Environmental Scanning Quiz

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Questions and Answers

What determines the ultimate profit potential in an industry?

The collective strength of the five forces, including threat of new entrants, rivalry among existing firms, threat of substitute products or services, bargaining power of buyers, and bargaining power of suppliers, as well as the relative power of other stakeholders

What are the six forces that a corporation must assess when scanning its industry?

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

What is the relationship between the strength of these forces and a company's profit potential?

Stronger forces limit a company's ability to raise prices and earn greater profits, while weaker forces present more opportunities for profit.

How do these forces act as constraints on a company's activities in the short run?

They restrict a company's ability to take certain actions, such as raising prices or expanding into new markets. Signup and view all the answers

What is the potential for companies to change the strength of these forces in the long run?

Companies can strategically choose to alter the strength of one or more forces to their advantage. Signup and view all the answers

What is an entry barrier, and how does it affect the threat of new entrants?

An entry barrier is an obstacle that makes it difficult for companies to enter a specific industry. The presence of entry barriers reduces the threat of new entrants. Signup and view all the answers

What are the eight elements or groups that directly affect a corporation and are in turn, affected by the corporation?

The eight elements that directly affect a corporation and are affected by it in turn are: government, local communities, suppliers, competitors, customers, creditors, employees/labor unions, special-interest groups, and trade associations. Signup and view all the answers

What is an industry analysis?

An industry analysis is an in-depth examination of key factors within a corporation's task environment. Signup and view all the answers

What is the impact of new entrants into an industry?

New entrants bring new capacity, a desire to gain market share, and substantial resources, which can intensify competition and potentially disrupt the industry dynamics. Signup and view all the answers

What is a STEEP analysis? What areas does it involve?

A STEEP analysis is the monitoring of trends in the societal and natural environments. It involves sociocultural, technological, economic, ecological, and political-legal forces. Signup and view all the answers

How does the reaction of existing competitors influence the threat of new entrants?

The reaction of existing competitors to new entrants can influence the success or failure of these newcomers. A strong response from established players can deter new entrants, while a weak response can encourage them to enter the market. Signup and view all the answers

What is the main purpose of a STEEP analysis?

The main purpose of a STEEP analysis is to help corporations understand and adapt to the changing forces that influence their business and environment, which can have a profound impact on their success. Signup and view all the answers

What are the five areas that large corporations use to categorize the natural and societal environments?

The five areas are sociocultural, technological, economic, ecological, and political-legal. Signup and view all the answers

What is the core difference between a task environment and a societal environment?

The task environment directly affects a corporation and is affected by it in return, while a societal environment represents broader trends and forces within an organization's surrounding society that can indirectly influence it. Signup and view all the answers

What are the six categories of risks associated with climate change for companies?

The six categories of climate change risks are: regulatory risk, supply chain risk, product and technology risk, litigation risk, reputational risk, and physical risk. Signup and view all the answers

Why do corporations conduct STEEP analysis?

Corporations conduct STEEP analysis to monitor the wider socio-cultural, technological, economic, ecological, and political-legal changes that affect their business, ensuring they can adapt their operations and strategies to remain competitive. Signup and view all the answers

What is the purpose of analyzing the variables in the international societal environment?

Analyzing these variables helps companies understand and adapt to the diverse societal environments they operate in. This information is critical for making informed decisions about market entry, operations, and strategic planning. Signup and view all the answers

What is a major advantage of a corporation conducting both a task environment and a societal environment analysis?

Conducting both a task environment and a societal environment analysis allows corporations to gain a more holistic view of their external landscape, enabling more informed and strategic decision-making. Signup and view all the answers

Explain the role of environmental scanning in corporate strategy.

Environmental scanning involves analyzing the external task environment to gather information about relevant factors affecting a company's operations. It helps identify opportunities and threats, allowing companies to make informed decisions and adapt their strategies accordingly. Signup and view all the answers

Why is it important for corporations to analyze the intensity of competition within their industry?

Analyzing competitive forces helps companies understand the nature and intensity of competition within their industry. This knowledge is crucial for developing successful competitive strategies and maintaining a profitable position in the market. Signup and view all the answers

What is the primary focus of environmental scanning for a corporation?

Environmental scanning focuses on analyzing all relevant elements in a corporation's external task environment, which involves understanding the factors that directly or indirectly affect its operations. Signup and view all the answers

How do the variables in Table 4-3 contribute to understanding the societal environment?

Table 4-3 provides a framework for analyzing the key variables that shape the societal environment of a country or region, including its economic, technological, political-legal, and sociocultural aspects. Signup and view all the answers

What are the potential consequences of not considering the effects of climate change on a company's operations?

Ignoring climate change risks can lead to significant financial and reputational losses for companies. Failure to adapt to the changing environment can result in regulatory fines, supply chain disruptions, product obsolescence, lawsuits, and damage to the company's image. Signup and view all the answers

How might a company's technological risk be affected by climate change?

Climate change can impact a company's technological risk by forcing them to adapt their products, processes, and infrastructure to cope with changing climate conditions. For example, rising sea levels could require companies to develop flood-resistant technologies or relocate facilities. Signup and view all the answers

Explain how a buyer's ability to backward integrate can influence their bargaining power.

Backward integration occurs when a buyer acquires or develops a supplier's assets or capabilities. This gives the buyer more control over the supply chain, potentially reducing dependence on outside suppliers and increasing their negotiating leverage. Signup and view all the answers

What are two factors that contribute to a supplier's strong bargaining power?

Two factors that contribute to a supplier's strong bargaining power are a unique product or service and the lack of readily available substitutes. Signup and view all the answers

How can the importance of a product to the buyer affect the buyer's bargaining power?

If the product is unimportant to the buyer, the buyer has less incentive to bargain for better prices or quality. If the product represents a high percentage of the buyer's cost, the buyer is more likely to shop around for better deals. Signup and view all the answers

Identify three additional stakeholder groups that can affect an industry, beyond Porter's five forces.

Three additional stakeholder groups, beyond Porter's five forces, are governments, local communities, and trade associations. Signup and view all the answers

Describe how a supplier's ability to forward integrate impacts their bargaining power.

Forward integration occurs when a supplier acquires or develops a customer's assets or capabilities. This gives the supplier more control over the distribution and marketing of their product, enhancing their bargaining power. Signup and view all the answers

Explain how the availability of alternative suppliers influences a buyer's bargaining power.

When alternative suppliers are readily available, buyers have more choices and can negotiate better prices or terms. Limited alternatives give suppliers more negotiating leverage. Signup and view all the answers

What is one way that a buyer's low profitability can impact their bargaining power?

Low profitability can make a buyer more cost/service sensitive, leading them to prioritize price and efficiency over other factors. Signup and view all the answers

How can special-interest groups influence an industry?

Special-interest groups can advocate for regulations, policies, or public opinion that affect an industry, influencing things like environmental standards, employment practices, or consumer protections. Signup and view all the answers

What are the defining characteristics of a multinational corporation (MNC) that operates in a global industry?

MNCs in global industries operate worldwide with only minor adjustments made for country-specific circumstances. Their activities in one country are not significantly impacted by those in other countries. Signup and view all the answers

What is the primary difference between an MNC operating in a global industry and an MNC operating in a multi-national industry?

An MNC operating in a multi-national industry tailors its products or services to the specific needs of consumers in each country or region, while an MNC operating in a global industry maintains a standardized approach with only minor adjustments for country-specific requirements. Signup and view all the answers

What is a strategic group, and how can its market position be visually represented?

A strategic group is a collection of companies within an industry that employ similar strategies and resources. Their market position can be visually represented on a two-dimensional graph, with two strategic variables plotted on the vertical and horizontal axes. Signup and view all the answers

Describe the strategic approach of a 'defender' company.

Defenders are companies that focus on improving the efficiency of their existing operations with a limited product line. Signup and view all the answers

How do 'prospectors' differ from 'defenders' in terms of their strategic focus?

Prospectors prioritize product innovation and exploring new market opportunities, resulting in a broader product line compared to defenders who focus on efficiency within a limited product scope. Signup and view all the answers

Explain the strategic approach of an 'analyzer' corporation.

Analyzers operate in at least two distinct product-market areas: one stable and one variable. They leverage their established strength in stable areas to explore and capitalize on emerging opportunities in more volatile markets. Signup and view all the answers

What distinguishes 'reactors' from other strategic types?

Reactors lack a consistent relationship between their strategy, structure, and culture, making them less proactive and more responsive to external pressures. Signup and view all the answers

How does the lack of a consistent strategy-structure-culture relationship affect a 'reactor' company?

This lack of consistency can lead to inefficiencies, poor decision-making, and a less effective response to competition and changing market dynamics. Signup and view all the answers

Describe a fragmented industry.

A fragmented industry is characterized by a lack of dominant firms, with many small companies competing for market share, each serving a relatively small portion of the overall market. Signup and view all the answers

Explain the key characteristic of a consolidated industry.

A consolidated industry is dominated by a few large firms, each striving to differentiate their products from rivals in a highly competitive market. Signup and view all the answers

What distinguishes multi-domestic industries from global industries?

Multi-domestic industries are specific to individual countries or groups of countries, operating as essentially domestic industries. Global industries, on the other hand, operate worldwide with multinational companies making minimal adjustments for local conditions. Signup and view all the answers

Provide an example of a multi-domestic industry.

Retailing and insurance are examples of multi-domestic industries. Signup and view all the answers

How do regional industries differ from global industries?

Regional industries are coordinated primarily within specific regions, like the Americas or Asia. Global industries, on the other hand, operate across the globe with minimal regional variations. Signup and view all the answers

Explain the continuum of international industries according to Porter.

Porter suggests that global industries vary along a spectrum, ranging from multi-domestic to global, with the level of integration and standardization varying across industries. Signup and view all the answers

What is the primary difference between a multi-domestic industry subsidiary and a global industry subsidiary?

In a multi-domestic industry, a subsidiary's activities are largely independent of other subsidiaries, while in a global industry, subsidiaries coordinate their activities more closely and operate with greater interdependence. Signup and view all the answers

How does a manufacturing facility in a multi-domestic industry operate in comparison to a global industry?

A manufacturing facility in a multi-domestic industry typically produces goods for sale within that country, while a global industry might have facilities in multiple countries producing for the global market. Signup and view all the answers

Flashcards

Regulatory risk

Potential financial loss due to changes in laws and regulations related to climate policies.

Supply chain risk

Disruptions in the supply chain caused by climate change effects, impacting resource availability.