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Strategic Management: A Competitive Advantage Approach, 16e (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) all of the above Answer: C Diff: 2 LO: 3.1: Describe the nature and purpose of an external assessment in formulating strategies. AACSB: Written and oral communication 2) The process of performing an external audit needs to include A) only top level managers, as it is a planning function. B) as many managers and employees as possible. C) primarily front-line supervisors. D) between 15 to 20 managers for it to be valid. E) stockholders and external government agencies. Answer: B Diff: 2 LO: 3.1: Describe the nature and purpose of an external assessment in formulating strategies. AACSB: Written and oral communication 3) 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: Written and oral communication 4) 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: Written and oral communication 1 Copyright © 2017 Pearson Education, Inc.

5) The process of performing an external audit should involve A) key representatives from each stakeholder group. B) as many stakeholders as possible. C) only strategists. D) primarily strategists. E) as many managers and employees as possible. Answer: E Diff: 2 LO: 3.1: Describe the nature and purpose of an external assessment in formulating strategies. AACSB: Written and oral communication 6) 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: Written and oral communication 7) 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: Written and oral communication 8) 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: Written and oral communication 9) 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: Written and oral communication 10) As many managers and employees as possible should be involved in the process of performing an external audit. Answer: TRUE Diff: 1 LO: 3.1: Describe the nature and purpose of an external assessment in formulating strategies. AACSB: Written and oral communication

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11) 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: Written and oral communication 12) 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: Written and oral communication 13) Discuss the process of performing an external audit. Answer: 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. Once information is gathered, it should be assimilated and evaluated. A meeting or series of meetings of managers is needed to collectively identify the most important opportunities and threats facing the firm. A prioritized list of these factors must be obtained. All managers could individually rank the factors identified, from 1 (for the most important opportunity/threat) to 20 (for the least important opportunity/threat) or managers could simply place a checkmark by their most important "top 10 factors." Then, by summing the rankings, or the number of checkmarks, a prioritized list of factors is revealed. Diff: 2 LO: 3.1: Describe the nature and purpose of an external assessment in formulating strategies. AACSB: Written and oral communication 14) The Industrial Organization (I/O) approach to competitive advantage advocates that external factors are ________ internal factors in a firm achieving competitive advantage. A) less important than B) equally important as C) more important than D) more common than E) less common than Answer: C Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication

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15) According to I/O theorists, which of the following contributes LEAST to firm's performance? A) Economies of scale B) Barriers to market entry C) Product differentiation D) Internal resources E) Level of competitiveness Answer: D Diff: 3 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Analytical thinking 16) 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 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 17) It is predicted that the United States will have no racial or ethnic majorities by the year A) 2035. B) 2045. C) 2055. D) 2065. E) 2075. Answer: E Diff: 1 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication

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18) 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 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 19) The world population is expected to grow to an estimated ________ billion in 2054. A) 6 B) 7 C) 8 D) 9 E) 10 Answer: D Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 20) Hawaii, California, and ________ already have no majority race or ethnic group. A) New York B) New Jersey C) New Hampshire D) New Mexico E) all of the above Answer: D Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication

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21) Who are the world's longest-living people? A) Americans B) Mexicans C) Indians D) Filipinos E) Japanese Answer: E Diff: 1 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 22) The historical trend of people moving from ________ has dramatically slowed. A) the Northeast to the Sunbelt B) the West to the Midwest C) the Northeast to the Midwest D) the Sunbelt to the West E) the West to the Northeast Answer: A Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 23) Which state has the highest union membership rate? A) Arkansas B) Colorado C) New Hampshire D) New York E) North Carolina Answer: D Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication

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24) 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 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 25) Changes in which of the following can significantly affect firms? A) Patent laws B) Antitrust legislation C) Tax rates D) Lobbying activities E) All of the above Answer: E Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 26) Many economists say the current rash of trade constraints will make it ________ for global economic growth. A) easier B) impossible C) harder D) more likely E) less time-consuming Answer: C Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication

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27) In recent times, ________ perhaps has instituted the most protectionist measures by raising tariffs on most imports and subsidizing its own exports. A) Russia B) The United States C) The European Union D) India E) Switzerland Answer: A Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 28) In recent times, which of the following has largely refrained from protectionist measures? A) The European Union B) The United States C) India D) Russia E) India and Russia Answer: B Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 29) 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 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication

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30) 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 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 31) Which of the following is NOT a characteristic that describes the most competitive companies in America? A) Divestiture is essential to growth. B) Hire and retain the best employees and managers possible. C) Continually adapt, innovate, improve—especially when the firm is successful. D) Strive to stay cost-competitive on a global basis. E) Whether it's broke or not, fix it. Answer: A Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 32) 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 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Analytical thinking

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33) 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 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 34) 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 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 35) The I/O approach to competitive advantage advocates that internal factors are more important than external factors in a firm achieving competitive advantage. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 36) Economic factors do not have much impact on the attractiveness of strategies. Answer: FALSE Diff: 1 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 37) A low value of the dollar means lower exports and higher imports. Answer: FALSE Diff: 3 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Analytical thinking

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38) 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 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 39) The United States is getting older and less white. Answer: TRUE Diff: 1 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 40) It is predicted that, by 2050, over 20 percent of the population in the United States will be 65 years or older. Answer: TRUE Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 41) 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 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 42) Remaining solely domestic is an increasingly safe strategy for U.S. companies. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication

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43) U.S. households are making more and more purchases online. Answer: TRUE Diff: 1 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 44) By 2075, the United States will have no racial or ethnic majority. Answer: TRUE Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 45) There are now more American households consisting of married couples with children than of people living alone or with unrelated people. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 46) The historical trend of people moving from the Northeast and Midwest to the Sunbelt and West has dramatically increased. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive. AACSB: Written and oral communication 47) By 2050, the Census Bureau projects that the number of Americans age 100 and older will dramatically decrease. Answer: FALSE Diff: 2 LO: 3.2: Identify and discuss 10 external forces that must be examined in formulating strategies: economic, social, cultural, demographic, en...