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

1. Supplier bargaining power is weaker when

suppliers furnish a critical part or component.buying firms are looking for suppliers with good just-in-time supply capabilities.the cost of switching from one supplier to another is high.a few large suppliers are the primary sources of a particular item.good substitute inputs exist or new ones emerge.

2. Which of the following is not generally a driving force" capable of producing fundamental changes in industry and competitive conditions?"

Changes in the long-term industry growth rateIncreasing globalization of the industryUps and downs in the economy and in interest ratesProduct innovation and technological changeNew government regulations or significant changes in government policy toward the industry

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

Coca-Cola as a substitute for PepsiVideo-on-demand services from a cable TV company as a substitute for going to the movies A salad as a substitute for French friesSnowboards as a substitute for snow skisWireless phones as a substitute for wired telephones

4. The competitive pressures from substitute products tend to be stronger when

there are more than 10 sellers of substitute products.demand for the industry's product is not very price sensitive.buyers are relatively comfortable with using substitutes and the costs to buyers of switching over to the substitutes are low.buyers have high psychic costs in severing existing brand relationships and establishing new ones.the quality and performance of the substitutes is well above what buyers need to meet their requirements.

5. Competitive pressures stemming from buyer bargaining power tend to be weaker when

the number of buyers is small, such that each customer’s business tends to be particularly important to a seller.buyer demand is growing slowly or maybe even declining.buyers purchase the item frequently and are well-informed about sellers’ products, prices, and costs.the buyer group consists a few large buyers and the seller group consists of numerous small firms. the costs incurred by buyers in switching to competing brands or to substitute products are relatively high.

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

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

7. In analyzing the strength of competition among rival firms, an important consideration is

the potential for buyers to exercise strong bargaining power.the number of firms pursuing differentiation strategies versus the number pursuing low-cost leadership strategies and focus strategies.the diversity of competitors in terms of visions, strategic intents, objectives, strategies, resources and countries of origin.the extent to which some rivals have more than two competitively valuable competencies or capabilities.whether the industry is characterized by a strong learning/experience curve and whether the industry is composed of many or few strategic groups.

8. With the aid of a strategic group map, one can

identify which competitive forces are strong and which are weak.often learn to what extent industry driving forces and competitive pressures favor some companies or groups and hurt others.readily identify the entry and exit barriers for each strategic group.measure accurately whether across-group rivalry is stronger than within-group rivalry or vice versa.pinpoint precisely which firms are in profitable strategic groups and which are not.

9. The intensity of rivalry among competing sellers does not depend on whether

competitors are diverse in terms of visions, strategic intents, objectives, strategies, resources and countries of origin.strong companies outside the industry have acquired weak firms in the industry and are launching aggressive moves to transform the acquired companies into strong market contenders.one or two rivals have particularly powerful and successful strategies.the industry has more than two strong driving forces and whether the industry has more than 2 strategic groups.industry conditions tempt industry members to use price cuts or other competitive weapons to boost unit sales.

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

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.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.is largely unaffected by whether industry conditions tempt rivals to use price cuts or other competitive weapons to boost unit sales.

11. Which one of the following is not an integral part of driving forces analysis?

Determining whether the driving forces are acting to raise or lower industry profitabilityDetermining whether the driving forces are acting to make competition more or less intenseIdentifying the specific factors causing fundamental changes in industry conditions and/or the industry’s competitive structureDetermining whether the driving forces are acting to strengthen or weaken market demandDetermining whether the driving forces are acting to cause one or more industry rivals to shift to a different strategic group

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

how aggressively rival industry members are trying to differentiate their products.whether the prices of the items being furnished by the suppliers are rising or falling.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.the number of suppliers that each seller/industry member purchases from on average.whether the profits of suppliers are relatively high or low.

13. Having good competitive intelligence about rivals’ strategies and moves to improve their situation is important because

it helps a company to anticipate what moves rivals are likely to make next and to craft its own strategic moves with some confidence about what market maneuvers to expect from its rivals.it identifies who the industry's current market share leaders are.it enables more accurate predictions about how long it will take a particular rival to copy most of what the strategy leader is doing.good scouting reports help identify which rival is in which strategic group.it enables company managers to determine which rival has the worst strategy and how to avoid making the same strategy mistakes.

14. The bargaining leverage of suppliers is greater when

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.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.

15. When one or more industry members have unusually effective and mutually advantageous partnerships with their suppliers,

there is a strong likelihood such partnerships will put increased competitive pressure on those industry members who lack productive collaborative relationships with their suppliers.it is rare for such partnerships to have much competitive impact on those industry members not having such partnerships.there is a high likelihood of such partnerships reducing competitive pressures on all industry members, provided technological change in the suppliers' business is rapid and the item being supplied is a commodity.one unfortunate outcome is that it tends to give the supply partners much enhanced bargaining power in their dealings with these industry members. the usual result is to reduce competitive pressures on all industry members, provided the costs of the items furnished by supply chain partners amount to 50% or more of total cost.

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

the stronger are the industry’s driving 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 larger the number of competitive advantage opportunities for industry members. the lower the combined profitability of industry members.

17. 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 buyer demand is growing rapidlyWhen 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 buyers are relatively well informed about sellers' products, prices, and costs

18. The state of competition in an industry is a function of

All of these.competitive pressures associated with the bargaining power of suppliers and customers.the competitive pressures associated with the market maneuvering and jockeying for buyer patronage that goes on among rival firms in the industry.competitive pressures coming from the attempts of companies in other industries attempting to win buyers over to their substitute products.competitive pressures associated with the threat of new entrants into the marketplace.

19. Which of the following is not one of the five typical sources of competitive pressures?

The market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industryThe bargaining power of suppliers and seller-supplier collaborationThe threat of new entrants into the marketThe attempts of companies in other industries to win customers over to their own substitute productsThe power and influence of industry driving forces

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

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 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. The variables chosen as axes for the map can be either quantitative or qualitative.The variables chosen as axes for the map should indicate big differences in how rivals have positioned themselves to compete in the marketplace.

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

Whether customers are relatively well informed about sellers' products, prices, and costsWhether certain customers offer sellers important market exposure or prestigeWhether 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 buyer needs and expectations are changing rapidly or slowlyWhether sellers' products are highly differentiated, making it troublesome or costly for buyers to switch to competing brands or to substitute products

22. A strategic group

consists of those firms whose market shares are about the same size.is a cluster of industry rivals that have similar competitive approaches and market positions.consists of those industry members that are growing at about the same rate and have similar product line breadth.is made up of those firms having comparable profit margins. includes all rival firms having comparable profitability.

23. Which one of the following pairs of variables is least likely to be useful in drawing a strategic group map?

Price/quality range and whether the company’s product appeals to many or few types of buyersBrand name reputation and distribution channel emphasisProduct quality and product line breadthLevel of profitability and size of market shareGeographic coverage and degree of vertical integration

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

there are fewer than 20 potential entry candidates and more than 10 firms already in the industry.the nature of the industry entails few scale economies. 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.

25. Which one of the following does not intensify the competitive pressures associated with the threat of entry?

When incumbent firms are unable or unwilling to launch competitive initiatives to strongly contest the entry of newcomersWhen industry members are struggling to earn good profitsWhen newcomers can expect to earn attractive profits and a number of outsiders have the expertise and resources to hurdle whatever entry barriers existWhen existing industry members are looking to expand their market reach by entering product segments or geographic areas where they currently do not have a presenceWhen entry barriers are relatively low and buyer demand for the product is growing fairly rapidly

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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 |

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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
© 2026 Fatskills.com