Understanding Business Strategy Concepts Plus 3rd Edition by R. Duane Ireland – Test Bank
Chapter 3 – Analyzing the External Environment
TRUE/FALSE
1.Between 2000-2020 the percentage of Americans over age 65 will decrease by approximately seven percent.
ANS: F PTS: 1 REF: Page 49 OBJ: Learning Objective 2
KEY:Knowledge
MSC: AACSB: Diversity | Management: Environmental Influence | Dierdorff & Rubin: Strategic & Systems Skills
2.Home Depot and Lowes’ installation service businesses are expected to grow as the population ages.
ANS: T PTS: 1 REF: Page 49 OBJ: Learning Objective 2
KEY:Application
MSC: AACSB: Analytic | Management: Analytic | Dierdorff & Rubin: Strategic & Systems Skills
3.When companies like Home Depot and Lowes analyze the external environment they are trying to understand how demographic trends might impact future profitability.
ANS: T PTS: 1 REF: Page 49 OBJ: Learning Objective 1
KEY:Application
MSC:AACSB: Reflective Thinking | Management: Environmental Influence | Dierdorff & Rubin: Strategic & Systems Skills
4.Personal opinions and casual observations about the external environment provide exactly the kind of information that managers should use when formulating strategies.
ANS: F PTS: 1 REF: Page 51 OBJ: Learning Objective 1
KEY:Comprehension
MSC: AACSB: Analytic | Management: Environmental Influence | Dierdorff & Rubin: Strategic & Systems Skills
5.Firms can exercise a moderate amount of direct control over the demographic and economic trends in the general environment.
ANS: F PTS: 1 REF: Page 49 OBJ: Learning Objective 2
KEY:Comprehension
MSC: AACSB: Analytic | Management: Environmental Influence | Dierdorff & Rubin: Strategic & Systems Skills
6.Changes in lifestyles, population size, society’s attitudes, educational status and marital status are all examples of demographic trends in the general environment.
ANS: F PTS: 1 REF: Page 49 OBJ: Learning Objective 2
KEY:Comprehension
MSC: AACSB: Analytic | Management: Environmental Influence | Dierdorff & Rubin: Strategic & Systems Skills
7.IN the United States there has been a geographic shift in the population as people have migrated from the south and west to the northern and eastern parts of the country.
ANS: F PTS: 1 REF: Page 49 OBJ: Learning Objective 2
KEY:Knowledge
MSC: AACSB: Diversity | Management: Environmental Influence | Dierdorff & Rubin: Strategic & Systems Skills
8.Income growth or decline, savings rates, and currency exchange rates are examples of economic trends.
ANS: T PTS: 1 REF: Page 50 OBJ: Learning Objective 2
KEY:Comprehension
MSC: AACSB: Analytic | Management: Environmental Influence | Dierdorff & Rubin: Strategic & Systems Skills
9.Economic trends affect customers’ purchasing decisions and how firm’s allocate their resources.
ANS: T PTS: 1 REF: Page 50 OBJ: Learning Objective 2
KEY:Comprehension
MSC: AACSB: Analytic | Management: Environmental Influence | Dierdorff & Rubin: Strategic & Systems Skills
10.The process of transforming state-owned firms to privately owned companies is known as deregulation.
ANS: F PTS: 1 REF: Page 50 OBJ: Learning Objective 2
KEY:Knowledge
MSC: AACSB: Analytic | Management: Environmental Influence | Dierdorff & Rubin: Strategic & Systems Skills
11.One reason that managers analyze conditions in the external environment is to help them select a strategy to implement.
ANS: T PTS: 1 REF: Page 48 OBJ: Learning Objective 1
KEY:Knowledge
MSC: AACSB: Analytic | Management: Environmental Influence | Dierdorff & Rubin: Strategic & Systems Skills
12.Changes in a society’s attitudes and cultural values reflect demographic trends.
ANS: F PTS: 1 REF: Page 51 OBJ: Learning Objective 2
KEY:Comprehension
MSC: AACSB: Analytic | Management: Environmental Influence | Dierdorff & Rubin: Strategic & Systems Skills
13.By keeping up with technological trends a company may be able to identify and incorporate cutting edge technology developed in other industries into its own products.
ANS: T PTS: 1 REF: Page 51 OBJ: Learning Objective 2
KEY:Comprehension
MSC:AACSB: Technology | Management: Environmental Influence | Dierdorff & Rubin: Knowledge of Technology, Design, & Production
14.Economies of scale and capital requirements are two of the barriers to entry that companies might try to establish in order to reduce the chances that a new competitor might enter the industry.
ANS: T PTS: 1 REF: Page 56 OBJ: Learning Objective 3
KEY:Comprehension
MSC: AACSB: Analytic | Management: Strategy | Dierdorff & Rubin: Strategic & Systems Skills
15.Imagine that you are in your final semester of college and you decide to transfer to a different school. This decision probably involves few, if any switching costs.
ANS: F PTS: 1 REF: Page 57 OBJ: Learning Objective 3
KEY:Comprehension
MSC: AACSB: Analytic | Management: Strategy | Dierdorff & Rubin: Strategic & Systems Skills
16.Licensing and permit requirements in liquor retailing and banking are examples of barriers to entry that are based on government policy.
ANS: T PTS: 1 REF: Page 57 OBJ: Learning Objective 3
KEY:Comprehension
MSC: AACSB: Analytic | Management: Strategy | Dierdorff & Rubin: Strategic & Systems Skills
17.Substitute products pose a strong threat when they are more effective and priced lower than your existing products.
ANS: T PTS: 1 REF: Page 58 OBJ: Learning Objective 3
KEY:Comprehension
MSC: AACSB: Analytic | Management: Strategy | Dierdorff & Rubin: Strategic & Systems Skills
18.Powerful suppliers can either increase the price of their product or reduce the quality while selling it at the same price.
ANS: T PTS: 1 REF: Page 58 OBJ: Learning Objective 3
KEY:Comprehension
MSC: AACSB: Analytic | Management: Strategy | Dierdorff & Rubin: Strategic & Systems Skills
19.Electronic Arts (EA) is a powerful supplier in the electronic game industry. As a result, EA’s actions can reduce the profit potential of companies that make electronic game boxes, such as Sony, Microsoft and Nintendo.
ANS: T PTS: 1 REF: Page 47 OBJ: Learning Objective 3
KEY:Application
MSC: AACSB: Reflective Thinking | Management: Strategy | Dierdorff & Rubin: Strategic & Systems Skills
20.Subprime mortgages are the leading cause of the 2007-2008 financial crisis in the US.
ANS: T PTS: 1 REF: Page 52 OBJ: Learning Objective 2
KEY:Knowledge
MSC: AACSB: Analytic | Management: Strategy | Dierdorff & Rubin: Strategic & Systems Skills
21.As switching costs and the industry growth rate decline, competitive rivalry will also decline.
ANS: F PTS: 1 REF: Page 57 OBJ: Learning Objective 3
KEY:Comprehension
MSC: AACSB: Analytic | Management: Strategy | Dierdorff & Rubin: Strategic & Systems Skills
22.In the airline industry, specialized assets create significant exit barriers and intensify the rivalry among competitors.
ANS: T PTS: 1 REF: Page 61 OBJ: Learning Objective 3
KEY:Application
MSC: AACSB: Reflective Thinking | Management: Strategy | Dierdorff & Rubin: Strategic & Systems Skills
23.A company’s motivation to leverage its resources and capabilities to reach its vision is known as market dependence.
ANS: F PTS: 1 REF: Page 62 OBJ: Learning Objective 4
KEY:Comprehension
MSC: AACSB: Analytic | Management: Creation of Value | Dierdorff & Rubin: Strategic & Systems Skills
24.A high degree of differentiation between competitors’ products decreases competitive rivalry.
ANS: T PTS: 1 REF: Page 54 OBJ: Learning Objective 3
KEY:Comprehension
MSC: AACSB: Analytic | Management: Strategy | Dierdorff & Rubin: Strategic & Systems Skills
25.Companies with high market dependence are likely to respond strongly when competitors attack their market position.
ANS: T PTS: 1 REF: Page 64 OBJ: Learning Objective 5
KEY:Comprehension
MSC: AACSB: Analytic | Management: Strategy | Dierdorff & Rubin: Strategic & Systems Skills
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