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Strategic Management: A Competitive Advantage Approach, 17e (David/David) Chapter 3 The External Assessment 1) To perform an external audit, a company first must A) get an approval from the Securities and Exchange Commission. B) perform an internal audit. C) gather competitive intelligence and information about external trends. D) hire a consultant to develop a comprehensive strategic plan. E) create a budget. Answer: C Diff: 2 LO: 3.1: Describe the nature and purpose of an external assessment in formulating strategies. AACSB: Analytical thinking 2) Collecting and evaluating information on competitors is essential for successful A) internal analysis. B) strategy evaluation. C) strategy formulation. D) strategy implementation. E) strategy correction. Answer: C Diff: 2 LO: 3.1: Describe the nature and purpose of an external assessment in formulating strategies. AACSB: Analytical thinking 3) External audits attempt to identify key variables that offer ________ responses. A) actionable B) authoritative C) profitable D) strategic E) terminal Answer: A Diff: 2 LO: 3.1: Describe the nature and purpose of an external assessment in formulating strategies. AACSB: Analytical thinking 4) External audit is sometimes called A) strategic analysis. B) strategy evaluation. C) statutory audit. D) financial audit. E) industry analysis. Answer: E Diff: 2 LO: 3.1: Describe the nature and purpose of an external assessment in formulating strategies. AACSB: Analytical thinking 1 Copyright © 2020 Pearson Education, Inc.

5) Industry analysis is also referred to as external strategic management audit. Answer: TRUE Diff: 1 LO: 3.1: Describe the nature and purpose of an external assessment in formulating strategies. AACSB: Analytical thinking 6) An external audit focuses on identifying and evaluating trends and events within the control of management. Answer: FALSE Diff: 2 LO: 3.1: Describe the nature and purpose of an external assessment in formulating strategies. AACSB: Analytical thinking 7) The aim of an external audit is to develop an exhaustive list of every possible factor that could influence the business. Answer: FALSE Diff: 2 LO: 3.1: Describe the nature and purpose of an external assessment in formulating strategies. AACSB: Analytical thinking 8) External audits attempt to identify key variables that offer actionable responses. Answer: TRUE Diff: 2 LO: 3.1: Describe the nature and purpose of an external assessment in formulating strategies. AACSB: Analytical thinking 9) External audits attempt to identify key variables that offer highly intuitive responses. Answer: FALSE Diff: 3 LO: 3.1: Describe the nature and purpose of an external assessment in formulating strategies. AACSB: Analytical thinking 10) External audits attempt to identify key variables that offer intuitive responses. Answer: FALSE Diff: 2 LO: 3.1: Describe the nature and purpose of an external assessment in formulating strategies. AACSB: Analytical thinking

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11) A systematic and ethical process for gathering and analyzing information about the competition's activities and general trends to further a business' own goals is called A) unethical business practices. B) artificial intelligence. C) competitive intelligence. D) industrial espionage. E) competitive advantage. Answer: C Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Ethical understanding and reasoning 12) Which of the following is NOT an external force that must be examined in formulating strategies? A) Economic B) Social C) Organizational D) Cultural E) Environmental Answer: C Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 13) Availability of credit falls under the ________ forces category of external forces. A) technological B) social C) environmental D) organizational E) economic Answer: D Diff: 3 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 14) In general, what happens to American goods in overseas markets when there is a strong dollar? A) They are less expensive. B) They are more attractive. C) They are cheaper. D) They are more expensive. E) They are desirable. Answer: D Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 3 Copyright © 2020 Pearson Education, Inc.

15) Individuals age 65 and older in the United States as a percentage of the population will rise to ________ percent by 2030. A) 27 B) 31 C) 14 D) 22 E) 19 Answer: E Diff: 1 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 16) The United States' population is A) getting younger and less white. B) getting younger and more white. C) getting older and less white. D) getting older and more white. E) remaining stable as to age and racial make up. Answer: C Diff: 1 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 17) In performing strategic planning and case analysis, relevant SCDE factors for a particular firm must be ________ and actionable to be useful. A) important B) past focused C) present focused D) quantified E) secular Answer: D Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 18) In the U.S. food industry, demand for processed packaged foods is ________. A) increasing B) stabilizing C) accelerating D) declining E) plateauing Answer: D Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking

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19) The acronym SCDE stands for social, cultural, demographic, and ________ forces. A) economic B) ecological C) ethnic D) external E) environment Answer: E Diff: 1 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 20) Which of the following states has zero state income tax? A) Florida B) New York C) North Carolina D) Montana E) Delaware Answer: A Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 21) In 2012, ________ passed the world's first legislation that would treat marijuana like alcohol, taxing and regulating its sales. A) Arkansas B) Colorado C) New Hampshire D) New York E) North Carolina Answer: B Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 22) When an industry relies heavily on government contracts, which forecasts can be the most important part of an external audit? A) Economic B) Political C) Technological D) Competitive E) Multinational Answer: B Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Reflective thinking

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23) The emergence of 3D printing is an example of a(n) ________ force that impacts organizations. A) economic B) legal C) political D) social, cultural, demographic, and environment (SCDE) E) technological Answer: E Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 24) The shift to a service economy is an example of a(n) ________ force. A) technological B) social, cultural, demographic, and environment (SCDE) C) economic D) legal E) political Answer: C Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 25) The World Economic Outlook report predicts a global growth rate of around ________ percent. A) 3.6 B) 7.8 C) 2.1 D) 1.8 E) 5.3 Answer: A Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 26) A strong dollar enables ________ firms to purchase raw materials more cheaply from other countries. A) European Union B) United States C) Indian D) Russian E) Chinese Answer: B Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 6 Copyright © 2020 Pearson Education, Inc.

27) All of the following are political, governmental, and legal variables that can represent key opportunities or threats to organizations EXCEPT A) tariffs. B) environmental regulations. C) level of defense expenditures. D) legislation on equal employment. E) population changes by race, age, sex, and level of affluence. Answer: E Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 28) Competition in virtually all industries is A) nonexistent. B) intense. C) never cutthroat. D) easily avoidable. E) insignificant. Answer: B Diff: 1 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 29) ________ forces are shaping the way people live, work, produce, and consume. A) SCDE B) VUCA C) IO D) Porter's fiveE) Internal Answer: A Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 30) A weak dollar means A) lower exports and higher imports. B) lower exports and lower imports. C) lower exports and no effect on imports. D) higher exports and higher imports. E) higher exports and lower imports. Answer: E Diff: 3 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking

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31) Corporate intelligence is the name for a systematic and ethical process for gathering and analyzing information about the competition's activities and general business trends to further a business's own goals. Answer: FALSE Diff: 3 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Ethical understanding and reasoning 32) Major competitors' weaknesses can represent internal opportunities. Answer: FALSE Diff: 1 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 33) Major competitors' strengths may represent key threats. Answer: TRUE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 34) Major competitors' strengths are areas of concern, but do not represent key threats to a firm. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 35) Hiring top executives from rival firms is a way companies obtain competitive intelligence. Answer: TRUE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 36) An effective competitive intelligence program allows all areas of a firm to access consistent and verifiable information in making decisions. Answer: TRUE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Written and oral communication 37) Competitive intelligence is a polite way of referring to corporate espionage. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Ethical understanding and reasoning

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38) Intelligence gathering is an unethical business practice. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Ethical understanding and reasoning 39) The five major categories of variables known as external forces are: 1) economic forces, 2) social, cultural, demographic, and natural environment forces, 3) political, governmental, and legal forces, 4) technological forces, and 5) competitive forces. Answer: TRUE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 40) To perform an external audit, a company first must gather competitive intelligence and information about economic, social, cultural, demographic, environmental, political, governmental, legal, and technological trends. Answer: TRUE Diff: 1 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 41) In the U.S. food industry, demand for processed packaged foods is increasing. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 42) Economic factors do not have much impact on the attractiveness of strategies. Answer: FALSE Diff: 1 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 43) A low value of the dollar means lower exports and higher imports. Answer: FALSE Diff: 3 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 44) There are benefits to the U.S. economy resulting from a low value of the U.S. dollar. Answer: TRUE Diff: 3 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking

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45) The United States is getting older. Answer: TRUE Diff: 1 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 46) It is predicted that, by 2030, 19 percent of the population in the United States will be 65 years or older. Answer: TRUE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 47) It is predicted that, by 2050, over 25 percent of the population in the United States will be 65 years or older. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 48) Remaining solely domestic is an increasingly safe strategy for U.S. companies. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 49) U.S. households are making more and more purchases online. Answer: TRUE Diff: 1 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 50) The trend toward an older society is good news for restaurants. Answer: TRUE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 51) In performing strategic planning and case analysis, relevant SCDE factors for a particular firm need not be quantified to be useful. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking

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52) Florida was the first state to legalize marijuana. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 53) By 2030, the Census Bureau projects that the number of Americans age 65 and older will dramatically decrease. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 54) The trend toward an older America is bad news for furniture producers, hotels, airlines, and home builders. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 55) Political issues and stances impact strategic decisions. Answer: TRUE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 56) Political forecasts can be the most important part of an external audit for firms that depend heavily on government contracts. Answer: TRUE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 57) For firms with large U.S. sales, a strong dollar provides a boost. Answer: TRUE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 58) Florida is one of nine states that has zero state income tax. Answer: TRUE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking

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59) Consumers in the United States now desire sedans rather than automobiles with greater space and utility. Answer: FALSE Diff: 3 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Written and oral communication 60) Competitive intelligence is not corporate espionage. Answer: TRUE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 61) The United States (and the world) is becoming older. Answer: TRUE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 62) The trend toward an older society is a threat for restaurants, hotels, and airlines. Answer: FALSE Diff: 3 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 63) U.S. consumers spent $6.7 billion on legal marijuana in 2016. Answer: TRUE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 64) Wisconsin was the first state to legalize marijuana. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 65) Political, governmental, and legal forces are always threats for both small and large organizations. Answer: FALSE Diff: 3 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking

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66) Define Competitive Intelligence (CI) and list three ways that CI can be gathered. Answer: Competitive Intelligence as formally defined by the Society of Competitive Intelligence Professionals (SCIP), is a systematic and ethical process for gathering and analyzing information about the competition's activities and general business trends to further a business's own goals (SCIP website). Students should also list three of the following: 1) hire top executives from rival firms, 2) reverse engineer rival firms' products, 3) use surveys and interviews of customers, suppliers, and distributors, 4) conduct drive-by and on-site visits to rival firm operations, 5) search online databases, 6) contact government agencies for public information about rival firms, 7) systematically monitor relevant trade publications, magazines, and newspapers. Diff: 2 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Ethical understanding and reasoning 67) What are the five major types of external forces that should be examined as part of an external audit? Give an example of each type of force. Answer: External forces can be divided into five broad categories: 1) economic forces, 2) social, cultural, demographic and natural environment forces, 3) political, governmental and legal forces, 4) technological forces and 5) competitive forces. Examples of each are as follows: 1) level of disposable income, availability of credit, interest rates, value of the dollar in world markets, and foreign countries' economic conditions; 2) immigration and emigration rates, regional changes in tastes and preferences, life expectancy rates, attitudes toward customer service, and social responsibility issues; 3) equal employment laws, unionization trends, antitrust legislation, tariffs, and political conditions in foreign countries; 4) technological advancements that could create new markets, result in a proliferation of new and improved products, change the relative competitive cost positions in an industry, render existing products and services obsolete, and/or create new competitive advantages that are more powerful than existing advantages; and 5) potential moves a competitor could make, changes to the strengths or weaknesses of competitors, and vulnerability of competitors to a firm's alternative strategies. Diff: 3 LO: 3.2: Identify and discuss ten external forces that impact organizations. AACSB: Analytical thinking 68) Explain briefly the SCDE forces. Answer: SCDE is an acronym for social, cultural, demographic, and environment forces that are an important part of a firm's external environment. S...