Strategic Management Practice Test: Evaluating a Company’s External Environment | Practice Test / Quiz / MCQs

1. Collaborative relationships between particular sellers and buyers in an industry can represent a source of strong competitive pressure when

buyers are very quality conscious. virtually all buyers have strong brand attachments and are highly brand loyal.demand for the product is growing rapidly.one or more rival sellers form mutually advantageous partnerships with important or prestigious buyers such that rivals lacking such partnerships are placed at a competitive disadvantage.sellers are racing to add the latest and greatest performance features so as to attract the patronage of important or prestigious buyers.

2. Which one of the following is not a factor in causing supplier bargaining power to be relatively strong?

There are only a few suppliers of the input. The inputs needed from suppliers are in short supply.The input being supplied significantly enhances the quality or performance of the products of industry members.The input being supplied is a commodity.Suppliers are a strong threat to integrate forward into the business of industry members.

3. Which of the following is particularly pertinent in evaluating whether an industry presents a sufficiently attractive business opportunity?

Whether the market leaders enjoy competitive advantages and how hard it is to develop a strongly differentiated productConstructing a strategic group map and assessing the attractiveness of the competitive position of each strategic groupThe industry’s growth potential, whether competition appears destined to become stronger or weaker, and whether the industry's overall profit prospects are above average, average, or below averageWhether there are more than 5 key success factors and more than 5 barriers to entryAn assessment of which firms in the industry have the best and worst competitive strategies, whether the number of strategic groups in the industry is increasing or decreasing, and whether economies of scale and experience curve effects are a key success

4. Competitive jockeying and market maneuvering among industry rivals

is usually an industry’s strongest driving force.is usually one of the two or three weakest competitive forces because of the close familiarity that rivals have for one another’s likely next moves.determines whether the industry’s strategic group map will be static or dynamic.is ever-changing as fresh offensive and defensive moves are initiated and as rivals emphasize first one mix of competitive weapons and tactics and then another.centers around collaborative efforts to overcome the bargaining power of powerful suppliers and powerful buyers.

5. In which one of the following instances are the competitive pressures that industry members experience in their dealings with suppliers not weakened?

When the buying firms purchase in large quantities and thus are important customers of the suppliersWhen the item being supplied is a commodityWhen the items purchased from suppliers are in short supplyWhen the cost of switching from one supplier to another is lowWhen industry members pose a credible threat of backward integration into the business of suppliers

6. Competitive pressures stemming from the threat of entry are weaker when

the nature of the industry entails few scale economies. there are fewer than 20 potential entry candidates and more than 10 firms already in the industry.there are more than 3 entry barriers.incumbent firms have little ability to leverage distributors, dealers, and/or retailers to retain their business.the industry outlook is risky or uncertain.

7. Which one of the following is not a common type of driving force?

Changing societal concerns, attitudes, and lifestylesDiffusion of technical know-how across more companies and more countriesTechnological change and manufacturing process innovationReductions in uncertainty and business riskIncreasing efforts on the part of industry members to collaborate closely with their suppliers

8. Just how strong the competitive pressures are from substitute products depends on

whether the available substitutes are strongly or weakly differentiated and whether buyers make purchases frequently or infrequently.whether the available substitutes are products or services.the speed with which buyer needs and expectations are changing.whether attractively priced substitutes are readily available and the ease with which buyers can switch to substitutes.whether the producers of substitutes have ample budgets for new product R&D.

9. As a rule, the stronger the collective impact of competitive pressures associated with the five competitive forces,

the greater the number of industry key success factors.the fewer companies that can achieve a competitive advantage via anything other than being the industry’s low-cost leader.the stronger are the industry’s driving forces.the larger the number of competitive advantage opportunities for industry members. the lower the combined profitability of industry members.

10. The most powerful of the five competitive forces is usually

the bargaining power and leverage that large customers are able to exercise.the benefits that emerge from close collaboration with suppliers and the competitive pressures that such collaboration creates.the competitive pressures that stem from the ready availability of attractively-priced substitute products.the competitive pressures associated with the potential entry of new competitors.the competitive pressures associated with the market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry.

11. Whether supplier-seller relationships in an industry represent a strong or weak source of competitive pressure is a function of"

whether suppliers can exercise sufficient bargaining power to influence the terms and conditions of supply in their favor and the extent of seller-supplier collaboration in the industry.how aggressively rival industry members are trying to differentiate their products.the number of suppliers that each seller/industry member purchases from on average.whether the prices of the items being furnished by the suppliers are rising or falling.whether the profits of suppliers are relatively high or low.

12. In which of the following instances are industry members not subject to stronger competitive pressures from substitute products?

Substitutes are readily available at competitive prices.Buyer brand loyalty is weak.The costs to buyers of switching over to the substitutes are low.Buyers are dubious about using substitutes.The quality and performance of the substitutes is well matched to what buyers need to meet their requirements.

13. Industry conditions change

because of such powerful driving forces as swings in buyer demand, changing interest rates, ups and downs in the economy, and higher/lower entry barriers.because of newly-emerging industry threats and industry opportunities that alter the composition of the industry's strategic groups.because new industry key success factors emerge.chiefly because of changes in the barriers to entry and the degree of competition from substitute products.because important forces create pressures or incentives for industry participants (competitors, customers, suppliers) to alter their actions.

14. Factors that tend to result in weak rivalry among competing sellers include

rapid growth in buyer demand, high buyer costs to switch brands, and so many industry rivals that any one company’s actions have little impact on rivals’ businesses.low buyer switching costs and low barriers to entry.weakly differentiated products among rival sellers.conditions where outsiders have recently acquired weak competitors and are trying to turn them into major contenders.rivals that are quite diverse in terms of their strategies, objectives, and countries of origin.

15. The bargaining leverage of suppliers is greater when

there are no good substitutes for the items being furnished by the suppliers and the number of suppliers is relatively small.industry members purchase in large quantities and thus are important customers of the suppliers.industry members incur low costs in switching their purchases from one supplier to another.the supplier industry is composed of a large number of relatively small suppliers.there is extensive seller-supplier collaboration.

16. Which of the following is not a relevant consideration in identifying an industry's dominant economic features?

How many strategic groups the industry has and which ones are most profitable and least profitableThe prevalence of vertical integration and the pace of technological change The number and sizes of buyers, the number of rivals, and the pace of product innovationMarket size and growth rate, the geographic scope of competitive rivalry, and demand-supply conditionsThe extent to which economies of scale and learning/experience curve effects are present

17. Whether buyer-seller relationships in an industry represent a strong or weak source of competitive pressure is a function of

how many buyers purchase all of their requirements from a single seller versus how many purchase from several sellers.the number of buyers versus the number of sellers.the speed with which general economic conditions and interest rates are changing.whether industry members are spending more or less on advertising.the extent to which buyers can exercise enough bargaining power to influence the conditions of sale in their favor and whether strategic partnerships between certain industry members can adversely affect other industry members

18. Which of the following factors is not a relevant consideration in determining the strength of buyer bargaining power?

Whether buyers pose a major threat to integrate backward into the product market of sellersWhether winning the business of prestigious customers gives a seller important market exposure and heightens its brand nameWhether collaborative partnerships and alliances between particular sellers and buyers put rivals lacking such collaborative relationships at a competitive disadvantageWhether the seller is a manufacturer or a wholesaler/distributorWhether sellers' products are weakly differentiated, making it easy for buyers to switch to competing brands

19. Which of the following is not an appropriate guideline for developing a strategic group map for a given industry?

The variables chosen as axes for the map should indicate big differences in how rivals have positioned themselves to compete in the marketplace.The variables chosen as axes for the map should be highly correlated.The sizes of the circles on the map should be drawn proportional to the combined sales of the firms in each strategic group. Several maps should be drawn if more than one pair of variables help illuminate differences in the competitive positioning of industry members.The variables chosen as axes for the map can be either quantitative or qualitative.

20. Rivalry among competing sellers grows in intensity when

there are so many industry rivals that the impact of any one company’s actions is spread thinly across all industry members.rivals have highly differentiated products and buyer demand is growing rapidly. rivals’ products/services are sold at widely varying prices and there are only 2-4 rivals.the products/services of rivals are strongly differentiated and buyers have high switching costs.buyer demand is growing slowly and the industry is composed of 6 to 10 competitors that are fairly equal in size and competitive capability.

21. Driving forces analysis helps managers identify whether

the industry is likely to become more or less vertically integrated and why.the driving forces will have a bigger impact on company profitability than competitive forces.competitive advantages are likely to grow or diminish in importance. it will become more or less important to aim the company’s strategy at being the industry’s low-cost producer.the combined impacts of the driving forces will act to increase/decrease market demand, increase/decrease competition, and raise/lower industry profitability in the years ahead.

22. The concept of strategic groups is relevant to industry and competitive analysis because

firms in the same strategic groups are rarely close competitors—a firm’s closest competitors are usually in distant strategic groups.competition grows in intensity as the number and diversity of the strategic groups in an industry increases.strategic group maps help identify each company’s market position and its closest competitors.the profit potential of firms in the same strategic group is usually very similar.competitive pressures tend to be weaker within strategic groups than across strategic groups.

23. Typically, the weakest of the five competitive forces in an industry is/are:

the bargaining power and leverage that suppliers are able to exercise.the threat posed by potential new entrants.the bargaining power and leverage that buyers are able to exercise.None of the above is typically weakest.the competitive pressures that stem from the ready availability of attractively-priced substitute products.

24. A competitive environment where there is weak to moderate rivalry among sellers, high entry barriers, weak competition from substitute products, and little bargaining leverage on the part of both suppliers and customers

makes it hard for industry members to compete successfully unless they can strongly differentiate their products.lacks powerful driving forces.is conducive to industry members earning attractive profits.requires that industry members have low costs in order to be competitively successful.gives each industry competitor the best potential for building sustainable competitive advantage over rival firms.

25. Factors that cause the rivalry among competing sellers to be weak include

low buyer switching costs and rival sellers that are relatively equal is size and capability.slow growth in buyer demand and strongly differentiated products.rapid growth in buyer demand and high buyer switching costs.few industry rivals that any one company’s actions can easily be anticipated and countered by its rivals.low barriers to entry and weakly differentiated products among rival sellers.

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25 Questions

❤ If you liked Fatskills, consider supporting us by checking out The Life Manuals You Never Got.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | What Should We Know? Privacy | Terms |

Without work one finishes nothing. - Ralph Waldo Emerson© 2026 Fatskills.com

All trademarks, logos and brand names are the property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, trademarks and brands does not imply endorsement.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | What Should We Know?
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Without work one finishes nothing. - Ralph Waldo Emerson
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