Strategic Management Chapter 3 Quiz

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Questions and Answers

What is the primary objective of conducting an external audit?

To monitor competitor pricing strategies

To assess employee satisfaction levels

To identify key opportunities and threats (correct)

To evaluate internal company performance

Which of the following best describes the external assessment in strategic management?

A comparison of company performance against industry benchmarks

A process to identify and evaluate external trends and events (correct)

A review of financial statements for profitability

An analysis of internal capabilities and resources

Porter’s Five-Forces Model is primarily used for what purpose in strategic management?

Evaluating a company’s internal processes

Forecasting future sales revenue

Understanding the competitive dynamics of an industry (correct)

Assessing employee skills within an organization

What is one of the key advantages of conducting an external assessment?

It allows firms to respond offensively or defensively to external factors Signup and view all the answers

Forecasting tools and techniques in strategic management are primarily used for what purpose?

Predicting future trends and events Signup and view all the answers

Which of the following is NOT a benefit of using an External Factor Evaluation (EFE) Matrix?

It focuses solely on the company's internal issues Signup and view all the answers

What is an important outcome of identifying external forces impacting organizations?

Formulating strategies to address opportunities and threats Signup and view all the answers

Which of the following statements about external audits is false?

They are focused solely on a company’s internal processes. Signup and view all the answers

Which technologies are primarily driving innovation in various industries today?

Cloud computing and mobile devices Signup and view all the answers

What roles do the Chief Information Officer (CIO) and Chief Technology Officer (CTO) typically play in a firm?

They ensure strategic information is available for decision-making. Signup and view all the answers

Which method is not considered a legal way to obtain competitive intelligence?

Hacking into the rival firm's database. Signup and view all the answers

What is a vital component of conducting an external audit regarding competitors?

Evaluating their strengths and weaknesses. Signup and view all the answers

Which of the following is a benefit of hiring top executives from rival firms?

It may provide insights into competitors’ strategies. Signup and view all the answers

Which of the following methods involves the least direct interaction with the competitor?

Monitoring trade publications and magazines. Signup and view all the answers

What is one key question to consider regarding competitors’ products and services?

What makes our products unique compared to competitors’? Signup and view all the answers

Which of the following is NOT a technological force mentioned as threatening competitors?

Traditional manufacturing techniques Signup and view all the answers

When are barriers to leaving the market considered high?

When consumers are highly brand loyal Signup and view all the answers

Which condition does NOT typically contribute to high rivalry among competing firms?

High levels of customer loyalty Signup and view all the answers

What factor can help overcome barriers to entry in an industry?

Innovative marketing strategies Signup and view all the answers

What element can increase pressure from substitute products?

Decreased prices of substitute products Signup and view all the answers

Which factor is least likely to be a barrier to entry in a market?

High consumer demand Signup and view all the answers

Which scenario would likely result in lower rivalry among competing firms?

Strong brand preferences among customers Signup and view all the answers

What contributes to a firm facing low barriers to entry?

Availability of essential raw materials Signup and view all the answers

What is a common outcome when consumer switching costs decrease?

Heightened threat from substitute products Signup and view all the answers

What condition primarily affects consumer bargaining power when buyers are particularly important?

If sellers are struggling with demand Signup and view all the answers

Which of the following factors typically increases the bargaining power of suppliers?

Few suppliers in the market Signup and view all the answers

Which source of external information is categorized as a published source?

Market research reports Signup and view all the answers

How does product standardization affect consumer power?

Increases their negotiating leverage Signup and view all the answers

Which of the following indicates a condition where buyers can switch products easily?

Availability of numerous alternatives Signup and view all the answers

What role does consumer information play in bargaining power?

It enhances their knowledge of market prices Signup and view all the answers

Which data source would be best for obtaining company-specific financial reports?

Lexis-Nexis Company Dossier Signup and view all the answers

What effect does backward integration have on supplier relationships?

It eliminates the need for external supplier relationships Signup and view all the answers

What is the primary purpose of forecasting in management?

To make educated assumptions about future trends and events Signup and view all the answers

Which of the following elements is NOT included in the EFE Matrix?

Financial Signup and view all the answers

What is the scale used to rate the effectiveness of current strategies in the EFE Matrix?

1-4 Signup and view all the answers

How are key external factors weighted in the EFE Matrix?

From 0.0 to 1.0 Signup and view all the answers

What does the formula 'weight x rating' in the EFE Matrix represent?

The individual weighted score for each factor Signup and view all the answers

What is the maximum total score possible after summing the weighted scores in the EFE Matrix?

40 Signup and view all the answers

In the context of external factors, what kind of impact do major external factors have according to EFE Matrix?

Significant impact on performance or achieving desired results Signup and view all the answers

What is a likely outcome of making incorrect assumptions in the context of forecasting?

Failure to achieve desired results Signup and view all the answers

What is the weighted score for the trend toward healthy eating eroding concession sales?

$0.48 Signup and view all the answers

Which factor has the highest weight in the EFE matrix?

Trend toward healthy eating Signup and view all the answers

How much has the unemployment rate in the county declined to?

3.1% Signup and view all the answers

What percentage growth in population is noted for Rowan County annually?

8% Signup and view all the answers

Which external factor has a rating of 1 in the EFE matrix?

Movies rented from Time Warner Signup and view all the answers

What is the projected growth in demand for going to cinemas?

10% Signup and view all the answers

What is the combined weighted score for the factors related to declining unemployment and increasing population?

$0.15 Signup and view all the answers

What is the percentage increase in county and city property taxes?

25% Signup and view all the answers

Study Notes

Strategic Management Concepts: A Competitive Advantage Approach, Concepts and Cases

The book is the Seventeenth Edition.
It is a Concepts & Cases textbook.
The book is by Fred David, Forest David, Meredith, and David.
Copyright is held by Pearson Education, Inc.
The chapter is Chapter 3, The External Assessment

Learning Objectives (Page 2)

3.1: Explain the nature and purpose of external assessment in strategy formulation.
3.2: Identify and discuss 10 external forces that impact organizations.
3.3: Explain Porter's Five-Forces Model and its relevance in strategy formulation.

Learning Objectives (Page 3)

3.4: Describe key sources of information for identifying opportunities and threats.
3.5: Discuss forecasting tools and techniques.
3.6: Explain how to develop and use an External Factor Evaluation (EFE) Matrix.
3.7: Explain how to develop and use a Competitive Profile Matrix (CPM).

External Audit (Page 5)

Focuses on trends and events outside the firm's control.
Reveals opportunities and threats.
Helps managers create strategies.

Purpose of External Audit (Page 6)

Aims to identify important factors.
Enables firms to respond offensively or defensively to factors.
Strategies can use opportunities and/or reduce threat impacts.

Key External Forces (Page 7)

Divided into five categories:
- Economic forces
- Social, cultural, demographic, and environmental (SCDE) forces
- Political, governmental, and legal forces
- Technological forces
- Competitive forces

Figure 3.2 Relationships Between Key External Forces and an Organization (Page 8)

Diagram illustrating relationships between various external forces and organizational opportunities and threats.
Shows how different forces influence the opportunities and threats facing an organization.

The AQCD Test (Page 9)

Four factors are important for identifying key external factors in strategic planning:
- Actionable
- Quantitative
- Comparative
- Divisional
AQCD is a measure of external factor quality.

Which one passed AQCD test? (Page 10)

Online retail grocery shopping grew 4% in 2018.
Consumer's average disposable income increased greatly in 2018.

Economic Forces (Page 11)

Shift to service economy
Availability of credit
Disposable income level
Propensity of people to spend
Interest rates
Inflation rates
GDP trends
Consumption patterns
Unemployment trends
Value of the dollar

Economic Forces (Page 12)

Import/Export factors
Demand shifts for goods and services
Income differences by region and consumer group
Fluctuations in prices
Foreign countries' economic conditions
Monetary and Fiscal policies
Stock market trends
Tax rate variation by country /state
European Economic Community (EEC) policies
Organization of Petroleum Exporting Countries (OPEC) policies

Impact on virtually all products, services, markets, and customers.
Shape how people live, work, produce, and consume.

Key SCDE Variables (Page 14, 15, 16)

Various factors that fall under the SCDE umbrella, including population changes, regional tastes, marriages, deaths, immigration, social security, life expectancy, income, social media, retirement, energy conservation, product quality, customer service, pollution control, attitudes toward foreign peoples, social programs, and number of churches (and members).

Political, Governmental, and Legal Forces (Page 17)

Local, state, federal laws and regulations impact strategies of different organization types.

Political, Governmental, and Legal Variables (Page 18, 19)

Various specifics including environmental regulations, protectionist actions, changes in patent laws, and equal employment laws. (Additionally, USA vs. other countries, political conditions, oil prices, local laws, import/export regulations, tariffs, and elections.)

Technological Forces (Page 20, 21, 22)

Internet of Things, 3D printing, cloud, mobile devices, biotech, analytics, autotech, robotics & artificial intelligence, and the increasing prevalence of Chief Information Officers (CIOs) and Chief Technology Officers (CTOs).

Competitive Forces (Page 23)

Identifying rival firms' strengths, weaknesses, capabilities, opportunities, threats, objectives, and strategies is an important part of external audit.

Obtaining Competitive Intelligence (Page 24, 25)

Legal and ethical ways to gather information about competitors.
Includes options like reverse engineering, surveys, analyzing financial reports, and visits, online databases, and contact with government agencies.

Key Questions About Competitors (Page 26, 27, 28)

Questions to ask about competitors, including their strengths, weaknesses, products, strategies, reactions to trends, vulnerabilities to new strategies, ability to counterattack, social media presence, industry exits/entrances, and factors determining competitive position, and supplier/distributor relationships.

Competitive Intelligence Programs (Page 29)

A systematic and ethical process for gathering and analyzing data on competitors, and general business trends, to support a business' own goals.

The Five-Forces Model of Competition (Page 30, 31)

A model used for understanding industry structure through analyzing competitive forces.
Focuses on power among competing firms and other forces like substitutes and potential entry.

The Five-Forces Model (Page 32, 33, 34, 35, 36, 37, 38, 39, 40)

Detailed factors influencing rivalry among competitors, entry, substitutes, suppliers, and consumer power.
Includes specific conditions related to each competitive force, ranging from the number of competitors to price fluctuations, and consumer switching costs.

Industry Analysis: EFE Matrix (Page 45)

Summarizing and evaluating various factors (Social, Cultural, Demographic, Economic, Environmental, Political, Governmental, Legal, Technological, and Competitive) for analyzing industry dynamics.

EFE Matrix Steps (Page 46)

Detailed steps for using the EFE Matrix to analyze external factors and strategies.

Table 3.8 EFE Matrix for a Local 10-Theater Cinema Complex (Page 47, 48)

Examples of how an EFE Matrix can be used for performing risk analysis for cinema complex industry. Presents data from a hypothetical local cinema complex to understand its opportunities and challenges from various factors.

Industry Analysis: Competitive Profile Matrix (CPM) (Page 49)

Identifying competitor strengths and weaknesses in relation to a sample firm. Assessing critical success factors that include both internal and external elements.

Table 3.10 An Example Competitive Profile Matrix (Page 50)

Example CPM displaying ratings and weighted scores for competitor analysis. Illustrates how to assess strengths, weaknesses, and overall competitive performance of different firms operating in the same industry.

Figure 3.4 How to Gain and Sustain Competitive Advantages (Page 51)

A circular diagram depicting the cyclical process of gaining and sustaining competitive advantages, highlighting steps from establishing a clear vision/mission to evaluating results and adapting to change.

Copyright (Page 52)

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Test your knowledge on Chapter 3 of 'Strategic Management Concepts' which focuses on the External Assessment. This quiz covers Porter's Five-Forces Model, key external forces impacting organizations, and tools for evaluating opportunities and threats. Perfect for students looking to reinforce their understanding of strategic analysis.