Tb03

CHAPTER 3: ENVIRONMENTAL FORCES

Test Correlation Table Question Types/Level of Difficulty

LEARNING OBJECTIVES Easy Moderate Difficult

1. Describe how economic and cultural factors influence organizations.

TF 2, 4, 6, 9, 17 1, 7, 8, 10, 12, 14, 15, 16

3, 5, 11, 13

MC 2, 3, 6, 12, 13, 18, 21, 22, 30,

31, 38, 39

4, 7, 10, 15, 19, 23, 24, 25, 26, 28, 29, 33,

35, 36, 37

1, 5, 8, 9, 11, 14, 16, 17, 20, 27, 32, 34, 40,

41

ES — — 1, 2

2. Identify the five competitive forces that affect organizations in an industry.

TF 20, 21, 22, 23, 24

18, 19 —

MC 42, 49, 52, 60 45, 46, 47, 50, 53, 55, 57, 59

43, 44, 48, 51, 54, 56, 58, 61

ES — 4 3

3. Describe the principal political and legal strategies used by managers to cope with changes in the environment.

TF 25, 30, 32 26, 28, 31 27, 29

MC 66, 72, 79, 82 62, 64, 65, 67, 70, 74, 75, 77,

78, 80, 83

63, 68, 69, 71, 73, 76

ES — — 5, 6, 7

4. Explain how technological forces influence changes in industries.

TF 33 34, 35 36

MC 84, 88 85, 87, 90, 91, 92, 93

86, 89

ES — 8 —

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True/False Questions

Learning Objective 1

1. The general environment, sometimes called the microenvironment, includes factors that usually affect all or most organizations.

ANSWER: F, Knowledge, Moderate, p. 70

2. McDonald’s has closed many of its locations in Latin America.

ANSWER: T, Knowledge, Easy, p. 70

3. McDonald’s had to close a number of its restaurants in Latin America because of an emerging health-consciousness of its local customers.

ANSWER: F, Knowledge, Difficult, p. 70

4. Economics is the discipline that focuses on understanding how people or nations produce, distribute, and consume various goods and services.


5. The concept of economic value emphasizes output rather than knowledge.

ANSWER: F, Knowledge, Difficult, pp. 71–72

6. Borderless competition is creating challenges for traditional retailers.


7. Economic stewardship is a position that an organization takes to protect or enhance the natural environment as it conducts its business activities.


8. Environmental concerns have changed the way producers and consumers alike think about products, the raw materials used to make them, and the by-products of manufacturing processes.

ANSWER: T, Knowledge, Moderate, p. 74

9. Changes in the demographics of the workforce in the United States are leading to decreased levels of diversity.

ANSWER: F, Knowledge, Easy, p. 74

10. By the end of this decade, about 23 million baby boomers will retire.


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11. Contingent workers are typically hired to fill the lowest skill level jobs.


12. The culture of a country can be defined as multiple beliefs that are compatible and supportive of one another.


13. The degree to which influence and control are unequally distributed among individuals and institutions within a particular culture is the measure of its power distance.

ANSWER: T, Knowledge, Difficult, p. 78

14. The degree to which members of a society strive to maintain ambiguity, risk, and the indefiniteness of the future is the measure if its uncertainty avoidance.


15. In Canada, employees rank high on individualism. These employees are likely to favor policies that support their common welfare.

ANSWER: F, Application, Moderate, p. 80

16. Claudia Olheiser lives in a foreign country that has a high masculinity culture. She can expect to be accepted by men in most business settings.


17. The number of managers and workers taking assignments in countries other than their own is rapidly increasing.



18. Organizations in any industry are directly affected by at least five competitive forces: competitors, new entrants, substitute goods and services, employee teams, and suppliers.


19. Competitors are the single most important day-to-day force facing organizations.


20. The threat or reality of increased competition in an industry depends on the relative ease with which new firms can compete with established firms.


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21. Economies of scale are achieved when increased volume lowers the unit cost of a good or service produced by a firm.


22. Product differentiation is uniqueness in quality, price, design, brand image, or customer service that gives one firm’s product an edge over another firm’s.


23. The number of employees needed for starting a pharmaceutical company is an example of the capital requirements for an industry.

ANSWER: F, Application, Easy, p. 82

24. Customers for goods or services try to force companies to increase competition and prices by playing one seller against another.

ANSWER: F, Knowledge, Easy, p. 82


25. Societies try to resolve conflicts over values and beliefs through their political and legal systems.


26. Lobbying is the process by which two or more individuals or groups, having both common and conflicting goals, present and discuss proposals in an attempt to reach an agreement.


27. The most common form of lobbying is by associations representing the interests of groups of individuals or organizations.

ANSWER: T, Knowledge, Difficult, p. 86

28. Alliances, especially those created to influence government actions, typically form around issues of social self-interest.


29. A joint venture is different from an alliance.


30. Motorola and IBM have formed an alliance to manufacture memory chips in China. This alliance is also referred to as a joint venture.

ANSWER: T, Application, Easy, p. 87

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31. Representation involves membership in an outside organization that serves the interest of the member’s organization. A representation strategy is often forceful and direct.


32. Socialization is the process by which people learn the values held by an organization and the broader society.



33. Technology is the knowledge, tools, techniques and actions used to transform ideas, information, and materials into finished goods and services.


34. As the watch industry moved from mechanical to electronic watches, Timex didn’t change its strategy and continued to build watches that relied on older technology. This is an illustration of technology’s role in manufacturing.


35. In the late 1990s, perhaps the single greatest change that technology made in the distribution of goods was the capability it provided for online ordering, distribution and sales via the Internet and the World Wide Web.


36. Technology is making it possible for Jeep to keep track of much higher parts inventories at the factory so that customers can have more optional equipment choices.

ANSWER: F, Knowledge, Difficult, pp. 90–91

Multiple Choice Questions

Preview1. According to the “Preview” about the fast-food industry, both opportunities and

competition are increasing. Which of the following is not one of the current interests of customers?a. healthy cuisineb. ethnic foodsc. better serviced. better value

ANSWER: C, Knowledge, Difficult, p. 70

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2. Fast-food customers are seeking all of the following new menu items except:a. value-priced mealsb. rotisserie chickenc. Chinese foodd. ”heart-healthy” foods

ANSWER: C, Knowledge, Easy, p. 70


The Environment3. The general environment is also referred to as .

a. the microenvironment b. the macroenvironmentc. the macrosystemd. an uncertainty

ANSWER: B, Knowledge, Easy, p. 70

4. __________ is(are) not included in the general environment.a. The type of economic systemb. Economic conditionsc. The type of political systemd. The companies that supply inputs

ANSWER: D, Knowledge, Moderate, pp. 70–71

5. According to your text, which of the following is not an element of the old economy?a. tangible products and physical assetsb. unskilled laborc. emphasis on valued. customers for a lifetime


6. The government, acting as a watchdog in the U.S. political system, provides direction in all of the following areas except __________.a. monetary policy b. environmental mattersc. strategies used by organizationsd. human rights


7. Several trends are currently affecting the U.S. and Canadian economies. Which of the following is not one of these trends?a. A major emphasis on value b. New markets are available c. Consumers desire more convenienced. An emphasis on unskilled labor

ANSWER: D, Knowledge, Moderate, p. 72

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8. Wal-Mart provides Procter & Gamble (P&G) with daily information on what is selling in which stores. P&G, in return, restocks Wal-Mart’s shelves as needed. Wal-Mart achieves greater sales and a reduction in inventory carrying costs. This is an illustration of ______________. a. the importance of information and the delivery of serviceb. the limitations of geographic borders c. environmental stewardshipd. a joint venture between Wal-Mart and P&G

ANSWER: A, Application, Difficult, p. 72

9. The Internet is revolutionary because it has dramatically reduced the cost of communication and coordination in business and personal transactions. This is an illustration of __________________.a. how firms are reaching out directly to customersb. how firms are challenging their distributorsc. how firms are challenging traditional retailersd. all of the above are correct

ANSWER: D, Application, Difficult, p. 72

10. Actions that managers can take to respond to environmental concerns include all of the following except __________.a. set measurable goals for environmental improvementsb. recognize that environmental regulations are here to stayc. confront environmental groups d. consider business opportunities for recycling or disposing of products

ANSWER: C, Knowledge, Moderate, pp. 73–74

11. The City of Calgary showed environmental awareness in its installation of low wattage streetlights, which was a result of __________. a. legislationb. pollution concernsc. hostile press exposured. the Sierra Club

ANSWER: B, Knowledge, Difficult, p. 73

12. Andy Grove, CEO of Intel says, “Our assets leave on the elevator every night.” He is referring to __________.a. potential customersb. diversityc. Environmental stewardshipd. human capital

ANSWER: D, Knowledge, Easy, p. 73

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13. The characteristics of a work group, organization, specific market, or national population is referred to as __________.a. collectivism b. individualism c. cultured. demographics


14. There have been a number of demographic changes in the United States. For instance, by 2010 the percentage of women and people of color in the workforce is expected to _____.a. increase greatlyb. increase slightlyc. stay the samed. actually decline


15. __________ now have the right to refuse __________.a. Hispanics and Asians, racial profilingb. Older workers, mandatory retirementc. Gays, HIV testingd. White males, affirmative action

ANSWER: B, Knowledge, Moderate, p. 74

16. It has been estimated that by the end of this decade, more than ________ people will be part of the U.S. labor force.a. 114 millionb. 137 millionc. 158 milliond. 173 million


17. Which of the following is least important to new workers entering the job market?a. flexibility in terms of employmentb. making a meaningful contribution to societyc. ability to earn a good livingd. being appreciated and supported by management


18. A contingent worker is __________.a. an unreliable workerb. someone who is about to be firedc. a person coming back from disability leaved. an independent contractor


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19. Employers are facing the demand of managing diversity. Some organizations are providing training to employees to be more tolerant in the workplace of all of the following except __________.a. language b. religion c. aged. ethnic differences


20. Many new workers expect more from their careers. This includes all of the following except _________.a. earningsb. excitementc. recognitiond. security

ANSWER: A, Knowledge, Difficult, p. 75

21. The shared characteristics and values that distinguish the members of one group of people from those of another is __________.a. a caste system b. power distancec. collectivismd. culture


22. Cultural values are not transferred __________.a. across organizationsb. within countriesc. geneticallyd. by ethnicity


23. A ______________ comprises multiple beliefs that are compatible and supportive of one another.a. cultureb. value system c. power distance scored. cultural force

ANSWER: B, Application, Moderate, p. 76

24. The framework of work-related values used in the text was developed by .a. Max Weber b. Martin Luther King c. Geert Hofsteded. Abraham Maslow

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ANSWER: C, Knowledge, Moderate, p. 76

25. Which of the following is not one of Hofstede’s value dimensions?a. power distanceb. certainty avoidancec. Confucian dynamismd. individualism (versus collectivism)


26. A ______________ is a basic belief about a condition that has considerable importance and meaning to individuals and is relatively stable over time.a. cultural forceb. culturec. valued. value system

ANSWER: C, Knowledge, Moderate, pp. 75–76

27. A high degree of __________ would cause employees to avoid disagreements with their bosses. a. power distance b. uncertainty avoidance c. collectivist cultured. femininity


28. Societies which rank low in power distance place less emphasis on __________.a. integrityb. inequalityc. predictabilityd. aggressiveness


29. There are many societies that rank high in power distance as a cultural value dimension. All of the following rank high in power distance except .a. Mexico b. France c. Malaysiad. Austria

ANSWER: D, Application, Moderate, p. 78

30. Individuals in many societies enjoy the freedom of achieving wealth, prestige, and social status regardless of family background. These privileges are found in all of the following countries except __________.a. Japan b. United States c. Canadad. Austria

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ANSWER: A, Application, Easy, p. 78

31. The degree to which members of a society attempt to make the future predictable by following rules and regulations is an indicator of their __________.a. power distanceb. uncertainty avoidance c. individualismd. collectivism


32. All of the following are representative of high uncertainty avoidance except __________.a. built-in career stabilityb. numerous rules governing behaviorc. tolerance of deviant ideas and behaviord. belief in absolute truths

ANSWER: C, Knowledge, Difficult, pp. 78–79

33. Kevin Fremont was raised in a culture that gives its highest respect and rewards to those with the greatest personal achievement. This is opposite of __________.a. power distance b. individualism c. uncertainty avoidanced. collectivism

ANSWER: D, Application, Moderate, pp. 79–80

34. France and the United States are examples of countries with __________.a. low uncertainty avoidance b. high uncertainty avoidance c. short-term orientationd. low power distance


35. ________________ refers to a tight social framework in which group members focus on the common welfare and feel strong loyalty toward one another.a. Masculinityb. Femininityc. Individualismd. Collectivism


36. The degree to which society expects people to take care of themselves and their immediate families is one measure of its ____________________.a. masculinityb. femininityc. individualism

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d. collectivism


37. ______________ is the degree to which assertiveness and the acquisition of money and material things are valued, as well as the degree of indifferences to others’ quality of life.a. Masculinityb. Femininityc. Individualismd. Collectivism

ANSWER: A, Knowledge, Moderate, p. 80

38. _______________ is a more nurturing, people-oriented approach to life.a. Masculinityb. Femininityc. Individualismd. Collectivism


39. The _______________ value dimension reflects the division of labor among men and women in a society.a. masculinityb. femininityc. individualismd. collectivism

ANSWER: A, Knowledge, Easy, p. 80

40. Confucius was a civil servant in China in about _______________.a. 500 BCb. 1500 BCc. 500 ADd. the time of Christ


41. Which of the following is not one of the key principles of long-term/short-term orientation?a. Individual status is recognized in the relationship between people.b. The family is the prototype of all social organizations.c. Allow others to maintain “face.” d. All of the above are key principles of long-term/short-term orientation.

ANSWER: D, Knowledge, Difficult, p. 80


Competitive Forces in an Industry42. Which of the following is not one of the five competitive forces faced by an

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organization?a. competitorsb. new entrantsc. customersd. government regulators


43. The most important force in the environment that affects organizations is usually __________.a. competitorsb. customers c. substitute goodsd. coalitions in the industry


44. Bruce D. Henderson of the Boston Consulting Group states, “For virtually all organizations the critical environment constraint is their actions in relation to __________.” a. government b. customers c. competitorsd. investors


45. The threat or reality of increased competition in an industry depends on the relative ease with which new firms can compete with established firms. In an industry with low barriers to entry, such as the __________ industry, competition will be fierce.a. photocopy b. health carec. public accountingd. airline

ANSWER: A, Application, Moderate, p. 82

46. ________________ in an industry depends on the relative ease with which new firms can compete with established firms.a. Economies of scaleb. The bargaining power of suppliersc. The bargaining power of buyersd. The threat of new entrants


47. __________ is not a common factor that needs to be diagnosed in assessing barriers to entry.a. Capital requirementsb. Economies of scale c. Product differentiationd. The macroenvironment

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48. One of the most crucial principles used and evaluated by managers is the notion of economies of scale. This refers to __________.a. increases in per unit costs as the volume of goods and services produced by a firm

increasesb. decreases in per unit costs as the volume of goods and services produced by a firm

decreasesc. decreases in per unit costs as the volume of goods and services produced by a firm

increasesd. decreases in total costs as the volume of goods and services produced by a firm

increases


49. ___________ is uniqueness in quality, price, design, brand image, or customer service that gives one firm’s product an edge over another firm’s. a. Product differentiation b. Price differentiation c. Focusd. Economies of scale


50. Food suppliers to large companies, such as Burger King, often give discounts that are not extended to smaller customers. This either directly or indirectly affects the factor of __________ that serves as a barrier to entry.a. capital requirement b. economy of scale c. planning and administrationd. product differentiation


51. According to Jean Birch, vice president of operations for Taco Bell, the cost of opening a new restaurant is close to __________ dollars.a. $75,000b. $500,000c. $1 milliond. $2 million


52. The cost of opening a new fast food restaurant is an important factor relating to __________.a. capital requirementb. profit maximizationc. product differentiationd. economy of scale

ANSWER: A, Application, Easy, p. 82

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53. After a drug has been approved, the Food and Drug Administration (FDA) continues to monitor the drug and may require additional testing or removal of the drug from the marketplace, which could cost a company billions of dollars. This is an example of __________ that can affect the profitability of firms in an industry.a. capital requirementsb. product differentiationc. government regulationd. lawsuits

ANSWER: C, Application, Moderate, p. 82

54. Substitutes are a powerful force in the pharmaceutical industry. The threat of substitutes is largely based on ______________.a. government regulationsb. expiration of patents c. bargaining powerd. profit maximization


55. The introduction of desktop publishing systems in the printing industry best represents the idea of __________.a. economies of scopeb. substitute goods or servicesc. bargaining powerd. economies of scale


56. Customer bargaining power is likely to be relatively great under all of the following circumstances except when __________.a. the customer purchases a large volume relative to the supplier’s total salesb. the product or service represents only a small expenditure by the customer c. large customers pose a threat of backward integrationd. customers have readily available alternatives for the same service

ANSWER: B, Knowledge, Difficult, pp. 82–83

57. Let’s assume Domino’s Pizza threatened to bake its own bread, grow its own tomatoes, and raise its own hogs (as a source for sausage and pepperoni) to get lower prices and better quality for its inputs. This would represent __________ integration.a. backward b. forward c. verticald. horizontal

ANSWER: A, Application, Moderate, p. 83

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58. Julio is one of many small Colombian farmers who sell their coffee beans to Folgers. In trying to get a higher price for his crop, Julio is most impacted by which competitive force? a. threat of new competitors b. customer bargaining power c. supplier bargaining powerd. threat of substitute goods or services

ANSWER: B, Application, Difficult, pp. 82–83

59. Patents on a popular drug should ______________.a. increase supplier strength of basic ingredientsb. decrease supplier strength of basic ingredientsc. increase customer strengthd. pose a threat of backward integration


60. KFC faces numerous problems in its attempt to operate in China. These problems include __________.a. making menu items affordable to local Chineseb. finding workers who will follow procedures in an operating manual c. meeting their quality standards with local chickensd. transportation of supplies

ANSWER: D, Knowledge, Easy, pp. 83–84

61. All of the following are associated with KFC’s strategy for differentiating itself in China except __________. a. attracting kids with combo meal selectionsb. administrative management principlesc. American/international lifestyle attractiond. consistency in food quality

ANSWER: B, Application, Difficult, pp. 83–84


Political–Legal Forces62. Societies try to resolve conflicts over values and beliefs through their ______________.

a. interest groups b. individual freedom c. political and legal systemsd. property rights


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63. Julie Thompson has applied for a MBNA America credit card. By law, the credit grantor must reveal the “true” cost of using the credit, including the annual interest rate that will be assessed. This law is known as .a. the Equal Credit Opportunity Actb. the Truth in Lending Actc. the Landrum-Griffith Actd. the Credit Discrimination Act

ANSWER: B, Application, Difficult, p. 85

64. __________ is not one of the basic political strategies to cope with the political–legal forces.a. Negotiation b. Judicial activism c. Allianced. Socialization


65. The process by which two or more individuals or groups having both common and conflicting goals present and discuss proposals in an attempt to reach an agreement is known as __________.a. negotiation b. goal optimizationc. allianced. collaboration


66. An attempt to influence government decisions by providing officials with information on the anticipated effects of legislation or regulatory rulings is known as __________.a. compromise b. affective conflicts c. lobbyingd. representation


67. All of the following are identified as being represented by large Congressional lobbying efforts except __________. a. college studentsb. retired personsc. pharmaceutical manufacturersd. insurance industry


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68. The most common form of lobbying is by associations, representing the interests of groups of individuals or organizations. Approximately __________ national lobbying organizations maintain staffs in Washington, D.C. a. 8,000 b. 1,000 c. 2,000d. 4,000


69. What is the number of state and local associations and organizations occasionally lobbying Washington decision makers?a. 100,000b. 30,000 c. 50,000d. 75,000


70. What is the largest U.S. lobbying association representing the interests of individuals?a. The Christian Coalitionb. National Chamber of Commercec. National Association of Manufacturersd. American Association of Retired Persons


71. The American Association of Retired Persons has a membership of .a. 50 million b. 15 million c. 22 milliond. 30 million


72. A unified effort involving two or more organizations, groups, or individuals to achieve common goals with respect to a particular issue is known as a(n) .a. alliance b. matrix c. industryd. network


73. Alliances are used for all the following purposes except to __________.a. oppose or support legislation, nomination of heads of regulatory agencies, and

regulations by such agenciesb. improve competitiveness of two or more organizations through collaborationc. promote particular products or servicesd. construct facilities limited to the resources of any one organization

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ANSWER: D, Knowledge, Difficult, pp. 86–87

74. Nestlé and Coca-Cola formed a collaboration whereby both firms have benefited from using each other’s distribution channels and marketing programs. Nestlé and Coca-Cola are utilizing the __________ strategy.a. backward integration b. representationc. allianced. vertical integration


75. IBM has teamed up with Motorola and Toshiba to improve its semiconductor manufacturing ability to make superdense chips. These companies are utilizing the __________ strategy.a. negotiation b. lobbying c. allianced. representation


76. American Fidelity Bank and Trust encourages its branch managers to participate in voluntary community associations, such as the Chamber of Commerce or United Way, that might solidify its reputation as well as bring in new customers. The bank is using the strategy.a. negotiation b. lobbying c. representationd. socialization

ANSWER: C, Application, Difficult, p. 87

77. JWA, Inc. and CBI, Inc. became partners and formed a separate entity called JWACBI Associates. This new organization is an example of the __________ strategy.a. negotiation b. oligopoly c. joint ventured. acquisition


78. ______________ refers to membership in an outside organization, which is intended to serve the interests of the member’s organization or group.a. Allianceb. Joint venturec. Partnershipd. Representation


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79. The process by which people learn the values held by an organization or the broader society is known as __________.a. political indoctrinationb. socialization c. trainingd. lobbying


80. Charles Schwab uses a __________ process to introduce new customer service representatives to its philosophy of non-commission, low pressure sales of stocks and fundsa. symbolic control b. socialization c. leadershipd. coercive control

ANSWER: B, Application, Moderate, pp. 87–88

81. Which of the following is not a goal of the American Association of Retired Persons?a. The education of older Americans on issues that face them.b. Seek clarification from political candidates on issues that affect senior citizens.c. Endorse political candidates supported by the association.d. Increase voter participation.



Technological Forces

82. The knowledge, tools, techniques, and actions used to transform ideas, information, and materials into finished goods and services is known as .a. technology b. strategic alliance c. venturingd. imaging


83. Which of the following statements is false?a. Technological change plays an increasingly pivotal role in an organization’s

environment.b. Many new technologies are radical enough to force organizations to reconsider their

methods of operation.c. The United States has become an information society.d. All of the above statements are true.


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84. The United States and several other industrial societies have become information societies. This shift was made possible by _________________.a. the explosion of computer-based and telecommunications technologiesb. a well crafted political strategyc. the industrial revolutiond. a strategic alliance among these nations


85. Using an engineering workstation and advanced software, Levi Strauss has successfully used computer-assisted design systems to __________. a. design next-generation manufacturing facilitiesb. eliminate its advertising agencyc. design customized jeans for customersd. achieve zero defects in all factories simultaneously


86. Which of the following is not one of the options created by new information technology that were not available with older technologies?a. computer-aided designsb. electronic shopping mallsc. real-time financial management systemsd. All of the above have been created by new information technology.


87. Technology plays an important role in manufacturing. Perhaps the most significant contribution of technology to manufacturing is that of ____________, which is the ability to produce a wide variety of a product by using the same basic design and production equipment. a. mass customizationb. mass marketingc. mass manufacturingd. mass globalization


88. In the late 1990s, technology had a profound impact on the distribution strategies of companies. Which of the following is not an example of how technology has changed the distribution of goods and services?a. Amazon.com offered online ordering, threatening established retail booksellers.b. Ameritrade allowed customers to access their accounts directly to buy and sell

stocks.c. Combining traditional catalog sales with the advantages of Internet access allowed

L.L. Bean to meet its customers needs in a new way.d. The U.S. Internal Revenue Service has developed a new “Taxpayers Bill of Rights.”

ANSWER: D, Application, Moderate, p. 91

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89. Manufacturing technology furnishes Jeep parts suppliers all of the following except __________.a. 10-day production forecastsb. ability to standardize the parts mixc. requirement for numerous model configurationsd. expectations of no factory parts inventories

ANSWER: B, Knowledge, Moderate, pp. 90–91

90. Manufacturing technology is a central feature of Jeep assembly. Parts suppliers must accept which of the following requirements?a. Allowing Jeep to access their confidential records.b. Requirement to buy expensive computers.c. Heavy penalty for stopping the line.d. Having to build a warehouse near the factory.


91. The information superhighway represents a change in ____________ for all companies.a. technologyb. competitionc. suppliersd. customers


Essay Questions


1. What are four of the factors in the external environment of organizations?

The general environment, sometimes called the macroenvironment, includes the external factors that usually affect all or most organizations in a society. It encompasses the type of economic system (capitalism, socialism, or communism); current economic conditions (expansionary and recessionary cycles and the general standard of living); type of political system (democracy, dictatorship, or monarchy); condition of the ecosystem (extent of land, water, and air pollution); demographics of the population (age, gender, race, ethnic origin and education level); and cultural background (values, beliefs, language, and religious influences).

Difficult, pp. 70–71

2. What are demographics and why are they important for management?

Demographics are the characteristics of work group, organization, specific market, or various populations (such as individuals between the ages of 18 and 22). Demographics, particularly changes in demographics, are important for management because they can play an important role in marketing, advertising, and human resource management (such as with recruiting and selection issues).

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Difficult, p. 74


3. Under what circumstances is customer bargaining power likely to be great?

a. The customer purchases a large volume relative to the supplier’s total sales.b. The product or service represents a significant expenditure by the customer.c. Large customers pose a threat of backward integration.d. Customers have readily available alternatives for the same services or products.

Difficult, p. 83

4. What are four common factors that need to be diagnosed in assessing barriers to entry?

Economies of scale, product differentiation, capital requirements and the amount of government regulation.

Moderate, p. 82


5. Describe how the American Association of Retired Persons (AARP) used their communication competencies and various political strategies in an effort to influence members of Congress.

The AARP uses a variety of political strategies to gain support for its programs. Its goal is to educate older Americans on issues that face them, ask political candidates for clarification of their positions on issues that affect senior citizens, and increase voter participation. To insure that the Social Security system is properly funded, AARP has pressured Congress (a lobbying strategy) to make adjustments in contribution rates, in annual cost of living adjustments, and investment of the trust fund. AARP was a driving force (representation strategy) for the 1997 Balanced Budget Act, which ensures that Medicare will be solvent through 2007. Finally, AARP tries to educate older people (socialization strategy) about different financing alternatives when they are faced with entering a nursing home.


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6. Identify and explain three of the principal political strategies used by managers to cope with external forces.

a. Negotiation is the process by which two or more individuals or groups, having both common and conflicting goals, present and discuss proposals in an attempt to reach an agreement.

b. Lobbying is an attempt to influence government decisions by providing officials with information on the anticipated effects of legislation or regulatory rulings.

c. An alliance is a unified effort involving two or more organizations, groups, or individuals to achieve common goals with respect to a particular issue. A joint venture, which typically involves two or more firms becoming partners to form a separate entity, is a common form of an alliance.

d. Representation refers to membership in an outside organization to serve the interests of the member’s organization or group.

e. Socialization is the process by which people learn the values held by an organization or the broader society.


7. Why are alliances used?

a. Oppose or support legislation, nomination of heads of regulatory agencies, and regulations issued by such agencies.

b. Improve competitiveness of two or more organizations through collaboration.c. Promote particular products or services.d. Construct facilities beyond the resources of any one organization.e. Represent the interests of specific groups, such as women, the elderly, minorities,

and particular industries.



8. What is technology? Give three examples of how technology influences the management of organizations.

Technology is a transformation process that changes organizational inputs into outputs. Thus, technology is the knowledge, tools, techniques and actions used to transform ideas, information, and materials into finished goods and services.

Technological change plays an increasingly pivotal role in the management of organizations. In particular, technology can affect a firm’s strategy, its manufacturing processes, and its distribution channels.

Moderate, pp. 89–92

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