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Strategic Management Practice Test: Evaluating a Company’s External Environment

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Strategic Management Practice Test: Evaluating a Company’s External Environment

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25 Questions

1. In which of the following circumstances are competitive pressures associated with the bargaining power of buyers not relatively strong?

When buyers pose a major threat to integrate backward into the product market of sellersWhen sellers' products are weakly differentiated, making it easy for buyers to switch to competing brandsWhen buyers have considerable discretion over whether and when they purchase the productWhen buyer demand is growing rapidlyWhen buyers are relatively well informed about sellers' products, prices, and costs

2. Which of the following is most likely to qualify as a driving force?

Wildly successful introduction of innovative new products by one or more industry rivals that force other rivals to respond quickly or lose a major share of their customers to the innovating rival(s)An increase in the prices of substitute productsDecisions by one or more outsiders not to attempt to enter the industryIncreases in price-cutting by rival sellers and the launch of major new advertising campaigns by one or more rivalsDecisions on the part the industry’s three biggest competitors not to pursue a strategy of striving to be the industry’s low-cost leader

3. The competitive force of rival firms' jockeying for better market positions, higher sales and market shares, and competitive advantage

is largely unaffected by whether industry conditions tempt rivals to use price cuts or other competitive weapons to boost unit sales.is typically a weaker competitive force than is the threat of entry of new rivals.is stronger when firms strive to be low-cost producers than when they use differentiation and focus strategies.tends to intensify when strong companies outside the industry acquire weak firms in the industry and launch aggressive, well-funded moves to transform the acquired companies into strong market contenders. is weaker when more firms have weakly differentiated products, buyer demand is growing slowly, and buyers have moderate switching costs.

4. Which of the following is not a factor to consider in identifying an industry's dominant economic features?

The pace of technological change, scale economies and experience curve effects, and product innovationMarket size and growth rateStrength of driving forces and competitive forcesWhether the products or services of rival firms are becoming more or less differentiatedThe extent of backward and forward integration and buyer needs and requirements

5. Driving forces analysis

identifies which strategic group is the most powerful.helps managers identify which industry member is likely to become (or remain) the industry leader and why.helps managers identify which key success factors are most likely to help their company gain a competitive advantage.involves identifying the driving forces, assessing whether their impact will make the industry more or less attractive, and determining what strategy changes a company may need to make to prepare for the impacts of the driving forces.helps managers identify which of the five competitive forces will be the strongest driver of industry change.

6. The key success factors in an industry

are a function of such considerations as how many firms are in the industry, how many have market shares above 5%, and whether the business models being used are similar or diverse.are those competitive aspects that most affect industry members' abilities to prosper in the marketplacespecific strategy elements, product attributes, competencies, competitive capabilities, and market achievements that spell the difference between being a strong competitor and a weak competitor.depend on how many rivals are trying to move from one strategic group to another.hinge on how many different strategic groups the industry has.are determined by the industry's driving forces.

7. Which of the following factors is not a relevant consideration in judging whether buyer bargaining power is relatively strong or relatively weak?

Whether sellers pose little threat of forward integration into the product market of their customers and whether buyers pose a major threat to integrate backward into the product market of sellers Whether certain customers offer sellers important market exposure or prestigeWhether customers are relatively well informed about sellers' products, prices, and costsWhether sellers' products are highly differentiated, making it troublesome or costly for buyers to switch to competing brands or to substitute productsWhether buyer needs and expectations are changing rapidly or slowly

8. Whether buyer bargaining power poses a strong or weak source of competitive pressure on industry members depends in part on

how many buyers are engaged in collaborative partnerships with sellers.whether the overall quality of the items being furnished by industry members is rising or falling.whether most buyers possess roughly equal or varying degrees of bargaining power and leverage.whether entry barriers are high or low and the size of the pool of likely entry candidates.whether demand-supply conditions represent a buyer’s market or a seller’s market.

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

the larger the number of competitive advantage opportunities for industry members. the lower the combined profitability of industry members.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 greater the number of industry key success factors.

10. The rivalry among competing sellers tends to be less intense when

industry rivals are not particularly aggressive or active in making fresh moves to improve their market standing and business performance.industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit sales.rival sellers have weakly differentiated products. buyer demand is weak and many sellers have excess capacity and/or inventory.rivals have diverse strategies and objectives and are located in different countries.

11. The nature and strength of the competitive forces that prevail in an industry are generally a joint product of

All of these.the pressures induced by the market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry.competitive pressures stemming from the bargaining power of both suppliers and buyers.the threat that firms outside the industry will decide to enter the market.the attempts of companies in other industries to win buyers over to their own substitute products.

12. In identifying an industry's key success factors, strategists should

try to single out all factors which play a major role in shaping whether buyer demand grows rapidly or slowly.consider what it will take to overtake the company with the industry's overall best strategy.consider on what basis customers choose between competing brands, what resources and competitive capabilities firms need to be competitively successful, and what shortcomings are almost certain to put a company at a significant competitive disadvantage.focus their attention on what it will take to capitalize on impacts of the industry’s driving forces.consider whether the number of strategic groups is increasing or decreasing and whether the five competitive forces are powerful or relatively weak.

13. The payoff of good scouting reports on rivals is improved ability to

figure out how many key success factors a rival has.anticipate what moves rivals are likely to make next, thereby providing a valuable assist in outmaneuvering them in the marketplace.determine whether a rival is gaining or losing market share.determine whether a rival has the best strategy and is the industry leader.determine which rivals are in the best strategic group.

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

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

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

Technological change and manufacturing process innovationIncreasing efforts on the part of industry members to collaborate closely with their suppliersReductions in uncertainty and business riskDiffusion of technical know-how across more companies and more countriesChanging societal concerns, attitudes, and lifestyles

16. In analyzing driving forces, the strategist's role is to

forecast fluctuations in product demand and how buyer needs will most likely change.determine who is likely to exit the industry and what changes can be expected in the industry's strategic group map.evaluate what stage of the life cycle the industry is in and when it is likely to move to the next stage.identify the driving forces and evaluate their impact on (1) demand for the industry’s product, (2) the intensity of competition, and (3) industry profitability.predict future marketing innovations and how fast the industry is likely to globalize.

17. Driving forces analysis helps managers identify whether

competitive advantages are likely to grow or diminish in importance. 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.it will become more or less important to aim the company’s strategy at being the industry’s low-cost producer.the driving forces will have a bigger impact on company profitability than competitive forces.the industry is likely to become more or less vertically integrated and why.

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

buyers are very quality conscious. sellers are racing to add the latest and greatest performance features so as to attract the patronage of important or prestigious buyers.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.demand for the product is growing rapidly.virtually all buyers have strong brand attachments and are highly brand loyal.

19. The bargaining leverage of suppliers is greater when

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

20. Buyers are in position to exert strong bargaining power in dealing with sellers when

a particular seller’s product delivers quality or performance that is very important to the buyer and is not matched by other brands.buyer demand is growing rapidly.they buy the product infrequently or in small quantities and are not particularly well-informed about sellers’ products, prices, and costs.their costs to switch to competing brands or to substitute products are relatively high.the number of buyers is small or when a customer is particularly important to a seller.

21. A company's macroenvironment" refers to"

general economic conditions plus the factors driving change in the markets where a company operates.the competitive market environment that exists between a company and its competitors.all the relevant forces and factors outside a company's boundariesgeneral economic conditions, population demographics, societal values and lifestyles, technological factors, governmental legislation and regulation, and closer to home, the industry and competitive arena in which it operates.the industry and competitive arena in which the company operates.the dominant economic features of a company's industry.

22. In which one of the following instances is rivalry among competing sellers not more intense?

When the products of rivals are weakly differentiated, buyer switching costs are low, and market demand is growing slowlyWhen competitors are fairly equal in size and capabilityWhen certain competitors are dissatisfied with their market position and make moves to bolster their standingWhen there are vast numbers of small rivals so the impact of any one company’s actions is spread thinly across all industry membersWhen strong companies outside the industry acquire weak firms in the industry and launch aggressive moves to transform their newly-acquired competitors into stronger market contenders

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

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.the bargaining power and leverage that large customers are able to exercise.the competitive pressures that stem from the ready availability of attractively-priced substitute products.the benefits that emerge from close collaboration with suppliers and the competitive pressures that such collaboration creates.

24. Which of the following is not a good example of a substitute product that triggers stronger competitive pressures?

A salad as a substitute for French friesWireless phones as a substitute for wired telephonesSnowboards as a substitute for snow skisCoca-Cola as a substitute for PepsiVideo-on-demand services from a cable TV company as a substitute for going to the movies

25. Which of the following do not qualify as potential driving forces capable of inducing fundamental changes in industry and competitive conditions?

Changes in who buys the product and how they use it and changes in the long-term industry growth rateGrowing buyer preferences for differentiated products instead of mostly standardized or identical productsIncreases in the economic power and bargaining leverage of customers and suppliers, growing supplier-seller collaboration, and growing buyer-seller collaborationChanges in economies of scale and experience curve effects brought on by changes in manufacturing technology and new Internet capabilities Entry or exit of major firms, product innovation, and marketing innovation

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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 | OSHA Basics Quiz | 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 | OSHA Basics Quiz | What Should We Know?
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Without work one finishes nothing. - Ralph Waldo Emerson
© 2026 Fatskills.com