60. The economic environment refers to
a. the nature and direction of the economy in which a firm competes or may compete.
b. the economic outlook of the world provided by the World Bank.
c. an analysis of how the environmental movement and world economy interact.
d. an analysis of how new environmental regulations will affect the U.S. economy.
61. Which of the following would NOT be identified in an analysis of the economic portion of the general environment?
a. the willingness of Chrysler’s buyers to purchase large vehicles in light of an increase in oil prices
b. the ability of Ford to issue new debt in light of its recent financial performance
c. the ability of BMW‘s buyers to finance car purchases in light of a change in interest rates
d. the willingness of GM buyers to purchase new vehicles in light of the threat of recession
62. The political/legal segment of an environment represents
a. the political preferences of different ethnic groups in the society.
b. the technological values of different political entities in society.
c. how organizations and governments mutually try to influence each other.
d. the system of regulations governments at all levels place on businesses.
63. All of the following are aspects of the political/legal segment of the general environment EXCEPT
a. lobby groups.
b. attitudes and values.
c. taxation laws.
d. industries chosen for deregulation.
64. An analysis of society‘s attitudes and values would be conducted when studying the
general environment.
a. sociocultural
b. global
c. demographic
d. economic
segment of the
65. In a suburban community outside a city in Alabama, a retail store opened that specialized in dancewear for children
and adults. It was moderately successful for five years until the local newspaper published an exposé that scanty
lingerie stocked in the back of the store’s showroom was selling briskly to a certain clientele. Afterward, the store
lost most of its customers and nearly closed. Which segment of the environment did the store owners fail to take
into account when they began selling the lingerie?
a. the sociocultural segment
b. the economic segment
c. the demographic segment
d. the political/legal segment
66. The technological segment of environmental analysis includes
a. institutions and activities involved with creating new knowledge and translating that knowledge into new
outputs.
b. the determination of when machinery will need to be replaced in a given firm.
c. the need for new technology in order for a firm to gain a competitive advantage.
d. places where a firm’s technology will allow that firm to dominate a given market.
67. Understanding how new knowledge can develop new products, processes, or materials is a result of analyzing the
segment of the general environment.
a. economic
b. political/legal
c. technological
d. global
68. The next critical technological opportunity for organizations is predicted to be
a. the Internet.
b. multiphasic interventions.
c. biological engineering.
d. wireless communications.
69. Which of the following would be an example of the application of the next major technological opportunity for
organizations?
a. Boeing’s Dreamliner
b. Toyota’s hybrid vehicles
c. Philip Morris International’s smokeless tobacco
d. Amazon‘s Kindle
70. The observation that China, despite a 37 percent surge in car sales in 2010, is expected to reach production
overcapacity by 2015 and have a glut of extra cars, is an aspect of the
environment.
a. demographic
b. global
c. physical
d. technological
segment of the general
71. Because of threats and risks in the global environment, some firms choose to take a more cautious approach by
a. avoiding global markets altogether.
b. expanding only to developed countries.
c. focusing on global niche markets.
d. acquiring already established firms in foreign markets.
72. The concepts of Guanxi, Wa, and Inhwa all convey the general idea of
a. entrepreneurial risk-taking.
b. interpersonal relationships.
c. the value of hard work.
d. personal achievement.
73. Global warming and energy consumption trends are aspects of the
that firms should monitor.
a. technological
b. physical
c. sociocultural
d. economic
segment of the general environment
74. Green restaurant design, sustainable packaging, waste management, and energy efficiency are aspects of the
segment of the general environment that McDonald’s has sought to address (Chapter 2 Strategic Focus).
a. technological
b. political/legal
c. global
d. physical
75. All of the following are examples of efforts by firms to address the physical segment of the general
a. development of sustainable packaging by McDonald’s.
b. reduction in carbon dioxide emissions by Procter & Gamble.
c. reduction in water usage in plants by Unilever.
d. increase in hiring of women and minorities at Microsoft.
76. One popular approach to taking care of the physical environment is
a. producing and selling additional green products.
b. lobbying the government to reduce environmental regulations.
c. making donations to the Sierra Club and other environmental organizations.
d. increasing health benefits for employees.
77. An industry is defined as
a. a group of firms producing the same products or services.
b. firms producing items that sell through the same distribution channels.
c. firms that sell the same products or services to the same customer base.
d. a group of firms producing products that are close substitutes.
78. The likelihood of entry of new competitors is affected by and
a. barriers to entry; expected retaliation of current industry organizations.
b. the power of existing suppliers; buyers.
c. the profitability of the industry; the market share of its leading firm.
d. the demand for the product; the profitability of the competitors.
79. Which of the following is NOT an entry barrier to an industry?
a. expected competitor retaliation
b. economies of scale
c. customer product loyalty
d. bargaining power of suppliers
80. New entrants to an industry are more likely when
a. it is difficult to gain access to distribution channels.
b. economies of scale in the industry are high.
c. product differentiation in the industry is low.
d. capital requirements in the industry are high.
81. Economies of scale refers to the fact that as the
a. quantity of product produced in a given time period increases, the cost of manufacturing each unit increases.
b. quantity of product produced in a given time period increases, the cost of manufacturing each unit remains
constant.
c. quantity of product produced in a given time period increases, the cost of manufacturing each unit decreases.
d. quantity of product produced in a given time period decreases, the cost of manufacturing each unit
decreases.
82. The large amount of advertising by firms such as Procter & Gamble and Colgate-Palmolive is an example of what
kind of barrier to entry?
a. access to distribution channels
b. capital requirements
c. economies of scale
d. product differentiation
83. Product differentiation refers to the
a. ability of the buyer of a product to negotiate a lower price.
b. response of incumbent firms to new entrants.
c. belief by customers that a product is unique.
d. fact that as more of a product is produced the cheaper it becomes per unit.
84. When consumers change phone service providers they are frequently required to maintain service with the provider
for a specified time period. This is an example of a
a. cost to a producer to exchange equipment in a facility when new technologies emerge.
b. cost of changing the firm‘s strategic group.
c. one-time cost suppliers incur when selling to a different customer.
d. one-time cost customers incur when buying from a different supplier.
85. Customer loyalty programs such as airline frequent-flyer miles are an attempt to
a. decrease competitors’ access to distribution channels.
b. develop a cost advantage independent of scale.
c. increase customers’ switching costs.
d. overcome the perishability of the hotel “product.”
86. As customers come to believe that a firm‘s product is unique, this allows the firm to
a. decrease its advertising expenditures.
b. customize its product.
c. force other companies out of the market by lowering prices.
d. obtain loyal customers.
87. DWK Foods has developed a line of cookies and candies sweetened exclusively with organic honey. Although
DWK is selling some of the products over the Internet, in order to gain economies of scale the products must be
sold in retail outlets. The main barrier to entry DWK is likely to encounter here is
a. government licensing and permits.
b. access to distribution channels.
c. consumers’ switching costs.
d. cost disadvantages independent of scale.
88. For a retail business dependent on drive-in customers, the major cost disadvantage independent of scale would be if
a. favorable locations are not available.
b. other competitors have proprietary product technology.
c. access to raw materials is difficult.
d. other competitors have government subsidies.
89. A certain marble quarry provides a unique type of marble that is richly colored and strikingly veined. It has been
used for churches and public buildings throughout the world. The architect of a new headquarters for a prestigious
Fortune 500 firm has specified the use of this marble, and this marble only, for this project. Which of the following
statements is most likely to be true?
a. The cost of the marble will be expensive because of the bargaining power of the supplier.
b. The cost of the marble will be moderate because of the bargaining power of the buyer.
c. The cost of the marble will be moderate because of economies of scale.
d. The cost of the marble will be expensive because of the high strategic stakes involved.
90. Suppliers are powerful when
a. satisfactory substitutes are available.
b. they sell a commodity product.
c. they offer a credible threat of forward integration.
d. they are in a highly fragmented industry.
91. How is consolidation among fuel providers serving airport facilities viewed in the five forces model of competition?
a. as a reduction of the airlines’ ability to benefit from economies of scale.
b. as an increase in switching costs because the airlines have no choice but to use jet fuel and other oil
products.
c. as an increase in the bargaining power of suppliers of a critical input.
d. as an increase in the intensity of rivalry among airlines for scarce resources.
92. Blood banks are highly dependent on donors. In the terminology of industry analysis, which statement of donors is
accurate?
a. Blood donors are suppliers and are powerful because of the critical nature of what they provide to the blood
bank.
b. Blood donors are suppliers and are powerful because of their concentration relative to the blood bank.
c. Blood donors are buyers and are not powerful because switching costs to change to alternative inputs are
low.
d. Blood donors are buyers and are powerful because of the volume of blood needed.
93. The aircraft industry has long been dominated by two large aircraft manufacturers, Boeing and Airbus. The
demand for major aircraft is low, and Boeing and Airbus aggressively compete for orders from airlines. What
effect will these conditions have on the domestic airline industry?
a. It will make the airline industry more attractive because of decreased supplier power.
b. It will make the airline industry less attractive because of decreased supplier power.
c. It will make the airline industry more attractive because of increased supplier power.
d. It will make the airline industry more attractive because of a new entrant.
94. Golden Lotus, an exercise club targeting healthy individuals over 50, is located in a fast-growing city in the
Southwest. Which of the following factors that may have an effect on the success of Golden Lotus is the most
directly controllable by the company?
a. the sociocultural environment
b. the demographics of the environment
c. the economy of the local area
d. the power of the customers/buyers
95. Buyers are powerful when
a. there is a threat of forward integration.
b. they purchase a small proportion of the supplier’s output.
c. switching costs are low.
d. the buyers’ industry is fragmented.
96. The highest amount a firm can charge for its products is most directly affected by
a. expected retaliation from competitors.
b. the cost of substitute products.
c. variable costs of production.
d. customers’ high switching costs.
97. The threat from substitutes is high when
a. switching costs are high.
b. the substitute product’s price is lower than the industry product’s price.
c. the quality of the substitute product is lower than the quality of the industry‘s product.
d. the substitute product stimulates new process innovations within the industry.
98. Media content has moved from paper, tape, and film to a digital world based on Internet technology. From the
perspective of the five forces model, which force is most relevant here?
a. buyers
b. substitutes
c. entry barriers
d. suppliers
99. All of the following are forces that create high rivalry within an industry EXCEPT
a. numerous or equally balanced competitors.
b. high fixed costs.
c. fast industry growth.
d. high storage costs.
100. High-level maintenance on aircraft is performed by the manufacturer. This service after the sale means that in the
aircraft industry
a. customers are relatively weak because of the high switching costs created by frequent-flyer programs.
b. the industry is moving toward differentiation of services.
c. the competitive rivalry in the industry is severe.
d. the economic segment of the external environment has shifted, but airline strategies have not changed.
101. A manufacturer of washing machines has expanded its plant and has created excess capacity, just as the general
economy has taken a downturn. The company is likely to
a. raise prices on washing machines to offset lost sales.
b. be vulnerable to new entrants to an attractive market.
c. suffer from intense rivalry from international manufacturers.
d. offer rebates and incentives for customers who purchase washing machines.
102. When rival firms compete aggressively by trying to attract competitors’ customers, this might be an indication of
a. an industry with low exit barriers.
b. increasing economies of scale.
c. slow industry growth.
d. high bargaining power among buyers.
103. Mighty Green, a residential lawn chemical manufacturer, is committed to gaining market share in its industry.
Mighty Green
a. is likely to raise the level of competitive rivalry in the industry.
b. probably has top management who are affected by emotional barriers to exit.
c. has decided that long-run above-average returns are not important.
d. will probably embark on an acquisition strategy.
104. Which of the following explains, in part, why rivalry among McDonald‘s, Wendy‘s, and Burger King is intense?
a. There is low geographic saturation of the market.
b. There is high differentiation among competing products.
c. The threat of supplier forward integration is low.
d. These companies are trying to find ways to differentiate their products.
105. Circuit Corp. is a manufacturer of a broad range of consumer electronics products. These consumer products are
all highly profitable. The firm also manufactures a low–cost component which is an essential differentiating feature
for most of its consumer products. The costs to manufacture this component have risen sharply in recent months.
Internal cost accounting estimates now indicate the company is breaking even on the manufacture of this
component. Which of the following is most likely?
a. Circuit will likely continue to manufacture the component, even at a loss, due to low supplier power.
b. Circuit will likely continue to manufacture the component, even at a loss, due to high strategic stakes.
c. Circuit will likely discontinue manufacture of the component due to low strategic stakes.
d. Circuit will likely discontinue manufacture of the component due to high supplier stakes.
106. Exit barriers to a firm include all of the following EXCEPT
a. generic assets.
b. loyalty to employees.
c. governmental concern about job loss.
d. restrictive labor agreements.
107. An owner of a stable of racehorses has been earning below-average returns for more than 15 years. To a
colleague, he expressed his determination to stay in horse racing until he died because “racing is in my blood.” This
individual is probably still racing horses because of
a. high barriers to exit.
b. high switching costs.
c. high fixed costs.
d. low levels of competitive rivalry.