Chapter 3-Strategic Management

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Industry analysis is also referred to as external strategic management audit.
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True
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An external audit focuses on identifying and evaluating trends and events within the control of management.
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False
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The aim of an external audit is to develop an exhaustive list of every possible factor that could influence the business.
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False
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External audits attempt to identify key variables that offer actionable responses.
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True
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Five major categories of external variables are: 1) economic forces, 2) social, cultural, demographic, and natural environment forces, 3) political, governmental, and legal forces, 4) technological forces and 5) demographic forces.
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True
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As many managers and employees as possible should be involved in the process of performing an external audit.
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True
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To perform an external audit, a company first must gather competitive intelligence and information about social, cultural, demographic, environmental, economic, political, legal, governmental, and technological trends.
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True
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Freund argues that key external factors must not be hierarchical.
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False
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The I/O approach to competitive advantage advocates that internal factors are more important than external factors in a firm achieving competitive advantage.
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False
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Much of Europe lingers in a recession.
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True
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Economic factors do not have much impact on the attractiveness of strategies.
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False
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An increase in interest rates is directly related to an increase in discretionary income and an increase in the demand for discretionary goods.
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False
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Motor vehicle firms in the United States are vulnerable when the value of the dollar falls against the yen and euro.
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False
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A low value of the dollar means lower exports and higher imports.
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False
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A low value of the dollar benefits the U.S. economy in many ways.
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True
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The United States is getting older and less white.
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True
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It is predicted that, by 2025, over 18% of the population in the United States will be 65 years or older.
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True
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Remaining solely domestic is an increasingly safer strategy for U.S. companies.
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False
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U.S. households are making more and more purchases online.
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True
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By 2075, the United States will have no racial or ethnic majority.
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True
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There are now more American households consisting of married couples with children than of people living alone or with unrelated people.
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False
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The historical trend of people moving from the Northeast and Midwest to the Sunbelt and West has dramatically increased.
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False
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By 2050, the Census Bureau projects that the number of Americans age 100 and older will dramatically decrease.
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False
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The trend toward an older America is bad news for restaurants, hotels, airlines and home builders.
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False
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Political issues and stances do matter for business, especially in today’s world of instant tweeting and e-mailing.
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True
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In response to the so-called Obamacare legislation, many U.S. businesses are transitioning to having a larger percentage of their workforce being comprised of full-time employees rather than part-time workers.
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False
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Political forecasts can be the most important part of an external audit for firms that depend heavily on government contracts.
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True
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In the face of a deepening global recession, countries worldwide are resorting to protectionism to safeguard their own industries.
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True
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India is increasing tariffs on foreign steel.
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True
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The United States has been more active than other nations in protectionist measures and has engaged in many “Buy American” policies.
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False
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The Internet is changing the very nature of many industries by altering product life cycles and changing the historical trade-off between production standardization and flexibility.
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True
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In practice, critical technology decisions are too often delegated to lower organizational levels or are made without an understanding of their strategic implications.
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True
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Walgreens and CVS pharmacies are located generally across the street from each other and battle each other every day on price and customer service.
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True
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A characteristic that describes the most competitive companies is adopting the adage, “whether it’s broke or not, fix it;” in other words, continually strive to improve everything about the firm.
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True
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The size of U.S. labor unions has increased sharply in the last decade.
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False
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Corporate intelligence can be defined as 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.
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False
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Major competitors’ weaknesses can represent internal opportunities.
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False
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Major competitors’ strengths may represent key threats.
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True
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Hiring top executives from rival firms is a way companies obtain competitive intelligence.
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True
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An effective CI program allows all areas of a firm to access consistent and verifiable information in making decisions.
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True
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Competitive intelligence is not considered corporate espionage because 95 percent of the information a company needs to make strategic decisions is available and accessible to the public.
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True
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Running a competitive intelligence program requires lots of people, computers, and other resources.
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False
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Intelligence gathering is an unethical business practice.
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False
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Market commonality is the extent to which the type and amount of a firm’s internal resources are comparable to a rival.
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False
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According to Michael Porter, five competitive forces create vital opportunities and threats to organizations: 1) rivalry among competing firms, 2) potential entry of new competitors, 3) potential development of substitute products, 4) bargaining power of suppliers, and 5) bargaining power of consumers.
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True
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Wisconsin recently passed a law eliminating most collective-bargaining rights for the state’s public-employee unions.
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True
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Bargaining power of consumers is usually the most powerful of Porter’s five competitive forces.
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False
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Significant barriers to entry are not always sufficient to keep some new firms from entering industries with higher-quality products, lower prices, and substantial marketing resources.
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True
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Laser eye surgery would be considered a substitute product for eyeglasses and contact lenses.
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True
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A forward integration strategy is used by firms to gain control or ownership of suppliers.
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False
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The bargaining power of consumers can be the most important force impacting competitive advantage.
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True
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Forecasts are educated assumptions about future trends and events.
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True
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Qualitative forecasts are most appropriate when historical data are available and when the relationships among key variables are expected to remain the same in the future.
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False
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Quantitative forecasts become less accurate as historical relationships become less stable.
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True
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Linear regression is based on the assumption that the future will be different from the past.
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False
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Assumptions have no place in planning.
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False
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Without reasonable assumptions, the strategy-formulation process could not proceed effectively.
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True
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While forecasts might not be perfect, they are never wildly inaccurate.
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False
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Organizations never develop their own projections.
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False
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Wild guesses should never be part of the planning process.
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True
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A total weighted score of 1.0 for an EFE Matrix indicates that the firm is responding in an outstanding way to existing opportunities and threats in its industry.
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False
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In an EFE Matrix, opportunities often receive higher weights than threats, but threats too can receive high weights if they are especially severe or threatening.
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True
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Regardless of the number of key opportunities and threats included in an External Factor Evaluation Matrix, the highest possible total weighted score for an organization is 4.0, and the lowest possible total weighted score is 0.0.
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False
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A Competitive Profile Matrix allows strategists to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information.
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False
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The weights and total weighted scores in both a Competitive Profile Matrix and an EFE Matrix have the same meaning.
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True
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The critical success factors in a Competitive Profile Matrix and EFE Matrix include both internal and external issues.
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False
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________ is NOT part of an external audit. A) Analyzing competitors B) Analyzing financial ratios C) Analyzing available technologies D) Studying the political environment E) Analyzing social, cultural, demographic and natural environment forces
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B) Analyzing financial ratios
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Identifying and evaluating key social, political, economic, technological and competitive trends and events comprise A) developing an effective mission statement. B) conducting an internal audit. C) performing an external audit. D) formulating strategy. E) implementing strategy.
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C) performing an external audit.
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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.
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B) as many managers and employees as possible.
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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
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C) gather competitive intelligence and information about external trends.
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Freund emphasizes that key external factors should be all of these EXCEPT A) important to achieving long-term and annual objectives. B) measurable. C) relatively few in number. D) applicable to all competing firms. E) hierarchical in the sense that some will pertain to the overall company while others will be more narrowly focused.
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C) relatively few in number.
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The 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
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C) more important than
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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
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D) Internal resources
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The lingering high underemployment rate in the U.S. is an example of a(n) ________ force affecting business. A) social B) economic C) cultural D) technological E) historical
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B) economic
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What happens when interest rates rise? A) Discretionary income increases. B) The demand for discretionary goods increases. C) Discretionary income is unchanged. D) The demand for discretionary goods decreases. E) Discretionary income increases and the demand for discretionary goods decreases.
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D) The demand for discretionary goods decreases.
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What effect do trends in the dollar’s value have on companies in different industries and in different locations? A) Significant and equal B) Marginal and equal C) Significant and unequal D) Insignificant and unequal E) No significant impact
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C) Significant and unequal
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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.
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D) They are more expensive.
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It is predicted that the United States will have how many racial or ethnic majorities by the year 2075? A) None B) One C) Two D) Three E) Five
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A) None
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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.
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C) getting older and less white.
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The world population is expected to grow to an estimated ________ billion in 2054. A) 6 B) 7 C) 8 D) 9 E) 10
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D) 9
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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
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D) New Mexico
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Who are the world’s longest-living people? A) Americans B) Mexicans C) Indians D) Filipinos E) Japanese
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E) Japanese
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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
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A) the Northeast to the Sunbelt
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According to the U.S. Bureau of Labor Statistics, which of the following is TRUE? A) The percent of wage and salary workers who were members of a union in the USA increased from 2010 to 2011. B) Workers in education, training and library occupations had the highest unionization rate. C) Black workers were less likely to be union members than were white, Asian, or Hispanic workers. D) Private sector workers had a union membership rate more than five times higher that of public-sector workers. E) Among states, North Carolina had the highest union membership rate.
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B) Workers in education, training and library occupations had the highest unionization rate.
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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
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B) Political
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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
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E) All of the above
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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
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C) harder
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________ perhaps has instituted the most protectionist measures in recent months by raising tariffs on most imports and subsidizing its own exports. A) Russia B) The United States C) The EU D) India E) Switzerland
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A) Russia
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Which of the following has largely refrained from protectionist measures? A) the EU B) the U.S.A. C) India D) Russia E) All of the above
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B) the U.S.A.
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All of the following are political, governmental, and legal variables that can represent key opportunities or threats to organizations EXCEPT A) special tariffs. B) environmental protection laws. C) world oil, currency, and labor markets. D) legislation on equal employment. E) population changes by race, age, sex, and level of affluence.
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E) population changes by race, age, sex, and level of affluence.
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Not all sectors of the economy are equally affected by technological developments; the ________ industry is much more volatile than the ________ industry. A) textile; communications B) pharmaceutical; forestry C) metals; electronics D) forestry; communications E) textile; pharmaceutical
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B) pharmaceutical; forestry
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Which of the following sectors of the economy would be most impacted by technological developments? A) Forestry B) Aeronautics C) Textiles D) Metals E) Cloth
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B) Aeronautics
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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.
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C) strategy formulation.
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Competition in virtually all industries is A) nonexistent. B) intense. C) never cutthroat. D) easily avoidable. E) insignificant.
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B) intense.
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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.
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A) Divestiture is essential to growth.
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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.
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C) competitive intelligence.
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________ is NOT a basic mission of a competitive intelligence program. A) Providing a general understanding of an industry B) Providing a general understanding of a company’s competitors C) Identifying industry executives who could be hired by the firm D) Identifying areas in which competitors are vulnerable and assessing the impact strategic actions would have on competitors E) Identifying potential moves a competitor might make that would endanger a firm’s position in the market
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C) Identifying industry executives who could be hired by the firm
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Which statement about business intelligence is accurate? A) Intelligence gathering is an unethical business practice. B) Running an intelligence program requires many people. C) Running an intelligence program requires many computers and other resources. D) Collecting intelligence about competitors violates antitrust laws. E) Business intelligence is not equal to espionage.
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E) Business intelligence is not equal to espionage.
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The responsibilities of a director of competitive analysis include all of the following EXCEPT A) researching special issues. B) disseminating information on a timely basis. C) recognizing what information is important and who needs to know. D) conducting corporate espionage. E) analyzing data.
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D) conducting corporate espionage.
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Market commonality can be defined as A) the number and significance of markets that a firm competes in with rivals. B) the number and significance of points in common a firm has with its rivals. C) the extent to which the type of a firm’s internal resources are comparable to a rival. D) the extent to which the amount of a firm’s internal resources are comparable to a rival. E) none of the above
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A) the number and significance of markets that a firm competes in with rivals.
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Intensity of competition ________ in lower-return industries. A) is lowest B) is nonexistent C) is highest D) is not important E) fluctuates
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C) is highest
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What is NOT one of Michael Porter’s five competitive forces? A) New entrants B) Rivalry among existing firms C) Bargaining power of unions D) Bargaining power of suppliers E) Bargaining power of buyers
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C) bargaining power of unions
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According to Porter, what is usually the most powerful of the five competitive forces? A) Potential development of substitute products B) Bargaining power of suppliers C) Bargaining power of consumers D) Rivalry among competing firms E) Potential entry of new competitors
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D) Rivalry among competing firms
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Whenever new firms can easily enter a particular industry, the intensity of competitiveness among firms tends to A) stay the same. B) increase. C) decrease. D) neutralize. E) become irrelevant.
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B) increase.
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If suppliers are unreliable or too costly, which of these strategies may be appropriate? A) Horizontal integration B) Backward integration C) Market penetration D) Forward integration E) Concentric diversification
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B) Backward integration
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What level of bargaining power do consumers have when the products being purchased are standard or undifferentiated? A) Marginal B) Low C) High D) Negative E) Negligible
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C) High
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A company website ________ information about a firm. A) is a good place to start to find B) is not a reliable source of C) is only acceptable as a last resort for D) should not be used as the first place to look for E) is a waste of time when searching for
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A) is a good place to start to find
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What are educated assumptions about future trends and events called? A) Wild guesses B) Forecasts C) Facts D) Statistics E) Premonitions
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B) Forecasts
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Without assumptions, planning would be A) impossible. B) easier. C) difficult. D) inexpensive. E) intuitive.
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A) impossible.
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Unpublished sources of external strategic information include all of the following EXCEPT A) abstracts. B) customer surveys. C) market research. D) speeches at professional and shareholders’ meetings. E) conversations with stakeholders.
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A) abstracts.
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Which of the following is NOT a published source of external strategic information? A) periodicals B) television programs C) journals D) reports E) directories
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B) television programs
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Standard and Poor’s Industry Surveys include all of the following sections EXCEPT A) Historic Environment. B) Industry Trends. C) How to Analyze a Company. D) Glossary of Industry Terms. E) Comparative Company Financial Analysis.
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A) Historic Environment.
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A total weighted score of ________ in an EFE Matrix indicates that the firm’s strategies are NOT capitalizing on opportunities or avoiding external threats. A) 0.0 B) 1.0 C) 2.5 D) 3.3 E) 4.0
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B) 1.0
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What is the first step in designing an EFE Matrix? A) Identifying key external factors in the industry B) Summing the weighted score for each competitor C) Calculating the sales of each competitor D) Drawing the horizontal and vertical lines for the matrix E) Determining four competitors
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A) Identifying key external factors in the industry
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What is the range for a firm’s total weighted score in an External Factor Evaluation Matrix? A) 0 to 5 B) 0 to 4 C) 1 to 5 D) 1 to 4 E) 0 to 10
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D) 1 to 4
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One difference between CPM and EFE is that A) CPM includes both internal and external issues. B) the weights and total weighted scores have different meanings. C) CPM ratings range from 1 to 10. D) CPM is performed only for the company, whereas EFE is performed for both the company and its competitors. E) CPM is only used in small firms.
answer

A) CPM includes both internal and external issues.

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