Lesson Content True/False Multiple Problems Short Case Instructor

choices answers studies

2 2.1 Dat
2.1.1 0 2
2.1.2 0 2 1
2.1.3 0 4
2.1.4 0 4
2.1.5 0 2
2.1.6 0 2 1
2.1.7 0 2 1
2.2
2.2.1 0 2
2.2.2 0 2
2.2.3 0 2
2.2.4 0 2
3.2.5 0 2 2
Lesson 2: Core Concepts & Analytical Tools

2.1 Evaluating a company’s external environment

2.1.1 The strategically relevant components of a company’s macro-environment

Multiple choice

1. A company’s “macro-environment” refers to

A) the industry and competitive arena in which the company operates.

B) general economic conditions plus the factors driving change in the markets being served.

C) all the relevant forces and factors outside a company’s boundaries–general economic conditions,
population demographics, societal values and lifestyles, technological factors, and governmental
legislation and regulation.

D) the competitive market environment that exists between a company and its competitors.

E) the dominant economic features of a company’s industry

ANSWER: C

2. Which one of the following is not part of a company’s macro-environment?

A) Conditions in the economy at large

B) Population demographics and societal values and lifestyles

C) Technological factors
D) Governmental regulations and legislation

E) The company’s resource strengths, resource weaknesses, and competitive capabilities

Answer: E

2.1.2 Assessing the Company’s Industry and Competitive Environment

Multiple choice

1. Which of the following is not a major question to ask in thinking strategically about industry and
competitive conditions in a given industry?

A) How many companies in the industry have good track records for revenue growth and profitability?

B) What strategic moves are rivals likely to make next?

C) What are the key factors for future competitive success?

D) Does the outlook for the industry offer good prospects for profitability?

E) What forces are driving changes in the industry, and what impact will these changes have on
competitive intensity and industry profitability?

ANSWER: A

2. Thinking strategically about industry and competitive conditions in a given industry involves
evaluating

such considerations as

A) the forces driving change in the industry.

B) the dominant economic features of the industry in which the company operates.

C) the kinds and strengths of competitive forces industry members are facing.

D) the key factors of success in the industry.

E) All of the above

ANSWER: E

2.1.3 Issue 1: Analyzing the dominant economic characteristics of an industry

Multiple choice

1. Which of the following is not a factor to consider in identifying an industry’s dominant economic
features?
A) The market size, growth rate and prospects

B) The scope of competitive rivalry including geographic area

C) The market demand-supply conditions

D) How strong driving forces and competitive forces are

E) The role and pace of technological change

ANSWER: E

2. Which of the following is not a relevant consideration in identifying an industry’s dominant economic

features?

A) Market size and growth rate, the geographic scope of competitive rivalry, and demand-supply
conditions

B) How many strategic groups the industry has and which ones are most profitable and least profitable

C) The number and sizes of buyers, the number of rivals, and the pace of product innovation

D) The pace of technological change

E) The current industry position in its life cycle to reveal the industry’s growth prospects

ANSWER: C

2.1.4 Issue 2: Evaluating the strength of the industry’s competitive forces

Multiple choice

1. The state of competition in an industry is a function of

A) the competitive pressures associated with rivalry among competing sellers to attract customers.

B) competitive pressures coming from the attempts of companies in other industries attempting to win

buyers over to their substitute products.

C) competitive pressures associated with the threat of new entrants into the marketplace.

D) competitive pressures associated with the bargaining power of suppliers and customers.

E) All of these

ANSWER: E
2. The nature and strength of the competitive forces that prevail in an industry is generally a joint
product of the

A) pressures associated with rivalry among sellers to attract buyer patronage.

B) threat that firms outside the industry will decide to enter the market.

C) attempts of companies in other industries to win buyers over to their own substitute products.

D) competitive pressures stemming from the bargaining power of both suppliers and buyers.

E) All of these

ANSWER: E

3. Which of the following is not one of the five typical sources of competitive pressures?

A) The power and influence of industry driving forces

B) The bargaining power of suppliers and seller-supplier collaboration

C) The threat of new entrants into the market

D) The attempts of companies in other industries to win customers over to their own substitute
products

E) The market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the

industry

ANSWER: A

4. Whether buyer bargaining power poses a strong or weak source of competitive pressure on industry
members depends in part on

A) whether most buyers possess roughly equal or varying degrees of bargaining power.

B) how many buyers are engaged in collaborative partnerships with sellers.

C) whether entry barriers are high or low.

D) whether the overall quality of the items being furnished by industry members is rising or falling.

E) whether buyer demand is strong or declining.

ANSWER: E

2.1.5 Issue 3: The impact of the changing driving forces on an industry

Multiple choice
1. The “driving forces” in an industry

A) are usually triggered by changing technology or stronger learning/experience curve effects.

B) usually are spawned by growing demand for the product, the outbreak of price-cutting, and big
reductions in entry barriers.

C) are major underlying causes of change in industry and competitive conditions and have the biggest

influences in reshaping the industry landscape and altering competitive conditions.

D) appear when an industry begins to mature but are seldom present during early stages of the industry
life cycle.

E) are usually triggered by shifting buyer needs and expectations or by the appearance of new substitute

products.

ANSWER: C

2. Industry conditions change

A) because of such powerful driving forces as swings in buyer demand, changing interest rates, ups and

downs in the economy, and higher/lower entry barriers.

B) because of newly emerging industry threats and industry opportunities that alter the composition of
the industry’s strategic groups.

C) because new industry key success factors emerge.

D) because forces create pressures or incentives for industry participants (competitors, customers,
suppliers) to alter their actions in important ways.

E) chiefly because of changes in the barriers to entry and the degree of competition from substitute
products.

ANSWER: D

3. The steps involved in driving forces analysis are

A) developing a comprehensive list of all the potential causes of changing industry conditions.

B) predicting which new driving forces will emerge next.

C) determining which of the five competitive forces is the biggest driver of industry change.

D) identifying the driving forces, assessing whether their impact will make the industry more or less
attractive, and determining what strategy changes are needed to prepare for the impact of the driving

forces.

E) All of these

ANSWER: D

4. Driving forces analysis

A) involves identifying the driving forces, assessing whether their impact will make the industry more or

less attractive, and determining what strategy changes a company may need to make to prepare for the

impact of the driving forces.

B) identifies which strategic group is the most powerful.

C) helps managers identify which industry member is likely to become (or remain) the industry leader
and why.

D) helps managers identify which key success factors are most likely to help their company gain a

competitive advantage.

E) helps managers identify which of the five competitive forces will be the strongest driver of industry

change.

ANSWER: A

2.1.6 Issue 4: Determining the position of the industry rivals

Multiple choice

1. A strategic group

A) consists of those industry members that are growing at about the same rate and have similar product
line breadth.

B) includes all rival firms having comparable profitability.

C) is a cluster of industry rivals that have similar competitive approaches and market positions.

D) consists of those firms whose market shares are about the same size.

E) is made up of those firms having comparable profit margins.

ANSWER: C
2. A strategic group consists of those firms in an industry that

A) are subject to the same driving forces.

B) are placing about the same emphasis on each distribution channel.

C) use the same key success factors to differentiate their products.

D) employ similar competitive approaches and occupy similar positions in the market.

E) have similar size market shares.

ANSWER: D

3. Which of the following is not an appropriate guideline for developing a strategic group map for a
given industry?

A) The variables chosen as axes for the map should indicate big differences in how rivals have positioned

themselves to compete in the marketplace.

B) The variables chosen as axes for the map can be quantitative, qualitative, or discrete and defined in

terms of distinct classes and combinations.

C) The variables chosen as axes for the map should be highly correlated.

D) Several maps should be drawn if more than one pair of variables can help illuminate differences in
the competitive positioning of industry members.

E) The sizes of the circles on the map should be drawn proportional to the combined sales of the firms in

each strategic group.

ANSWER: C

4. Not all positions on a strategic group map are equally attractive because

A) entry and exit barriers are different for each strategic group.

B) key success factors are usually quite different for differently positioned industry participants.

C) small strategic groups are always less profitable than large strategic groups.

D) across-group rivalry is strongest at the outer edges of the strategic group map.

E) industry driving forces and competitive pressures favor some companies or groups and hurt others
and the profit potential of different strategic groups varies because of strengths and weaknesses in each
strategic group’s position.
ANSWER: D

2.1.7 Issue 5: Anticipating the next strategic moves of rivals

Multiple choice

1. The payoff of good scouting reports on rivals is improved ability to

A) predict what strategic moves rivals are likely to make next, thereby allowing a company to prepare

defensive countermoves and develop strategies to exploit rivals’ missteps.

B) determine which rivals are in the best strategic group.

C) figure out how many key success factors a rival has.

D) determine whether a rival is gaining or losing market share, whether rivals are increasing or
decreasing R&D spending, and what new marketing promotions are in the works.

E) determine whether a rival has the best strategy and is the industry leader.

ANSWER: A

2. Having good competitive intelligence about rivals’ strategies, latest actions and announcements,
resource strengths and weaknesses, and moves to improve their situation is important because

A) it identifies who the industry’s current market share leaders are.

B) it helps a company to anticipate what moves rivals are likely to make next and to craft its own
strategic moves.

C) good scouting reports help identify which rival is in which strategic group.

D) it enables company managers to determine which rival has the worst strategy and how to avoid
making

the same strategy mistakes.

E) it enables more accurate predictions about how long it will take a particular rival to copy most of
what the strategy leader is doing.

ANSWER: B

2.1.6 Issue 6: Determining the position of the industry rivals

Multiple choice

1. The key success factors in an industry

A) are the strategy elements, intangible assets, and competitive capabilities that most affect industry

members’ abilities to prosper in the marketplace.

B) are determined by the industry’s driving forces.

C) hinge on how many different strategic groups the industry has.

D) depend on how many rivals are trying to move from one strategic group to another.

E) are a function of such considerations as how many firms are in the industry, how many have market

shares above 5%, and whether the business models being used are similar or diverse.

ANSWER: A

2. An industry’s key success factors

A) are a function of market share, entry barriers, economies of scale, degree of vertical integration, and

industry profitability.

B) vary according to whether an industry has high or low long-term attractiveness.

C) can be determined through identifying an industry’s dominant economic characteristics, assessing the

five competitive forces, considering the impacts of the driving forces, comparing the market positions

of industry members, and forecasting the likely next moves of industry rivals.

D) can be determined from studying the “winning” strategies of the industry leaders and ruling out as

potential key success factors the strategy elements of those firms considered to have “losing” strategies.

E) depend on the relative competitive strengths of the industry leaders and how vulnerable they are to

competitive attack.

ANSWER: C

2.1.7 Issue 7: Anticipating the next strategic moves of rivals

Multiple choice

1. Which of the following factors should a company consider when determining if an industry offers
good prospects for attractive profits?

A) The industry’s growth potential, whether competition appears destined to become stronger or
weaker, how the industry’s driving forces might affect overall industry profitability, the company’s
competitive
position relative to rivals, and the company’s proficiency in performing industry key success factors

B) An assessment of which firms in the industry have the best and worst competitive strategies, whether
the number of strategic groups in the industry is increasing or decreasing, and whether economies of
scale and experience curve effects are a key success factor

C) Whether there are more than five key success factors and more than five barriers to entry

D) Constructing a strategic group map and assessing the attractiveness of the competitive position of
each strategic group

E) Whether the market leaders enjoy competitive advantages and how hard it is to develop a strongly

differentiated product

ANSWER: A

2. Evaluating whether an industry presents a sufficiently attractive business opportunity usually does not

involve a consideration of which of the following factors?

A) The industry’s growth potential

B) Whether competitive pressures will likely grow stronger or weaker

C) Whether the industry’s future profitability will be favorably or unfavorably affected by the prevailing

driving forces

D) The company’s competitive position in the industry and its ability to perform industry key success

factors

E) Whether the industry’s product is strongly or weakly differentiated

ANSWER: E

Short answer

1. Draw the five-forces model of competition and briefly describe the relevance of each of the five
forces in determining the overall strength of competitive pressures a company faces. Which of the five
competitive forces is typically the strongest?

2. What are industry key success factors? Why is it important for strategy makers to have a clear
understanding of an industry’s key success factors?

3. Can an industry be attractive to one company and unattractive to another company? Why or why
not?
2.2 Evaluating a company’s resources, cost position and competitiveness

2.2.1 Issue 1: Assessing the efficiency of the current strategy

Multiple-choice

1. One important indicator of how well a company’s present strategy is working is whether

A) it has more core competencies than close rivals.

B) its strategy is built around at least two of the industry’s key success factors.

C) the company is achieving gains in financial strength.

D) it has been able to create new industry demand through the use of a blue ocean strategy.

E) it is subject to weaker competitive forces and pressures than close rivals (a good sign).

ANSWER: C

2. Which one of the following is not a reliable measure of how well a company’s current strategy is
working?

A) Trends in the company’s sales and earnings growth

B) The company’s development of human capital, organizational capital, and information capital

C) Changes in the firm’s image and reputation with its customers

D) The company’s overall financial strength

E) Evidence of improvement in internal processes such as defect rate, order fulfillment, and employee

productivity.

ANSWER: B

2.2.2 Issue 2: Determining the important resources and capabilities

Multiple-choice

1. A resource-based strategy

A) is often based on cross-department combinations of intellectual capital and expertise.

B) uses a company’s valuable and rare resources and competitive capabilities to deliver value to
customers

that rivals have difficulty matching.

C) is typically based on a stand-alone resource strength such as technological expertise.

D) refers to a company’s most efficiently executed value-chain activity.

E) uses industry key success factors to provide a company with a core competence that rivals cannot

effectively imitate.

ANSWER: B

2. A resource-based strategy

A) focuses on exploiting a company’s best-executed operating strategy.

B) is based upon efficient performance of the company’s primary value chain activities.

C) concentrates on minimizing the costs associated with the design of a product or service.

D) attempts to exploit resources in a manner that offers value to customers in ways rivals are unable to
match.

E) focuses on working with forward channel allies to develop capabilities to outmatch the capabilities of

rivals.

ANSWER: D

2.2.3 Issue 3: Assessing the competitiveness of the company’s cost structure and customer value
proposition

Multiple-choice

1. One of the most telling signs of whether a company’s market position is strong or precarious is

A) whether its product is strongly or weakly differentiated from rivals.

B) whether its prices and costs are competitive with those of key rivals.

C) whether it has a lower stock price than key rivals.

D) the opinions of buyers regarding which seller has the best product quality and customer service.

E) whether it is in a bigger or smaller strategic group than its closest rivals.

ANSWER: B

2. Two analytical tools useful in determining whether a company’s prices and costs are competitive are

A) SWOT analysis and key success factor analysis.

B) SWOT analysis and benchmarking.

C) value chain analysis and benchmarking.

D) competitive position assessment and competitive strength assessment.

E) driving forces analysis and SWOT analysis.

ANSWER: C

2.2.4 Issue 4: Comparing the competitive strengths of the company with key rivals

Multiple-choice

1. The value of doing competitive strength assessment is to

A) determine how competitively powerful the company’s core competencies are.

B) learn if the company’s market opportunities are better than those of its rivals.

C) learn whether a company has a distinctive competence.

D) learn how the company ranks relative to rivals on each of the important factors that determine
marketsuccess and ascertain whether the company has a net competitive advantage or disadvantage
vis-à-vis key rivals.

E) determine whether a company’s resource strengths are sufficient to allow it to earn bigger profits
than rivals.

ANSWER: D

2. Doing a competitive strength assessment entails

A) determining whether a company has a cost-effective value chain.

B) ranking the company against major rivals on each of the important factors that determine market
success and ascertaining whether the company has a net competitive advantage or disadvantage versus
major rivals.

C) identifying a company’s core competencies and distinctive competencies (if any).

D) analyzing whether a company is well positioned to gain market share and be the industry’s profit
leader.

E) developing quantitative measures of a company’s chances for future profitability.

ANSWER: B

3.2.5 Issue 5: Strategic problems and managements

Multiple-choice

1. Identifying the strategic issues a company faces and compiling a “worry list” of problems and
roadblocks is

an important component of company situation analysis because

A) without a precise fix on what problems/issues a company confronts, managers cannot know what the

industry’s key success factors are.

B) the “worry list” sets the management agenda for taking actions to improve the company’s
performance and business outlook.

C) without a precise fix on what problems/roadblocks a company confronts, managers are less clear
about what value chain activities to benchmark.

D) the “worry list” helps company managers clarify their thinking about how best to modify the
company’s value chain.

E) these issues and obstacles must be cleared before management can focus clearly on what is the best

strategy for the company to pursue.

ANSWER: B

Which of the following is not accurate as concerns the task of identifying the strategic issues and
problems that merit front-burner managerial attention?

A) It entails drawing upon the results and conclusions from analyzing the company’s external
environment.

B) It entails drawing on the results and conclusions from evaluating the company’s own resources and

competitive position.

C) It entails developing a “worry list” of problems and issues for managerial strategy making.

D) Identifying the strategic issues and problems that the company faces is the first thing that company

managers need to do before starting to analyze the company’s internal and external environment.

E) Developing a list of what issues and problems that managements needs to address (and to resolve)

should always precede deciding upon a strategy and what actions to take to improve the company’s

position and prospects.

ANSWER: D

Short Answer

1. Draw a typical company value chain and briefly explain the difference between primary activities and

support activities.

2. Draw a typical value chain for an entire industry. Why are the activities performed by value chain
allies strategically relevant?