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Questions and Answers
Which category does the shift to a service economy belong to?
Which category does the shift to a service economy belong to?
Which aspect is NOT considered in the AQCD Test for external factors?
Which aspect is NOT considered in the AQCD Test for external factors?
What is an example of a social, cultural, demographic, and environmental (SCDE) force?
What is an example of a social, cultural, demographic, and environmental (SCDE) force?
Which force is likely to directly impact strategic decisions regarding product consumption?
Which force is likely to directly impact strategic decisions regarding product consumption?
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Which of the following is a characteristic feature of economic forces?
Which of the following is a characteristic feature of economic forces?
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What is the impact of import/export factors categorized under?
What is the impact of import/export factors categorized under?
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Which of the following actions demonstrates the impact of competitive forces?
Which of the following actions demonstrates the impact of competitive forces?
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What do GDP trends reflect in the context of strategic planning?
What do GDP trends reflect in the context of strategic planning?
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Which of the following factors does NOT contribute to low barriers of entry in a market?
Which of the following factors does NOT contribute to low barriers of entry in a market?
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What is a likely consequence when products are perishable?
What is a likely consequence when products are perishable?
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Which condition is most likely to increase competition amongst existing firms?
Which condition is most likely to increase competition amongst existing firms?
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Which aspect does NOT play a crucial role in overcoming barriers to entry?
Which aspect does NOT play a crucial role in overcoming barriers to entry?
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What economic factor can contribute to a decrease in consumer switching costs?
What economic factor can contribute to a decrease in consumer switching costs?
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Which of the following is a barrier that could deter new competitors from entering a market?
Which of the following is a barrier that could deter new competitors from entering a market?
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Which of these conditions would likely reduce the intensity of rivalry in an industry?
Which of these conditions would likely reduce the intensity of rivalry in an industry?
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What effect do government regulatory policies typically have on market competition?
What effect do government regulatory policies typically have on market competition?
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What condition increases the bargaining power of suppliers?
What condition increases the bargaining power of suppliers?
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How does consumer power increase in a market?
How does consumer power increase in a market?
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Which of the following is not a source of external information?
Which of the following is not a source of external information?
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What impact does informed buyers have on market dynamics?
What impact does informed buyers have on market dynamics?
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In which scenario would sellers struggle the most with consumer demand?
In which scenario would sellers struggle the most with consumer demand?
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Which statement correctly reflects the bargaining power of consumers?
Which statement correctly reflects the bargaining power of consumers?
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Which of the following factors does not affect the bargaining power of suppliers?
Which of the following factors does not affect the bargaining power of suppliers?
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Which of the following is an example of a published source of strategic information?
Which of the following is an example of a published source of strategic information?
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What does the Competitive Profile Matrix (CPM) analyze?
What does the Competitive Profile Matrix (CPM) analyze?
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How many critical success factors does the template suggest including in a Competitive Profile Matrix?
How many critical success factors does the template suggest including in a Competitive Profile Matrix?
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In the Competitive Profile Matrix, what rating indicates a poor response?
In the Competitive Profile Matrix, what rating indicates a poor response?
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What is a potential limitation of using only 8 critical success factors in a CPM?
What is a potential limitation of using only 8 critical success factors in a CPM?
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What does a total weighted score of 2.20 indicate for Company 3 in a Competitive Profile Matrix?
What does a total weighted score of 2.20 indicate for Company 3 in a Competitive Profile Matrix?
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What is the primary goal of conducting an external audit in strategic management?
What is the primary goal of conducting an external audit in strategic management?
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Which of the following is NOT a purpose of the external audit?
Which of the following is NOT a purpose of the external audit?
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Porter’s Five-Forces Model is relevant for strategizing because it helps in analyzing what?
Porter’s Five-Forces Model is relevant for strategizing because it helps in analyzing what?
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Which forecasting tool is utilized for analyzing the impact of external factors on strategy formulation?
Which forecasting tool is utilized for analyzing the impact of external factors on strategy formulation?
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What kind of strategies should firms focus on based on the findings of an external audit?
What kind of strategies should firms focus on based on the findings of an external audit?
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What characteristic of external audit findings is critical for formulating actionable strategies?
What characteristic of external audit findings is critical for formulating actionable strategies?
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How should organizations ideally respond to the threats identified in an external audit?
How should organizations ideally respond to the threats identified in an external audit?
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Which external force is NOT typically considered when assessing an organization’s external environment?
Which external force is NOT typically considered when assessing an organization’s external environment?
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Which technologies are currently impacting strategic planning decisions in various industries?
Which technologies are currently impacting strategic planning decisions in various industries?
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What roles do a Chief Information Officer (CIO) and Chief Technology Officer (CTO) serve in an organization?
What roles do a Chief Information Officer (CIO) and Chief Technology Officer (CTO) serve in an organization?
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Which of the following is NOT a legal method to obtain competitive intelligence?
Which of the following is NOT a legal method to obtain competitive intelligence?
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What is an essential component when conducting an external audit concerning competition?
What is an essential component when conducting an external audit concerning competition?
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What type of information can be useful for analyzing rival firms?
What type of information can be useful for analyzing rival firms?
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Which of the following questions helps in understanding a competitor's strategic position?
Which of the following questions helps in understanding a competitor's strategic position?
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What is a potential downside of hiring top executives from rival firms?
What is a potential downside of hiring top executives from rival firms?
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Which of these is a technological force that may pose a threat to existing firms in an industry?
Which of these is a technological force that may pose a threat to existing firms in an industry?
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Study Notes
Strategic Management Concepts - Chapter 3: The External Assessment
- The external assessment focuses on identifying and evaluating trends and events outside a firm's control.
- This reveals key opportunities and threats facing an organization.
- Managers can use this information to formulate strategies that capitalize on opportunities and mitigate threats.
- The external audit is aimed at identifying key variables that offer actionable responses.
- Firms can choose to respond offensively, taking advantage of emerging opportunities or defensively to mitigate potential threats.
Learning Objectives
- Describe the nature and purpose of an external assessment in the formulation of strategies.
- Identify and discuss 10 external forces that affect organizations.
- Explain Porter's Five-Forces Model and its relevance in formulating strategies.
- Describe key information sources for identifying opportunities and threats.
- Discuss forecasting tools and techniques.
- Explain how to develop and use an External Factor Evaluation (EFE) Matrix.
- Explain how to develop and use a Competitive Profile Matrix (CPM).
Key External Forces
- Economic forces (e.g., availability of credit, disposable income levels, interest rates, inflation rates, GDP trends, import/export, price fluctuations, etc.)
- Social, Cultural, Demographic, and Environmental (SCDE) forces
- Political, Governmental, and Legal forces
- Technological forces
- Competitive forces
Key SCDE Variables
- Population changes (race, age, geographic area)
- Regional changes in tastes and preferences
- Number of marriages, divorces, births, and deaths
- Immigration and emigration rates
- Social Security programs
- Life expectancy rates
- Per capita income
- Social media pervasiveness
- Attitudes toward retirement, energy conservation, product quality, customer service, and pollution control
- Attitudes toward foreign peoples
- Number of churches and members
- Social responsibility issues
Key Questions About Competitors
- What are the strengths and weaknesses of major competitors?
- What unique products/services does the firm offer?
- What are the objectives and strategies of major competitors?
- How will competitors respond to current trends (economic, SCDE, political, legal, technological, and competitive)?
- How vulnerable are competitors to new strategies, products, and services?
- How vulnerable is the firm to competitor counterattacks?
- How does the firm compare to rivals in social media mastery?
- How much industry turnover (entry/exit) is occurring?
- What key factors explain the firm's current competitive position?
- How are supplier and distributor relationships changing?
Competitive Intelligence (CI)
- A systematic and ethical process for collecting and analyzing information about competition, and general business trends.
- Aims to enhance the business' goals.
Porter's Five-Forces Model
- Analyzes competitive forces impacting a firm.
- Includes:
- Rivalry among competing firms
- Potential entry of new competitors
- Potential development of substitute products
- Bargaining power of suppliers,
- Bargaining power of consumers
EFE Matrix
- A tool for summarizing and evaluating external factors.
- Steps:
- List 20 key external factors
- Assign weights (0.0 to 1.0)
- Rate effectiveness of current strategies (1-4)
- Multiply weight * rating
- Sum weighted scores
Competitive Profile Matrix (CPM)
- Identifies strengths and weaknesses of major competitors compared to a sample firm
- Critically assesses internal and external factors affecting the firm's strategic positions
Forecasting Tools and Techniques
- Forecasts involve educated predictions about future trends.
- No forecast is perfect.
Making Assumptions
- Best present estimates of external factors.
- Factors can influence performance and achieving desired results.
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Description
This quiz covers the essential aspects of the external assessment in strategic management. Learn about the importance of identifying trends and events outside an organization’s control, and how to leverage Porter's Five-Forces Model. Test your knowledge on external forces that impact strategy formulation and explore forecasting tools for effective decision-making.
