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Exam 2: Analyzing the External Environment of the Firm: Creating Competitive Advantages

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Question 51

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The strategic groups concept is valuable for determining mobility barriers across groups, identifying groups with marginal competitive positions, charting the future directions of firm strategies, and assessing the implications of industry trends for the strategic group as a whole.

A) True
B) False

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Question 52

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Which of the following would be an entry barrier?

A) easy access to raw materials
B) low switching costs
C) large economies of scale
D) low capital requirements

E) A) and D)
F) B) and C)

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Question 53

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When management assumptions, premises, or beliefs are incorrect or when internal inconsistencies among them render the overall theory of the business invalid, the strategy of the firm needs to be updated.

Scenario planning is useful for anticipating major future changes in the external environment.

Only one scenario is considered in a scenario analysis in order to envision possible future outcomes.

In 2014, Audi introduced the Q3 SUV at a base price of only $32,500. And BMW, with its 1-series, is another well-known example. Such cars, priced in the low $30,000s, compete more directly with products from broad-line manufacturers like Ford, General Motors, and Toyota. This suggests that members of a strategic group can overcome _____ barriers and migrate to other groups that they find attractive if they are willing to commit time and resources.

Consider the example of Salemi Industries and the launch of its product, Cell Zone, in 2005. Although it tried to carefully analyze its potential market, it misread the market demand for the product and paid a steep price for its mistake. This is an example of internal forecasting.

The use of the strategic group concept is generally not helpful in charting the future directions of the strategies of a firm.

Supplier power has increased because of the Internet for all of the following reasons except

Buyer power will be greater when

The Nintendo success story in the early 1990s was a result of its ability to manage its relationship with its complementors, such as the licensee rights given to outside firms to develop games using the Nintendo game console.

Strategic groups are helpful in thinking through the implications of each industry trend for the strategic group as a whole.

Referring to the textbook Exhibit 2.7 The World Automobile Industry: Strategic Groups, which strategic group is the largest in terms of breadth of product line?

Steve Jobs, the former chairman of Apple, used intuition and judgment to forecast the future.

Classifying an industry into strategic groups involves judgment. If it is useful as an analytical tool, we must exercise caution in deciding what dimensions to use to map these firms. Dimensions include

Environmental monitoring deals with tracking changes in environmental trends that are often uncovered during the environmental scanning process.

The Internet and digital technologies suppress the bargaining power of buyers by providing them with more information to make buying decisions.

Heightened concern with fitness might be a threat to some companies and an opportunity to others. In the SWOT framework, these are

Corporate retreats do not

The threat of new entrants is high when there are