SEVI 3013H- CH 2 ANALYZING THE
EXTERNAL ENVIRONMENT EXAM
QUESTIONS AND ANSWERS
A supplier groups is powerful when? - Answer-- The suppliers group is dominated by a
few companies
- The suppliers group is not obligated to contend with substitute products for sale to the
industry
- The industry is not an important customer of the supplier
- The suppliers produce is an important input to the buyers business
- The suppliers groups products are differentiated, or it has built up switching costs for
the buyer
- The supplier group poses a credible threat of forward integration
Threat of substitute Products and service - Answer-The threat of limiting the potential
returns of an industry by placing a ceiling on the prices that firms in that industry can
profitably charge without losing too many customers to substitute products
The General Environment - Answer-- Factors external to an industry, and usually
beyond a firm's control, that affect a firm's strategy
- Composed of factors that can have dramatic effects on a firms strategy
What are the 6 segments of the General Environment - Answer-1. Demographic
2. Sociocultural
3. Political/Legal
4. Technological
5. Economic
6. Global
Demographic Segment - Answer-Genetic and observable characteristics of a
population, including the levels and growth age, density, sex, race, ethnicity, education,
geographic region, and income
Sociocultural Segment - Answer-The values, beliefs, and lifestyles of a society
ex: Higher percentage of women in the workforce, dual income families, increase the
number of temporary workers, health, and fitness trend
Political/Legal Segment - Answer-How a society creates and exercises power, including
rules, laws, and taxation policies
Technological Segment - Answer-Innovation and state of knowledge in industrial arts,
engineering, applied sciences, and pure science, and their interaction with society
, Economic Segment - Answer-Characteristics of the economy, including national income
and monetary conditions
Global Segment - Answer-Influences from foreign countries, including foreign market
opportunities, foreign based competition, and expanded capital markets
Digital Economy - Answer-The term digital economy refers to economic transactions
and business operations that are based on digital computing technologies
What are the effects of digital economy? - Answer-- Globalization of business
- Disintermediation of markets
- Reducing the asset intensity of business operations
- Increasing collaboration
- Increasing customer expectations
- Infusion of internet technology into products
- Led to the creation of completely new markets
Data Analytics or " Big Data" - Answer-The process of examining large data sets to
uncover hidden patterns, market trends, and customer preferences
The competitive environment - Industry - Answer-A group of firms that produce similar
goods or services
Competitive environment - Answer-Factors that pertain to an industry and affect a firm's
strategies
Porters Five Force Model of Industry Competition - Answer-- It has been the most
commonly used analytical tool for examining the competitive environment
What are the 5 basic competitive forces in Porters 5 force model? - Answer-1. Threat of
new entrants
2. The bargaining power of buyers
3. The bargaining power of suppliers
4. The threat of substitutes products and services
5. The intensity of rivalry among competitors in an industry
The threat of New Entrants - Answer-The possibility that the profits of established firms
in the industry may eroded by new competitors
What are the 6 main sources of entry barriers - Answer-1. Economies of scale
2. Product Differentiation
3. Capital Requirements
4. Switching Costs
5. Access to Distribution Channels
6. Cost Disadvantages Independent of scale
EXTERNAL ENVIRONMENT EXAM
QUESTIONS AND ANSWERS
A supplier groups is powerful when? - Answer-- The suppliers group is dominated by a
few companies
- The suppliers group is not obligated to contend with substitute products for sale to the
industry
- The industry is not an important customer of the supplier
- The suppliers produce is an important input to the buyers business
- The suppliers groups products are differentiated, or it has built up switching costs for
the buyer
- The supplier group poses a credible threat of forward integration
Threat of substitute Products and service - Answer-The threat of limiting the potential
returns of an industry by placing a ceiling on the prices that firms in that industry can
profitably charge without losing too many customers to substitute products
The General Environment - Answer-- Factors external to an industry, and usually
beyond a firm's control, that affect a firm's strategy
- Composed of factors that can have dramatic effects on a firms strategy
What are the 6 segments of the General Environment - Answer-1. Demographic
2. Sociocultural
3. Political/Legal
4. Technological
5. Economic
6. Global
Demographic Segment - Answer-Genetic and observable characteristics of a
population, including the levels and growth age, density, sex, race, ethnicity, education,
geographic region, and income
Sociocultural Segment - Answer-The values, beliefs, and lifestyles of a society
ex: Higher percentage of women in the workforce, dual income families, increase the
number of temporary workers, health, and fitness trend
Political/Legal Segment - Answer-How a society creates and exercises power, including
rules, laws, and taxation policies
Technological Segment - Answer-Innovation and state of knowledge in industrial arts,
engineering, applied sciences, and pure science, and their interaction with society
, Economic Segment - Answer-Characteristics of the economy, including national income
and monetary conditions
Global Segment - Answer-Influences from foreign countries, including foreign market
opportunities, foreign based competition, and expanded capital markets
Digital Economy - Answer-The term digital economy refers to economic transactions
and business operations that are based on digital computing technologies
What are the effects of digital economy? - Answer-- Globalization of business
- Disintermediation of markets
- Reducing the asset intensity of business operations
- Increasing collaboration
- Increasing customer expectations
- Infusion of internet technology into products
- Led to the creation of completely new markets
Data Analytics or " Big Data" - Answer-The process of examining large data sets to
uncover hidden patterns, market trends, and customer preferences
The competitive environment - Industry - Answer-A group of firms that produce similar
goods or services
Competitive environment - Answer-Factors that pertain to an industry and affect a firm's
strategies
Porters Five Force Model of Industry Competition - Answer-- It has been the most
commonly used analytical tool for examining the competitive environment
What are the 5 basic competitive forces in Porters 5 force model? - Answer-1. Threat of
new entrants
2. The bargaining power of buyers
3. The bargaining power of suppliers
4. The threat of substitutes products and services
5. The intensity of rivalry among competitors in an industry
The threat of New Entrants - Answer-The possibility that the profits of established firms
in the industry may eroded by new competitors
What are the 6 main sources of entry barriers - Answer-1. Economies of scale
2. Product Differentiation
3. Capital Requirements
4. Switching Costs
5. Access to Distribution Channels
6. Cost Disadvantages Independent of scale
