External Strategic Management Audit

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Questions and Answers

What is the primary focus of an external strategic-management audit?

Identifying and evaluating trends and events beyond the control of a single firm (correct)

Evaluating the organization's internal strengths and weaknesses

Gathering competitive intelligence from industry competitors

Formulating strategies to take advantage of opportunities and avoid threats

What is the purpose of conducting an external audit?

To evaluate the organization's internal resources and capabilities

To gather competitive intelligence from industry competitors

To identify key variables that offer actionable responses (correct)

To develop an EFE Matrix

What is the outcome of an external audit?

A list of key opportunities and threats confronting an organization (correct)

A list of the organization's internal strengths and weaknesses

A Competitive Profile Matrix

A forecast of future market trends

Why is it important to monitor external trends and events?

To formulate strategies that take advantage of opportunities and avoid threats Signup and view all the answers

What is the trend among competitors in the current business environment?

Toward less competition and more cooperation Signup and view all the answers

What is the importance of gathering competitive intelligence?

To understand the strategies and actions of industry competitors Signup and view all the answers

What is market commonality in relation to competitive analysis?

A concept that describes the degree to which two or more firms compete in the same market Signup and view all the answers

What is the relation between resource similarity and competitive analysis?

Resource similarity is related to market commonality in competitive analysis Signup and view all the answers

What type of factors can influence strategic planning decisions related to manufacturing plant location?

Political variables Signup and view all the answers

What has been the trend in the size of American labor unions over the last decade?

Sharp decline Signup and view all the answers

What type of government actions can affect business operations?

All of the above Signup and view all the answers

What can be a significant factor in determining the location of a manufacturing plant?

Level of unionization Signup and view all the answers

What type of political variables can affect business operations?

Both A and B Signup and view all the answers

What can be a result of changes in government regulations?

Decreased business investment Signup and view all the answers

What type of government actions can promote fair labor practices?

Legislation on equal employment Signup and view all the answers

What can be an indicator of the political climate in a country?

Voter participation rates Signup and view all the answers

When is a firm likely to face intense competition from its rivals?

When rivals have excess capacity Signup and view all the answers

What is an important factor in overcoming barriers to entry?

Pricing and marketing strategies Signup and view all the answers

What is a barrier to entry for a new firm?

Strong customer loyalty Signup and view all the answers

When does the pressure of substitute products increase?

When prices of substitutes decrease Signup and view all the answers

When is the bargaining power of suppliers increased?

When there are large numbers of suppliers Signup and view all the answers

What is one of the purposes of a competitive intelligence program?

To identify areas in which competitors are vulnerable Signup and view all the answers

What is an example of backward integration?

Gaining control or ownership of suppliers Signup and view all the answers

What is market commonality in the context of competitive strategy?

The number and significance of markets that a firm competes in with rivals Signup and view all the answers

What is the purpose of the five-forces model of competition?

To evaluate the impact of each competitive force on a firm Signup and view all the answers

When do consumers gain bargaining power?

When products are standardized Signup and view all the answers

What is a condition that can lead to intense competition among firms?

When rivals have excess inventory Signup and view all the answers

Which of the following is NOT a condition that can lead to high rivalry among competing firms?

Increasing demand for the industry's products Signup and view all the answers

What is resource similarity in the context of competitive strategy?

The extent to which the type and amount of a firm's internal resources are comparable to a rival Signup and view all the answers

What is the most powerful of the five forces in the five-forces model of competition?

Rivalry among competing firms Signup and view all the answers

What is one of the steps involved in using the five-forces model of competition?

Identify key aspects of each competitive force that impact the firm Signup and view all the answers

What is the result of a competitive intelligence program identifying potential moves that a competitor might make?

A better understanding of the competitor's position in the market Signup and view all the answers

What is the main purpose of the External Factor Evaluation (EFE) Matrix?

To evaluate the effectiveness of current business strategies Signup and view all the answers

Which of the following is NOT a step in creating an EFE Matrix?

Conduct a SWOT analysis Signup and view all the answers

What does the 'Weight' column represent in an EFE Matrix?

The importance of each external factor Signup and view all the answers

What is the result of multiplying the weight and rating of an external factor in an EFE Matrix?

The weighted score Signup and view all the answers

What type of external factor is 'Rowan County is growing 8 percent annually in population'?

Opportunity Signup and view all the answers

Why is 'Major competitor across town recently ceased operations' considered an opportunity?

Because it reduces competition for the cinema complex Signup and view all the answers

What is the purpose of the 'Rating' column in an EFE Matrix?

To rate the effectiveness of current business strategies Signup and view all the answers

What is the final step in creating an EFE Matrix?

Sum the weighted scores Signup and view all the answers

Study Notes

External Audit

An external audit focuses on identifying and evaluating trends and events beyond the control of a single firm.
It reveals key opportunities and threats confronting an organization, enabling managers to formulate strategies to take advantage of opportunities and avoid or reduce the impact of threats.

Nature of an External Audit

The external audit aims to identify key variables that offer actionable responses.
Firms should be able to respond either offensively or defensively to external factors by formulating strategies that take advantage of external opportunities or minimize the impact of potential threats.

Political, Governmental, and Legal Variables

Government regulations or deregulations can impact an organization.
Changes in tax laws, political action committees, and voter participation rates are significant political factors.
Government fiscal and monetary policy changes, import-export regulations, and special local, state, and federal laws can affect organizations.

American Labor Unions

The extent to which a state is unionized can be a significant political factor in strategic planning decisions related to manufacturing plant location and other operational matters.
The size of American labor unions has fallen sharply in the last decade due to the erosion of the U.S. manufacturing base.

Competitive Intelligence Programs

Identify potential moves that a competitor might make that would endanger a firm's position in the market.
Identify areas in which competitors are vulnerable and assess the impact of strategic actions on competitors.

Market Commonality and Resource Similarity

Market commonality refers to the number and significance of markets that a firm competes in with rivals.
Resource similarity refers to the extent to which the type and amount of a firm's internal resources are comparable to a rival.

The Five-Forces Model of Competition

Rivalry among competing firms is the most powerful of the five forces and focuses on competitive advantage of strategies over other firms.
Potential entry of new competitors is influenced by barriers to entry, such as economies of scale, technology, and government regulatory policies.
Potential development of substitute products can pressure existing firms when prices of substitutes decrease and consumers' switching costs decrease.
Bargaining power of suppliers is increased when there are few substitutes, high switching costs, and high concentration.
Bargaining power of consumers is higher when products are standard or undifferentiated, and consumers are concentrated or buying in volume.

Industry Analysis: The External Factor Evaluation (EFE) Matrix

The EFE Matrix involves listing key external factors, weighting them from 0 to 1, rating the effectiveness of current strategies, multiplying weight and rating, and summing weighted scores.
The EFE Matrix helps organizations prioritize and address key external factors affecting their operations.

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Description

This quiz assesses your understanding of conducting an external strategic-management audit, major external forces affecting organizations, and key sources of external information. It also covers forecasting tools used in strategic management.