MBA 705 LSUS Mclaughlin exam questions and answers with complete solutions verified graded a++ latest update 2025/2026

LSUS MBA 705 Final exam questions and answers with complete solutions verified graded a++ Terms in this set (61) PESTEL Analysis 6 segments of general environment, use to identify how these factors influence industries and the firms within them P - Political E- Economic S- Socio- Cultural T - Technological E- Environmental L - Legal Political Factors -include tax policies, changes in trade restrictions and tariffs, and stability of governments - example : immigration policy, clean energy policies Economic Factors - include elements such as interest rates, inflation rates, gross domestic product, unemployment rates, levels of disposable income and general growth or decline of economy - example: Covid crisis of 2020 Unemployment Rate percentage of labor force looking for employment over the last 4 weeks Housing Starts number of houses, apartments and condos on which new construction has been started - includes concrete, steel, wood, plumbing, and banks as suppliers, carefully watched measure of economic condition Gross Domestic Product (GDP) - market value of goods and services within a country produced in a given time period -rough indicator of a country's standard of living Federal Reserve System ("The Fed") US's central banking system, attempts to strengthen economy, ie by setting short- term interest rates Discretionary Income amount of money individuals have to spend after all bills are paid Socio-cultural factors -capture a society's cultures norms, societal values and trends - trends in demographics such as population size, age, ethnic mix, as well as attitudes toward obesity and consumer activism Hemline Theory -women's skirt lengths predict stock market increases and decreases. Raised skirts when times are good, lowered skirts in tough economic times Technological Factors -centers on improvements in products and services that are provided by science -ie changes in product development, increases in automation and advancements in service industry delivery Moore's Law performance of microcircuit technology roughly doubles every 2 years Environmental or Ecological Factors - physical/ecological conditions within which an organization operates -includes factors such as natural disasters, pollution levels, global warming and weather patterns Legal Factors - centers on how courts and laws influence business activity - ie employment laws, health and safety regulations, discrimination and anti-trust laws Intellectual Property A product of the intellect, such as an expressed idea or concept, that has commercial value. -ie pixar movie or adobe program, piracy of it would be illegal Sherman Antitrust Law of 1890 limits cartels and monopolies in US Industry group of firms that produce competing products/services Industry Effects -firms within the same industry often have the same suppliers and buyers - firm performance is due to the structure of the industry in which the firm competes - makes up 20% of a firm's performance Firm Effects - firm performance due to actions strategic leaders take - makes up 55% of a firm's performance Other Effects of a Firm's Performance - business cycles, effects, unexplained variance -makes up 25% of firm's performance Porter's Five Forces 1. Threat of potential entrants 2. Bargaining power of suppliers 3. Rivalry of industry competitors 4. Bargaining power of buyers 5. Threat of substitutes Threat of Potential Entrants firms not considered viable competitors in the industry but that may become viable in the future Bargaining power of buyers firms that buy directly from industry such as car dealerships Rivalry among existing competitors tend to be high to the extent that: 1. Competitors are numerous or are roughly equal in size or power 2. Growth rate of industry is low 3. Competitors are not differentiated from each other 4. Fixed costs in industry are high 5. Exit Barriers are high 6. Excess capacity exists in the industry 7. Capacity must be expanded in large increments to be efficient 8. Product is perishable Industry Concentration extent to which large firms dominate an industry - measured by looking at percentage of total industry output produced by 4 biggest competitors High-concentrated Industries - examples: circus (89%), polite competition, no ad campaigns, don't put on shows in same city at same time -breakfast cereal manufacturing (85%) Medium-concentration Industries examples: Flight training (52%) and sugar manufacturing (60%) Low Concentration "fragmented" industries - examples include full service restaurants (9%), Legal services (3%), truck driving schools (27%), call centers (22%) - usually have to steal customers from competitors The Threat of Potential New Entrants to an Industry - usually reduce profit potential in industry by increasing competition - could be start ups, firms entering new geographic area, supplier firms entering customer's business, or buyer firms entering supplier's business Threats of substitutes is high when 1. Subsitute offers attractive prices 2. Buyer's cost of switching to substitute is low New Entrants Economies of Scale Capital Requirements Access to Distribution Channels Government policy Differentiation Switching costs Expected retaliation Cost advantage independent of size Economies of Scale number of customers served increases, cost of serving customers decreases because fixed costs are allocated across larger scale - new firms struggle to be able to sell at competitive prices when firms have this Capital requirements - more expensive it is to enter a business, less likely a new firm will enter - when this is substantial, existing firms don't worry about new firms joining Access to Distribution Channels - ability to get goods and services to customers can be a challenge to new firms Government Policy -government decisions can deter or encourage potential new entrants Differentiation - how a new entrant would struggle to match years worth of ads created for popular brands Switching costs - for example, most gas stations and repair shops are for gas cars, but there are few charging stations for electric vehicles, so switching could be costly Expected retaliation -new firms must be concerned about if current industry members will aggressively respond to them entering the market -firms could slash prices in response Cost advantages independent of size proprietary technology, access to new materials and desirable geographic location are all not associated with size or economy of scale Power of Supplies to an Industry 1. A supplier group is powerful if it is dominated by a few companies or is more concentrated than the industry it supplies 2. Supplier group is powerful if there is no substitute for what it provides 3. Supplier group is powerful if industry members rely heavily on suppliers to be profitable 4. Supplier group is powerful if industry members face high costs when changing suppliers 5. Suppler group is powerful if their products are differentiated 6. Supplier group is powerful if it can credibly threaten to compete (integrate forward) in industry if motivated to do so Power of Buyers 1. Buyer group is powerful when there are few buyers compared to the number of firms 2. Buyer group is powerful when an industry's goods or services are standardized or undifferentiated 3. Buyer group is powerful when they face little to no switching costs in changing vendors 4. Buyer group is powerful when goods or services purchased by buyers represents a high percentage of buyer's costs, encouraging ongoing searches for lower-paid suppliers 5. Buyer group is powerful if it can credibly threaten to compete (integrate backward) in the industry if it is motivated 6. Buyer group is powerful when the goods/services purchased by the buyer's group is of limited importance to quality or price of buyer's offerings The Limitations of the Five Forces Analysis - assumes competition is a zero-sum game, meaning amount of profit potential is fixed. To profit, you have to take from a rival, supplier or buyer -doesn't factor in collaboration and that it could make more profits and benefits Nonmarket strategy Lobbying, PR, contributions, and litigations done by firms to get what they want -ie hotels lobbying local officials to limit or prohibit short-term rentals to compete with Air BnB Recession - when a nation's economy has their GDP decline for 2 consecutive quarters OSHA Occupational Safety and Health Administration, prevents work-related injuries. diseases and fatalities by enforcing workplace safety and health -example of legal factor The Difference Between Legal Factors and Political Factors - political factors are interactions and relationships between businesses and government - legal factors are boundary parameters of legal activities Bottled Water Example - good for the environmental segment since they prevent water pollution - bad for socio-cultural segment since 80% of bottles end up in landfills Macro Environmental Factors set of external conditions and forces that can influence organizations Inflation high rates harm most businesses, but can actually help some businesses Political Factors examples - clean-energy - should companies be subsidized by the government or left on their own? -US companies using overseas child labor - in levying tariffs and implementing trade restrictions, governments can protect domestic firms from international competition -stability of US government makes foreign firms want to do business in US, countries with regime changes and political turmoil could have a harder time with foreign investments - US elected officials must debate and set new tax policies Socio-cultural factor examples - supersize vs health-conscious -rise of upscale cupcake outlets reflects trend, expensive specialty stores are popular with some customers -in the 1800s, families were bigger due to the high infant mortality rate and relying on children for farm labor. Today families are smaller -Obesity rate in 2020 in US was 40%, only 30.5% in 2000, caused by fast food and sedentary activities - Hemline theory -Hoarding epidemic, people collect more without throwing things away leading to more storage facilities Technological Factors examples -adoption rate of new technology is closely monitored. The internet took 4 years to get to 50 million users, whereas it took 3 years for TV and 38 years for radio to reach this user amount -Online shopping: failure to compete against Amazon forced Sears, JC Penney, KMart and Neiman Marcus to close stores or shut down all together - dramatic changes in video games over 25 years highlight the need to adapt technology to maintain market leadership (current leaders: Sony, Nintendo, Microsoft) -smartphone success has changed how businesses operate -product marketing is changing due to social media -Moore's Law explains that over time, devices become smaller and more powerful (ie fallout of digital camera) Examples of Environmental/Ecological Factors - Subaru plant in Lafayette, IN was the first manufacturing facility to achieve zero landfill status -more solar panels and solar panel companies now because of climate change -3 R's of green living: reduce, reuse, recycle fueled new businesses -Recycle Match - brings waste products to companies that need them -Electric scooters are more popular due to concerns of environmental effects on burning fossil fuel -rise of food co-ops: interest in sustainable, natural foods that are socially responsible in production Legal Factor examples - electronic recycling laws create "green collar jobs" - Sherman Antitrust Law of 1890 - in US it is illegal to discriminate based on age, religion, race, sex or disability - OSHA -Laws that require nutrition information appears on food products to protect consumers and aid them in making informed choices Purpose of Five Forces Analysis - evaluates industry by understanding dynamics that shape how much profit potential exists in an industry and is key to knowing how likely it is that a firm will succeed -determines profitability, together factors show attractiveness of an industry If none of the five forces work together to undermine profits, then profit potential is very strong If all of the five forces work to undermine profits, then profit potential is weak High levels of rivalry reduce industry's profit potential Exit Barriers could include emotional barriers such as mass layoffs or desire to recoup losses Vehicles in US vs South America example - large vehicles in US due to wide roads and low fuel taxes (political and legal factor) and high standard of living (economic facftor) -Small vehicles in South America due to narrow roads and high fuel taxes (political and legal factors) and lower disposable income (economic factor) Backward Integration occurs when a buyer moves upstream in the industry value chain, into the seller's business -example: Ford and GM threaten to self-manufacture products if their suppliers don't lower the cost of goods and services