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

1. 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 rateNew government regulations or significant changes in government policy toward the industryUps and downs in the economy and in interest ratesIncreasing globalization of the industryProduct innovation and technological change

2. One of the things that can be gleaned from a strategic group map of industry rivals is

whether profit prospects vary among strategic groups due to strengths and weaknesses in their respective market positions on the map (perhaps because competitive pressures are acting to favor some strategic groups and to disadvantage other groups).which strategic groups are currently viewed as the most prestigious by customers and which companies are being shunned by customers because of high prices and relatively low product quality.which strategic groups have the highest profit margins and the highest customer switching costs.which rivals have been in business longer and thus have greater access to experience curve effects.which rivals have newer manufacturing facilities.

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

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

4. In mapping strategic groups

the primary objective is to determine which strategic groups are profitable and which are not. it is important to use price as the variable for the vertical axis.it is important for the variables used as axes to be highly correlated.one strategic variable and one financial variable should be used as axes for the map.the best variables to use as axes for the map are those that differentiate how rivals have positioned themselves in the marketplace.

5. 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 rateEntry or exit of major firms, product innovation, and marketing innovationChanges in economies of scale and experience curve effects brought on by changes in manufacturing technology and new Internet capabilities Growing 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 collaboration

6. Which of the following are most unlikely to qualify as driving forces?

Mounting competition from substitutes and increasing efforts to collaborate with suppliers via strategic alliancesIncreasing globalization of the industry and product innovationChanges in the long-term industry growth rate, the entry or exit of major firms, and changes in cost and efficiencyMarketing innovations and changes in who buys the industry's product and how they use itNew Internet technology applications, new government regulations, and significant changes in government policy toward the industry

7. Evaluating whether an industry’s environment presents a company with a sufficiently attractive business opportunity involves

using value chain analysis to determine the relative cost positions of rival firms and to learn who the industry's low-cost producer is.constructing a strategic group map and assessing the attractiveness of the competitive position of each strategic group to determine the overall attractiveness of all the strategic groups.sizing up overall industry and competitive conditions to determine whether the industry's overall profit prospects are above average, average, or below average.determining the overall strength of the five competitive forces.determining which firms in the industry have a competitive advantage and how they got their advantage.

8. Good competitive intelligence about the strategies and competitive strengths and weaknesses of rival companies helps management determine

which competitor has the best strategy and which competitors have flawed or weak strategies.All of these.which rivals are likely to rank among the industry leaders on the road ahead. which rivals are poised to gain market share and which seem destined to lose market share. which rivals are likely to initiate what kinds of fresh strategic moves and why.

9. 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.competitive pressures tend to be weaker within strategic groups than across strategic groups.the profit potential of firms in the same strategic group is usually very similar.

10. In seeking to predict the next moves of close or key rivals, it is useful to consider such questions as:

All of these.Which rivals badly need to increase their unit sales and market share and what new offensive initiatives are they likely to employ?Which rivals are likely to enter new geographic markets or expand their product offerings (so as to enter new market segments where they currently do not have a presence)? Which rivals are poised to gain market share and which seem destined to lose market share? Which rivals are good candidates to be acquired?

11. Supplier bargaining power is weaker when

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

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

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

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

Whether there are more than 5 key success factors and more than 5 barriers to entryWhether the market leaders enjoy competitive advantages and how hard it is to develop a strongly differentiated productAn 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 The 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 averageConstructing a strategic group map and assessing the attractiveness of the competitive position of each strategic group

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

the number of buyers is small or when a customer is particularly important to a seller.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.their costs to switch to competing brands or to substitute products are relatively high.they buy the product infrequently or in small quantities and are not particularly well-informed about sellers’ products, prices, and costs.

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

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

16. A strategic group

is made up of those firms having comparable profit margins. includes all rival firms having comparable profitability.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.consists of those firms whose market shares are about the same size.

17. 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 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 certain customers offer sellers important market exposure or prestigeWhether buyer needs and expectations are changing rapidly or slowly

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

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

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

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

20. Strategic group mapping is a technique for displaying

the different market or competitive positions that rival firms occupy in an industry and identifying each rival’s closest competitors.which companies have the biggest market share and who the industry leader really is.how many rivals are pursuing each type of strategy.which companies have the highest degrees of brand loyalty.which companies have failing business models.

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

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

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

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

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

Whether winning the business of prestigious customers gives a seller important market exposure and heightens its brand nameWhether buyers pose a major threat to integrate backward into the product market of sellersWhether 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

24. Which of the following is not among the factors that affect whether competitive rivalry among participating firms is strong, moderate, or weak?

Whether demand for the industry's product is growing rapidly or slowlyThe degree to which rivals are satisfied with their current market position Whether industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit sales and whether one or two rivals have particularly powerful strategiesWhether industry driving forces are strong or weakWhether the products of rival sellers are strongly or weakly differentiated

25. Which of the following is not a major question to ask in thinking strategically about industry and competitive conditions in a given industry?

Does the outlook for the industry present the company with sufficiently attractive prospects for profitability?What are the key factors for future competitive success?How many companies in the industry have good track records for revenue growth and profitability? What strategic moves are rivals likely to make next?What forces are driving changes in the industry, and what impact will these changes have on competitive intensity and industry profitability?

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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?
Privacy | Terms |

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