Chapter 2 Flashcards
True or False. An integrated understanding of the core competencies is essential for firms to understand the present and predict the future
False. An integrated understanding of the external and internal environments is essential for firms to understand the present and predict the future
3 major areas of external environment
- General
- Industry
- Competitor
It is a major area of the external environment that it is composed of dimensions in the broader society that influence an industry and the firms within it
general environment
6 environmental segments in the general environment (DET-SPG)
- demographic
- economic
- political/legal
- sociocultural
- technological
- global
True or False. Firms can directly control the general environment’s segments and elements.
False. Firms cannot directly control the general environment’s segments and elements.
It is a major area of the general environment that pertains to the set of factors that directly influence a firm and its competitive actions and competitive responses such as the threat of new entrants, the power of suppliers, the power of buyers, the threat of product substitutes, and the intensity of the rivalry among competitors
industry environment
It is how companies gather and interpret information about their competitors
competitor analysis
True or False. Analysis of the general environment is focused on the future; analysis of the industry environment is focused on the factors and conditions influencing a firm’s profitability within its industry; and analysis of competitors is focused on predicting the dynamics of competitors’ actions, responses, and intentions
True
True or False. The results of the three analyses such as the general environment, industry environment, and competitor environment, the firm uses to understand its external environment do not influence its vision, mission, and strategic actions
False. Analyses the firm uses to understand its external environment influence its vision, mission, and strategic actions
True or False. To cope with often ambiguous and incomplete environmental data and to increase understanding of the general environment, firms engage in external environmental analysis
True
4 activities in external environmental analysis
- scanning
- monitoring
- forecasting
- assessing
True or False. An important objective of studying the general environment is identifying strength and weaknesses
False. An important objective of studying the general environment is identifying opportunities and threats
It is a condition in the general environment that, if exploited, helps a company achieve strategic competitiveness.
opportunity
It is a condition in the general environment that may hinder a company’s efforts to achieve strategic competitiveness
threat
True or False. opportunities suggest competitive possibilities, while threats are potential constraints
True
Scanning includes:
a. Identifying early signals of environmental changes and trends
b. Detecting meaning through ongoing observations of environmental changes and trends
c. Developing projections of anticipated outcomes based on monitored changes and trends
d. Determining the timing and importance of environmental changes and trends for firms’ strategies and their management
a
Monitoring includes
a. Detecting meaning through ongoing observations of environmental changes and trends
b. Identifying early signals of environmental changes and trends
c. Determining the timing and importance of environmental changes and trends for firms’ strategies and their management
d. Developing projections of anticipated outcomes based on monitored changes and trends
a
Forecasting includes
a. Detecting meaning through ongoing observations of environmental changes and trends
b. Identifying early signals of environmental changes and trends
c. Determining the timing and importance of environmental changes and trends for firms’ strategies and their management
d. Developing projections of anticipated outcomes based on monitored changes and trends
d
assessing includes
a. Detecting meaning through ongoing observations of environmental changes and trends
b. Identifying early signals of environmental changes and trends
c. Determining the timing and importance of environmental changes and trends for firms’ strategies and their management
d. Developing projections of anticipated outcomes based on monitored changes and trends
c
It is one of the categories of external environmental analysis which entails the study of all segments in the general environment. Through this, firms identify early signals of potential changes in the general environment and detect changes that are already underway
scanning
It is one of the categories of external environmental analysis where the analysts observe environmental changes to see if an important trend is emerging from among those spotted by scanning. It refers to the firm’s ability to detect meaning in different environmental events and trends.
monitoring
It is one of the categories of external environmental analysis where the analysts develop feasible projections of what might happen, and how quickly, as a result of the changes and trends detected through scanning and monitoring
forecasting
It is one of the categories of external environmental analysis where the objective is to determine the timing and significance of the effects of environmental changes and trends on the strategic management of the firm
assessing
It is concerned with a population’s size, age structure, geographic distribution, ethnic mix, and income distribution
demographic segment
It refers to the nature and direction of the economy in which a firm competes or may compete
economic environment
Segments where scanning, monitory, forecasting, and assessing are applied
- Demographic segment
- Economic segment
- Political/legal segment
- Technological segment
- Sociocultural segment
- Global segment
It is a segment that refers to the arena in which organizations and interest groups compete for attention, resources, and a voice in overseeing the body of laws and regulations
guiding the interactions among nations
political/legal segment
It is concerned with a society’s attitudes and cultural values
sociocultural segment
It is a segment that includes the institutions and activities involved with creating new knowledge and translating that knowledge into new outputs, products, processes, and materials
technological segment
It includes relevant new global markets, existing markets that are changing, important international political events, and critical cultural and institutional characteristics of global markets
global segment
True or False. A key objective of analyzing the general environment is identifying anticipated changes and trends among external elements. With a focus on the future, the analysis of the general environment allows firms to identify opportunities and threats. As a result, it is necessary to have a top management team with the experience, knowledge, and sensitivity required to effectively analyze this segment of the environment
true
It refers to the group of firms producing products that are close substitutes
industry
True or False. The general environment often has a more direct effect on the firm’s strategic competitiveness and above-average returns than the industry environment
False. The industry environment often has a more direct effect on the firm’s strategic competitiveness and above-average returns than general environment
The Five Forces of Competition Model (BIPTS)
- power of buyers
- intensity of rivalry among competitors
- product substitutes,
- threats posed by new entrants
- power of suppliers
They are derived from incremental efficiency improvements through experience as a firm grows larger.
economies of scale
True or False. As the quantity of a product produced during a given period increases, the cost of manufacturing each unit increases
False. As the quantity of a product produced during a given period increases, the cost of manufacturing each unit declines
They are the one-time costs customers incur when they buy from a different supplier
switching costs
They are goods or services from outside a given industry that perform similar or the same functions as a product that the industry produces
substitute products
True or False. Analysis of the five forces in the industry allows the firm to determine the industry’s attractiveness in terms of the potential to earn adequate or superior returns
True
True or False. The weaker the competitive forces are, the lower the profit potential for an industry’s firms
False. The stronger the competitive forces are, the lower the profit potential for an industry’s firms
It is a set of firms that emphasize similar strategic dimensions and use a similar strategy
strategic group
True or False. The competition between firms within a strategic group is lesser than the competition between a member of a strategic group and companies outside that strategic group
False. The competition between firms within a strategic group is greater than the competition between a member of a strategic group and companies outside that strategic group
It is an analysis that focuses on each company against which a firm directly competes
Competitor analysis
It is the set of data and information the firm gathers to better understand and better anticipate competitors’ objectives, strategies, assumptions, and capabilities
competitor intelligence
True or False. The external environment has three major parts: (1) the general environment (elements in the broader society that affect industries and their firms), (2) the industry environment (factors that influence a firm, its competitive actions
and responses, and the industry’s profit potential), and (3) the competitor environment (in which the firm analyzes each major competitor’s future objectives, current strategies,
assumptions, and capabilities).
True
Five Components of Demographic Segment (ISAGE)
- Income distributions
- Size of population
- Age
- Geographic distribution
- Ethnic mix
It is a trade agreement between two countries where each country agrees to open its market to the other country’s products.
bilateral trading
Factors in Threat of New Entrants
(BEPASCCEG)
- barriers to entry
- economies of scale
- product differentiation
- access to the distribution channel
- switching costs
- capital requirements
- cost disadvantages independent scale
- expected retaliation
- government policy
Increasing prices and reducing the quality of their products are potential means used by ______ to exert power over firms competing within an industry.
suppliers
Firms seek to maximize the return on their invested capital.
Bargaining Power of Buyers
___________ are goods or services from outside a given industry that performs similar or the same functions as a product
that the industry produces.
substitute products
The ___________ intensifies when a firm is challenged by a competitor’s actions or when the company recognizes an opportunity to improve its market position.
competitive rivalry
__________ are products of careful study and interpretation of data and information from multiple sources
Effective industry analyses
Research shows that in some industries, __________ are more important than ______ ones as determinants of strategic competitiveness.
- international variables
- domestic
_______ group competition is
more intense than _____ group competition.
- Intrastrategic group
- Interstrategic group
Competitor Analysis - Components/Competitor Intelligence
(FACS)
- future objectives
- assumptions
- current strategy
- strengths and weaknesses
