Chapter 2 (Analyzing the External Environment of the Firm)

Question 1

environmental scanning

Answer 1

surveillance of a firm’s external environment to predict environmental changes and detect changes already under way

Question 2

environmental monitoring

Answer 2

a firm’s analysis of the external environment that tracks the evolution of environmental trends, sequences or events, or streams of activities

Question 3

competitive intelligence (CI)

Answer 3

a firm’s activities of collecting and interpreting data on competitors, defining and understanding the industry, and identifying competitors’ strengths and weaknesses

Question 4

environmental forecasting

Answer 4

the development of plausible projections about the direction, scope, speed, and intensity of environmental change

Question 5

scenario analysis

Answer 5

an in-depth approach to environmental forecasting that involves experts’ detailed assessments of societal trends, economics, politics, technology, or other dimensions of the external environment

Question 6

SWOT analysis

Answer 6

a framework for analyzing a company’s internal and external environment (the Strengths, Weaknesses, Opportunities, and Threats)

Question 7

general environment

Answer 7

factors external to an industry, and usually beyond a firm’s control, that affect a firm’s strategy

Question 8

demographic segment of the general environment

Answer 8

genetic and observable characteristics of a population, including the levels and growth of age, density, sex, race, ethnicity, education, geographic region, and income

Question 9

sociocultural segment of the general environment

Answer 9

the values, beliefs, and lifestyles of a society

Question 10

political/legal segment of the general environment

Answer 10

how a society creates and exercises power, including rules, laws, and taxation policies

Question 11

technological segment of the general environment

Answer 11

innovation and state of knowledge in industrial arts, engineering, applied sciences, and pure science; and their interaction with society

Question 12

economic segment of the general environment

Answer 12

characteristics of the economy, including national income and monetary conditions

Question 13

global segment of the general environment

Answer 13

influences from foreign countries, including foreign market opportunities, foreign-based competition, and expanded capital markets

Question 14

competitive environment

Answer 14

factors that pertain to an industry and affect a firm’s strategies

Question 15

industry

Answer 15

a group of firms that produce similar goods or services

Question 16

Porter’s five-forces model of industry competition

Answer 16

a tool for examining the industry-level competitive environment, especially the ability of firms in that industry to set prices and minimize costs

Question 17

threat of new entrants

Answer 17

the possibility that the profits of established firms in the industry may be eroded by new competitors

Question 18

economics of scale

Answer 18

decreases in cost per unit as absolute output per period increases

Question 19

product differentiation

Answer 19

the degree that a product has strong brand loyalty or customer loyalty

Question 20

switching cost

Answer 20

one-time costs that a buyer/supplier faces when switching from one supplier/buyer to another

Question 21

bargaining power of buyers

Answer 21

the threat the buyers may force down prices, bargain for higher quality or more services, and play competitors against each other

Question 22

bargaining power of suppliers

Answer 22

the threat that suppliers may raise prices or reduce the quality of purchased goods or services

Question 23

threat of substitute products and services

Answer 23

the threat of limiting the potential returns of an industry by placing a ceiling on the prices that firms in the industry can profitably charge without losing too many customers to substitute products

Question 24

substitute products and services

Answer 24

products and services outside the industry that serve the same customer needs as the industry’s products and services

Question 25

intensity of rivalry among competitors in an industry

Answer 25

the threat that customers will switch their business to competitors within the industry

Question 26

internet

Answer 26

a global network of linked computers that use a common transmission format, exchange information and store data