Strategic Management Chapter 2

Chapter 2—The External Environment: Opportunities, Threats, Industry Competition,
and Competitor Analysis


TRUE/FALSE

1. The health-related concerns in the general environment facing Philip Morris International are part of
the physical segment.

ANS: F PTS: 1 DIF: Medium REF: 36
OBJ: 02-01 TYPE: comprehension
NOT: AACSB: Ethical & Legal understanding | Management: Ethical Responsibilities | Dierdorff &
Rubin: Managing the task environment

2. The external environment facing business stays relatively constant over time.

ANS: F PTS: 1 DIF: Easy REF: 34-35
OBJ: 02-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |
Dierdorff & Rubin: Managing the task environment

3. Demographic, economic, political/legal, sociocultural, technological, global, and physical are the
seven elements comprising the industry environment.

ANS: F PTS: 1 DIF: Hard REF: 38 (Table 2.1)
OBJ: 02-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |
Dierdorff & Rubin: Managing the task environment

4. Firms can directly control the elements of the seven segments of the general environment.

ANS: F PTS: 1 DIF: Easy REF: 37
OBJ: 02-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |
Dierdorff & Rubin: Managing the task environment

5. To successfully deal with today’s external environment and to achieve strategic competitiveness, firms
must be aware and fully understand the different segments of that environment.

ANS: T PTS: 1 DIF: Easy REF: 36
OBJ: 02-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |
Dierdorff & Rubin: Managing the task environment

6. The recent bankruptcy filings by General Motors and Chrysler Corporation illustrate that firms cannot
directly control the general environment’s segments.

ANS: T PTS: 1 DIF: Medium REF: 37
OBJ: 02-02 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |
Dierdorff & Rubin: Managing the task environment

7. The industry environment directly influences the firm and its competitive actions and responses.

, ANS: T PTS: 1 DIF: Easy REF: 37
OBJ: 02-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |
Dierdorff & Rubin: Managing decision-making processes

8. Competitor analysis is focused on the factors and conditions influencing an industry’s profitability
potential.

ANS: F PTS: 1 DIF: Medium REF: 39
OBJ: 02-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |
Dierdorff & Rubin: Managing decision-making processes

9. When firms analyze the external environment, they typically have complete and unambiguous data.

ANS: F PTS: 1 DIF: Medium REF: 39
OBJ: 02-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |
Dierdorff & Rubin: Managing decision-making processes

10. Monitoring involves the development of a forecast of what might happen at a future point in time.

ANS: F PTS: 1 DIF: Easy REF: 40
OBJ: 02-03 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing decision-making processes

11. Scanning involves detecting meaning through early signals of environmental trends.

ANS: F PTS: 1 DIF: Medium REF: 39
OBJ: 02-03 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |
Dierdorff & Rubin: Managing decision-making processes

12. When Philip Morris International studies the cigarette tax policies of various nations, it is engaged in
the forecasting component of the environmental analysis process.

ANS: F PTS: 1 DIF: Hard REF: 40
OBJ: 02-03 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |
Dierdorff & Rubin: Managing decision-making processes

13. The objective of assessing the external environment is to determine the timing and importance of the
effects of environmental changes and trends on the strategic management of the firm.

ANS: T PTS: 1 DIF: Medium REF: 41
OBJ: 02-03 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence |
Dierdorff & Rubin: Managing the task environment

14. The Strategic Focus case example of the premium-priced home builders who discovered the trend
towards desiring smaller homes illustrated the application of the external environmental analysis
process by these builders.