changing suppliers costs a great deal.
Answer: FALSE - supplier
Diff: 2 Page Ref: 113
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking
26) A consolidated industry is dominated by a few large firms, each of which struggles to
differentiate its products from the competition.
Answer: TRUE
Diff: 1 Page Ref: 114
Topic: Industry Analysis: Analyzing the Task Environment
28) The only factor used to determine whether an industry will be primarily multidomestic or
primarily global is the pressure for local responsiveness.
Answer: FALSE
Diff: 2 Page Ref: 115
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking
29) McDonald's and Olive Garden are in the same strategic group.
Answer: FALSE
Diff: 3 Page Ref: 116
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills
30) Reactors are companies with a limited product line that focus on improving the efficiency of
their existing operations.
Answer: FALSE - defenders
Diff: 2 Page Ref: 117
Topic: Industry Analysis: Analyzing the Task Environment
4
31) In 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 possible new advantage.
Answer: TRUE
Diff: 1 Page Ref: 118
Topic: Industry Analysis: Analyzing the Task Environment
33) An industry matrix summarizes the key success factors within a particular industry.
Answer: TRUE
Diff: 2 Page Ref: 119
Topic: Industry Analysis: Analyzing the Task Environment
35) Business intelligence is one of the fastest growing fields within strategic management.
Answer: TRUE
Diff: 1 Page Ref: 120
Topic: Competitive Intelligence
36) A.C. Nielsen is an example of an outside organization providing a firm with competitive
intelligence.
Answer: TRUE
Diff: 2 Page Ref: 121
Topic: Competitive Intelligence
AACSB: Analytic Skills
37) To combat the increasing theft of company secrets, the U.S. government passed the
Economic Espionage Act.
Answer: TRUE
Diff: 2 Page Ref: 122
Topic: Competitive Intelligence
38) Faulty underlying assumptions are the most frequent cause of forecasting errors.
Answer: TRUE
Diff: 2 Page Ref: 123
Topic: Forecasting
5
39) Extrapolation rests on the assumption that the world is relatively dynamic and changes
quickly in the short run.
Answer: FALSE - consistent
Diff: 2 Page Ref: 124
Topic: Forecasting
40) Statistical modeling is a quantitative forecasting technique that attempts to discover causal or
at least explanatory factors that link two or more time series together.
Answer: TRUE
Diff: 2 Page Ref: 124
Topic: Forecasting
42) The combination of the degree of complexity and the degree of change existing in an
organization's external environment is/are called
A) strategic factors.
B) strategic issues.
C) environmental uncertainty.
D) strategic fit.
E) scenarios.
Answer: C
Diff: 1 Page Ref: 98
43) According to the text, one reason environmental uncertainty is a threat to strategic managers
is because
A) it is a costly and time consuming process.
B) the strategic manager cannot control the environment.
C) it forces the strategic manager to be reactive.
D) it hampers their ability to develop long-range plans.
E) there are too many uncontrollable variables.
Answer: D
Diff: 2 Page Ref: 98
6
44) Which of the following is NOT descriptive of external environmental scanning?
A) Used as a tool to ensure a corporation's long-term health.
B) Used to monitor, evaluate, and disseminate information from the external environment to key
people within the corporation.
C) Used to identify opportunities and threats.
D) It is a tool that corporations use to avoid strategic surprise.
E) Used to identify strengths and weaknesses.
Answer: E
Diff: 2 Page Ref: 98
Topic: Environmental Scanning
46) Which of the following is NOT an element of the organization's task environment?
A) local communities
B) trade associations
C) governments
D) technological developments
E) special interest groups
Answer: D
Diff: 2 Page Ref: 99
Topic: Environmental Scanning
AACSB: Analytic Skills
47) Which environment was generally perceived by business people to be a given until the 20th
century?
A) the task environment
B) the natural environment
C) the industry
D) the societal environment
E) the external environment
Answer: B
Diff: 2 Page Ref: 99
Topic: Environmental Scanning
AACSB: Ethical Reasoning
7
48) Which of the following is NOT a major force in the societal environment?
A) political-legal forces
B) labor forces
C) economic forces
D) technological forces
E) sociocultural forces
Answer: B
Diff: 2 Page Ref: 101
Topic: Environmental Scanning
49) All of the following are technological breakthroughs already having a significant impact on
many industries EXCEPT
A) growing health consciousness.
B) alternative energy sources.
C) genetically altered organisms.
D) smart, mobile robots.
E) virtual personal assistants.
Answer: A
Diff: 1 Page Ref: 102
Topic: Environmental Scanning
AACSB: Analytic Skills
51) Which of the following is NOT one of the eight sociocultural trends mentioned in the text?
A) Increasing environmental awareness.
B) Growth of the seniors market.
C) Decline of the mass market.
D) Increasing food consumption.
E) Impact of Generation Y boomlet.
Answer: D
Diff: 2 Page Ref: 104-105
Topic: Environmental Scanning
8
52) Which is the largest of the current US generations?
A) Baby Boomers
B) Woofies
C) Silent Generation
D) Gen X
E) Gen Y
Answer: A
Diff: 1 Page Ref: 103
Topic: Environmental Scanning
53) A company with significant assets and activities in multiple countries is known as a(n)
________.
A) multinational corporation
B) repatriated corporation
C) transferable corporation
D) duplicate corporation
E) emancipated corporation
Answer: A
Diff: 1 Page Ref: 105
Topic: Environmental Scanning
54) When strategic managers have a willingness to reject unfamiliar as well as negative
information it is referred to as
A) strategic paralysis.
B) corporate inertia.
C) management indifference.
D) strategic myopia.
E) Corporate apathy
Answer: D
Diff: 2 Page Ref: 108
Topic: Environmental Scanning
55) The issues priority matrix used in environmental scanning is composed of two axis or
dimensions which are labeled
A) importance to the industry and likelihood of occurrence.
B) industry growth rate and probable competitive position.
C) probability of occurrence and probable impact on the corporation.
D) probable industry attractiveness and business strength/competitive position.
E) issue importance and relative power of stakeholder groups.
Answer: C
Diff: 3 Page Ref: 109
Topic: Environmental Scanning
9
56) What are the key environmental trends that are judged to have a medium to high probability
of occurrence and a medium to high probability of impact on the corporation?
A) external strategic factors
B) scenarios
C) industry forces
D) strategic issues
E) historical concerns
Answer: A
Diff: 2 Page Ref: 109
Topic: Industry Analysis: Analyzing the Task Environment
59) In addition to Porter's Five Forces, another force added in the text is
A) bargaining power of unions.
B) other stakeholders.
C) threat of prospects.
D) threat of shareholders.
E) bargaining strength of employees.
Answer: B
Diff: 1 Page Ref: 110
Topic: Industry Analysis: Analyzing the Task Environment
10
60) The collective strength of the interaction of potential entrants, buyers, substitutes, suppliers,
firm rivalry, and other stakeholders determine
A) the level of government action in an industry.
B) the probable industry attractiveness and business strength position.
C) the ultimate profit potential in the industry measured in terms of long-run return on invested
capital.
D) the aggregate level of demand for a product line.
E) the amount of pressure from the societal environment.
Answer: C
Diff: 3 Page Ref: 110
Topic: Industry Analysis: Analyzing the Task Environment
61) According to Porter's model, a strong or high force is likely to reduce profits and can be
regarded as a(n)
A) benefit.
B) opportunity.
C) advantage.
D) threat.
E) risk.
Answer: D
Diff: 2 Page Ref: 110
Topic: Industry Analysis: Analyzing the Task Environment
62) According to Porter's model, a low force can enable the company to earn greater profits and
can be regarded as a(n)
A) benefit.
B) opportunity.
C) advantage.
D) threat.
E) risk.
Answer: B
Diff: 2 Page Ref: 110
Topic: Industry Analysis: Analyzing the Task Environment
63) Which of the following is NOT descriptive of the "threat of new entrants?"
A) Depends on the presence of entry barriers.
B) Have a desire to gain market share.
C) Depends on the reaction of existing competitors.
D) Does not impact industry attractiveness.
E) Brings new capacity and substantial resources.
Answer: D
Diff: 2 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills
11
64) Which barrier to entry uses brand identification to force new entrants to spend heavily to
overcome existing customer loyalty?
A) rivalry among existing firms
B) switching costs
C) capital requirements
D) product differentiation
E) access to distribution channels
Answer: D
Diff: 2 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills
65) Which barrier to entry uses cost advantages associated with large size?
A) rivalry among existing firms
B) switching costs
C) cost disadvantages independent of size
D) capital requirements
E) economies of scale
Answer: E
Diff: 3 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills
*67) Intel was able to gain a significant cost advantage over its competitors in the production and
sale of microprocessors because of
A) capital requirements.
B) product differentiation.
C) switching costs.
D) economies of scale.
E) access to distribution.
Answer: D
Diff: 3 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking
12
68) Which of the following is NOT descriptive of intense rivalry among firms?
A) slow industry growth
B) high fixed costs
C) high exit barriers
D) few competitors or competitors that are roughly equal in size and power
E) product offerings that are highly differentiated
Answer: E
Diff: 3 Page Ref: 112
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills
69) Which of the following is NOT descriptive of "threat of substitute products or services?"
A) Substitute products appear to be different, but satisfy the same need as another product.
B) If the cost of switching is low, substitutes may have a strong effect on an industry.
C) Identifying substitutes is relatively easy since they look similar.
D) Possible substitute products or services may not appear to be easily substitutable.
E) Substitutes limit the potential returns of an industry.
Answer: C
Diff: 2 Page Ref: 112
Topic: Industry Analysis: Analyzing the Task Environment
70) A sugar company that is worried that consumers may buy artificial sweetener instead of
sugar is concerned about the
A) threat of new entrants.
B) rivalry among existing firms.
C) threat of substitute products.
D) bargaining power of suppliers.
E) bargaining power of buyers.
Answer: C
Diff: 2 Page Ref: 112
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills
71) Which of the following is NOT descriptive of a high level of bargaining powers of buyers?
A) Changing suppliers costs very little.
B) Alternative suppliers are plentiful because of standardization of the product.
C) The purchased product represents a high percentage of buyer's costs.
D) The buyer buys a large proportion of the seller's product or service.
E) A buyer earns high profits and is very insensitive to costs and service differences.
Answer: E
13
*72) When General Motors considers making its own automotive parts, Delphi Automotive
Supply Company would be concerned with the
A) bargaining power of suppliers.
B) bargaining power of buyers.
C) rivalry among existing competitors.
D) threat of substitutes.
E) threat of new entrants.
Answer: B
Diff: 2 Page Ref: 113
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking
73) Which of the following is NOT descriptive of a high level of bargaining power of suppliers?
A) Substitutes are readily available.
B) The product or service is unique.
C) The supplier industry is dominated by a few companies, but sells too many.
D) The purchasing industry buys only a small portion of the supplier group's goods and services.
E) Suppliers are able to integrate forward and compete directly with their present customers.
Answer: A
Diff: 2 Page Ref: 113
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills
*74) Other software companies could not compete with Microsoft based on the hesitation of
consumers to try a new software. Which of Porter's forces does this reflect?
A) threat of new entrants
B) bargaining power of buyers
C) threat of substitutes
D) bargaining power of suppliers
E) rivalry among existing firms
Answer: D
Diff: 2 Page Ref: 113
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills
75) A company or an industry whose product works well with a firm's product and without which
the product would lose much of its value is considered to be a(n)
A) complementor.
B) oligopoly.
C) strategic group.
D) industry leader.
E) staggered company.
Answer: A
Diff: 1 Page Ref: 113
Topic: Industry Analysis: Analyzing the Task Environment
14
*76) A relationship that illustrates the term complementor is
A) Microsoft and Intel.
B) General Motors and Ford.
C) Hewlett Packard and Compaq.
D) Gateway and Dell.
E) America Online and CompuServe.
Answer: A
Diff: 2 Page Ref: 113
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking
77) According to the text, the strength of each of the six driving forces of industry competition
varies according to the
A) effectiveness of the strategic planning.
B) stage of industry evolution.
C) industry growth rate and competitive position.
D) changes in the political environment.
E) amount of government regulation.
Answer: B
Diff: 2 Page Ref: 114
Topic: Industry Analysis: Analyzing the Task Environment
*79) The U.S. major home appliance industry, including the companies of Maytag, Whirlpool,
General Electric, and Electrolux, is an example of an industry
A) that has evolved from an oligopoly to a monopoly.
B) in which each company maintained a distinct product line.
C) that was once fragmented, but now is consolidated.
D) that has experienced consistent, increasing sales.
E) experiencing a successful strategy of product specialization because of product differentiation.
Answer: C
Diff: 3 Page Ref: 114
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills
15
80) An industry dominated by a few large firms, all of which struggle with product
differentiation, is known as
A) multidomestic.
B) consolidated.
C) global.
D) indigenous.
E) worldwide.
Answer: B
Diff: 2 Page Ref: 114
Topic: Industry Analysis: Analyzing the Task Environment
81) In which type of international industry do corporations tailor their products to the specific
needs of consumers in a particular country?
A) consortium industry
B) global industry
C) indigenous industry
D) multidomestic industry
E) worldwide industry
Answer: D
Diff: 1 Page Ref: 114
Topic: Industry Analysis: Analyzing the Task Environment
82) Which type of international industry manufactures and sells the same products with only
minor adjustments made for individual countries around the world?
A) consortium industry
B) global industry
C) indigenous industry
D) multidomestic industry
E) worldwide industry
Answer: B
Diff: 1 Page Ref: 115
Topic: Industry Analysis: Analyzing the Task Environment
16
84) The two factors that tend to determine whether an industry will be primarily multidomestic
or primarily global are (1) the pressure for coordination within the MNCs operating in that
industry and (2):
A) the pressure for local responsiveness on the part of individual country markets.
B) the power of the local country governments to restrict MNC actions.
C) the need for brand management in the various MNCs operating within that industry.
D) the importance of differentiating with integrating mechanisms in regional cooperatives.
E) the likelihood of terrorist activity impacting that industry.
Answer: A
Diff: 3 Page Ref: 115
Topic: Industry Analysis: Analyzing the Task Environment
85) When 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 become
A) global.
B) consolidated.
C) multidomestic.
D) risky.
E) indigenous.
Answer: A
86) When the pressure for local responsiveness is strong and the pressure for coordination is
weak for multinational corporations in an industry, the industry will tend to become
A) global.
B) consolidated.
C) multidomestic.
D) risky.
E) indigenous.
Answer: C
Diff: 3 Page Ref: 115
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking
87) What is a set of business units or firms that "pursue similar strategies with similar
resources?"
A) strategic group
B) collective collaboration
C) cooperative
D) integral association
E) strategic assembly
Answer: A
Diff: 1 Page Ref: 115
Topic: Industry Analysis: Analyzing the Task Environment
17
88) Which of the following is NOT one of the general strategic types?
A) initiators
B) reactors
C) analyzers
D) prospectors
E) defenders
Answer: A
89) Which strategic orientation is demonstrated by companies that have a limited product line
and focuses on improving the efficiency of their existing operations?
A) initiators
B) reactors
C) analyzers
D) prospectors
E) defenders
Answer: E
Diff: 2 Page Ref: 117
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills
90) A company that operates in at least two different product-market areas in which one product
is stable and the other one is variable, reflects which strategic orientation?
A) initiators
B) reactors
C) analyzers
D) prospectors
E) defenders
Answer: C
Diff: 2 Page Ref: 117
Topic: Industry Analysis: Analyzing the Task Environment
91) Companies with fairly broad product lines that focus on product innovations and market
opportunities, reflect which strategic orientation?
A) initiators
B) reactors
C) analyzers
D) prospectors
E) defenders
Answer: D
Diff: 2 Page Ref: 117
Topic: Industry Analysis: Analyzing the Task Environment
18
92) Corporations that lack a consistent strategy-structure-culture relationship reflect which
strategic orientation?
A) initiators
B) reactors
C) analyzers
D) prospectors
E) defenders
Answer: B
Diff: 2 Page Ref: 117
Topic: Industry Analysis: Analyzing the Task Environment
94) A table which summarizes the key success factors within a particular industry is called a(n)
A) EFAS Table.
B) IFAS Table.
C) SFAS Table.
D) TOWS Matrix.
E) industry matrix.
Answer: E
Diff: 1 Page Ref: 119
Topic: Industry Analysis: Analyzing the Task Environment
95) Those variables that can affect significantly the overall competitive positions of companies
within any particular industry are known as
A) external strategic factors.
B) internal strategic factors.
C) matrix factors.
D) key success factors.
E) industry scenario.
Answer: D
Diff: 1 Page Ref: 118
Topic: Industry Analysis: Analyzing the Task Environment
19
96) A formal program of gathering information on a company's competitors is referred to as
A) statistical modeling.
B) competitive intelligence.
C) competitive strategy.
D) quantitative forecasting.
E) qualitative matrix.
Answer: B
Diff: 1 Page Ref: 120
Topic: Competitive Intelligence
99) A study of nearly 500 of the world's largest corporations indicated which of the following to
be the most widely practiced form of forecasting?
A) statistical modeling
B) scenario-writing
C) delphi technique
D) brainstorming
E) trend extrapolation
Answer: E
Diff: 1 Page Ref: 124
Topic: Forecasting
20
100) Over ________ of large companies use trend extrapolation for forecasting.
A) 20%
B) 30%
C) 40%
D) 50%
E) 70%
Answer: E
Diff: 1 Page Ref: 124
Topic: Forecasting
102) A non-quantitative approach to forecasting that requires simply the presence of people with
some knowledge of the situation to be predicted is called
A) simulations.
B) the delphi technique.
C) signal monitoring.
D) brainstorming.
E) scenarios.
Answer: D
Diff: 2 Page Ref: 124
Topic: Forecasting
21
104) A forecasting technique using quantitative measures that attempt to discover causal or at
least explanatory factors that link two or more time series together is called
A) the delphi technique.
B) statistical modeling.
C) trend extrapolation.
D) trend-impact analysis.
E) morphological analysis.
Answer: B
Diff: 2 Page Ref: 124
Topic: Forecasting
105) The most widely used forecasting technique used after trend extrapolation is
A) statistical modeling.
B) simulations.
C) scenario-writing.
D) expert opinion.
E) brainstorming.
Answer: C
Diff: 1 Page Ref: 125
Topic: Forecasting
106) Which one of the following is NOT part of the process of industry scenarios?
A) Examine possible shifts in societal variables.
B) Identify uncertainties in each of the six forces in the task environment.
C) Generate at least 15 scenarios.
D) Make a range of plausible assumptions about future trends.
E) Analyze the industry situation that would prevail under each scenario.
Answer: C
Diff: 1 Page Ref: 125
Topic: Forecasting
107) The technique recommended by the text to organize an analysis of external strategic factors
is called
A) IFAS.
B) EFAS.
C) SFAS.
D) S.W.O.T.
E) the issues priority matrix.
Answer: B
Diff: 1 Page Ref: 126
Topic: Synthesis of External Factors - EFAS
22
108) In the EFAS Table, the indicator of how well a particular company is responding to current
and expected factors in its external environment is characterized by the
A) IFAS.
B) industry matrix.
C) total weighted score.
D) S.W.O.T. weighted score.
E) SFAS weighted score.
Answer: C
Diff: 3 Page Ref: 127
Topic: Synthesis of External Factors - EFAS
110) List eight current sociocultural trends in the U.S. that are transforming North America and
the world.
Answer: Eight current sociocultural trends in the U.S. that are transforming North American and
the world are as follows:
Increasing environmental awareness
Growing health consciousness
Expanding seniors market
Impact of Generation Y boomlet
Decline of the mass market
Changing pace and location of life
Changing household composition
Increasing diversity of workforce and markets
Diff: 2 Page Ref: 104-105
Topic: Environmental Scanning
23
111) Describe Porter's approach to industry analysis.
Answer: Michael Porter contends that a corporation is most concerned with the intensity of
competition within its industry. The level of this intensity is determined by basic competitive
forces. These are the threat of new entrants, rivalry among existing firms, threat of substitute
products or services, bargaining power of buyers, bargaining power of suppliers, and relative
power of other stakeholders (added later by the authors).
New entrants to an industry typically bring to it new capacity, a desire to gain market share, and
substantial resources. The threat of entry depends on the presence of entry barriers and the
reaction that can be expected from existing competitors.
A competitive move by one firm can be expected to have noticeable effect on its competitors and
thus may cause retaliation or counter efforts. Intense rivalry is related to the presence of the
number of competitors, rate of industry growth, product or service characteristics, the amount of
fixed costs, capacity, the height of exit barriers, and the diversity of rivals. (continued)
Substitute products are those products that appear to be different but can satisfy the same need as
another product.
Buyers affect an industry through their ability to force down prices, bargain for higher quality or
more services, and play competitors against each other.
Suppliers can affect an industry through their ability to raise prices or reduce the quality 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 by industry.
Diff: 3 Page Ref: 110-113
Topic: Industry Analysis: Analyzing the Task Environment
24
113) What are the two factors that tend to determine whether an industry will be primarily
multidomestic or primarily global?
Answer: The factors that tend to determine whether an industry will be primarily multidomestic
or primarily global 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 global industry is one in which companies manufacture and
sell the same products, with only minor adjustments made for individual countries around the
world.
Diff: 3 Page Ref: 114-115
Topic: Industry Analysis: Analyzing the Task Environment
114) Describe the four strategic types of the Miles and Snow typology.
Answer: According to Miles and Snow, there are four general types of firms based on a common
strategic orientation and a combination of structure, culture, and processes consistent with that
strategy. Defenders are companies with a limited product line that focus on improving the
efficiency of their existing operations. Prospectors are companies with fairly broad product lines
that focus on product innovation and market opportunities. Analyzers are corporations that
operate in at least two different product-market areas, one stable and one variable. Reactors are
corporations that lack a consistent strategy-structure-culture relationship.
Diff: 2 Page Ref: 117
Topic: Industry Analysis: Analyzing the Task Environment
25