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Indicate whether the statement is true or false.

1. A SWOT analysis is one of the most effective tools to analyze and organize environmental data and information.
a. True
b. False

2. Focus groups can be used to determine cause-and-effect relationships.

a. True
b. False

3. The use of a vending machine is an example of nonstore retailing.

a. True
b. False

4. Most of the time, it is unrealistic to convert noncustomers into customers because they are already biased against the
company or product.
a. True
b. False

5. A major drawback to primary data gathering is its relevance to the specific problem at hand.
a. True
b. False

6. Situational analysis is only valuable to the extent that it improves the quality of the resulting marketing plan.
a. True
b. False

7. The competitive analysis should start by identifying current and potential competitors.
a. True
b. False

8. A change in international, federal, state, or local laws and regulations is an example of a political trend.
a. True
b. False

9. Another word for data is information.

a. True
b. False

10. Information is often easier to collect than data.

a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.

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11. A consumer wanted to purchase a new computer. However, she used the money to pay her rent instead. In this case,
housing is what type of competitor?
a. Product competitor
b. Total budget competitor
c. Market competitor
d. Generic competitor
e. Brand competitor

12. When a firm analyzes its objectives and performance, availability of resources, structural characteristics, and
organizational culture, the firm is most likely examining its:
a. internal environment. b. external environment.
c. mission statement. d. competitive strategy.
e. strategic environment.

13. Which of the following cultural values is not typically associated with American consumers?
a. low tolerance for waiting b. growing disconnect with government
c. greater focus on long-term goals d. concern for the natural environment
e. less tolerance of smoking in public

14. If an organization does not understand its customers, what should it consider doing?
a. Determine a competitive advantage.
b. Choose another target market.
c. Analyze the external environment.
d. Conduct primary research.
e. Conduct secondary research.

15. Compared to primary data, secondary data have the main advantage of:
a. being up-to-date.
b. having greater relevance to a specific issue.
c. being both internally and externally focused.
d. being dramatically lower in cost.
e. being readily accessible in electronic format.

16. Microsoft is interested in customers’ perceptions of Windows 8, its new PC operating system. Since the research goal
is rather specific, Microsoft should conduct its own __________ research by asking customers to complete an online
questionnaire.
a. secondary b. primary
c. qualitative d. observation
e. experimental

17. In many buying situations, customers will buy one product because it complements another product. In these cases of
__________ demand, the demand of one product depends on the demand of another product.
a. linked b. dependent
c. quasi- d. conjoined
e. derived
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18. Although internal data sources have a number of advantages, one of their biggest problems is:
a. there are rarely enough internal data.
b. internal data are often not relevant to the marketing issue at hand.
c. internal data are expensive to collect.
d. internal data are often in a form that is not readily accessible.
e. internal data are typically biased.

19. What is the main purpose of the Sarbanes-Oxley Act of 2002?

a. To increase the accuracy and reliability of corporate disclosures of financial information.
b. To ensure that CEOs are adequately compensated for the risks they face in terms of corporate governance.
c. To amend NAFTA to be more favorable to U.S. interests.
d. To limit the ability of drug companies to engage in direct-to-consumer advertising.
e. To limit the ability of the media to obtain confidential corporate information.

20. The sheer volume of available information on the economy, population, and business activities is the major strength of
most __________ data sources.
a. book and periodical b. primary
c. commercial d. internal
e. government

21. As a form of __________ competition, bicycles can solve the same basic need as automobiles, albeit with a very
different product.
a. regular b. generic
c. brand d. total budget
e. product

22. In the 5W model of customer analysis, what is the primary emphasis of the “Why” question?
a. Identifying the situational influences that affect the customer buying process.
b. Assessing how purchases vary across different distribution outlets.
c. Determining how the purchase and consumption of one product is related to other products.
d. Identifying the basic need-satisfying benefits provided by the firm’s products.
e. Assessing how customers consume and dispose of products.

23. Which of the following is NOT a part of evaluating the internal environment?
a. A review of current objectives, strategy, and performance.
b. A review of the current availability of organizational resources.
c. A review of the organizational culture.
d. A review of the organizational structure.
e. A review of the competition.

24. What is perhaps the most important economic reality in the United States over the last 50 years?
a. Real GDP has declined dramatically since the end of World War II.
b. The middle class has been shrinking.
c. Those with higher income are greater than those in the middle or lower-income classes.
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d. Our economy has shifted to become dominated by intangibles such as services and information.
e. Our economy is still suffering from the very high inflation rates of the 1970s.

25. In the 5W model of customer analysis, what is the primary emphasis of the “What” question?
a. Assessing how customers consume and dispose of products.
b. Determining the relevant characteristics that define markets.
c. Assessing how purchases vary across different distribution outlets.
d. Identifying the basic need-satisfying benefits provided by the firm’s products.
e. Identifying the situational influences that affect the customer buying process.

26. The growth of the Internet has changed the way that situation analysis is conducted in today’s business environment.
In terms of situation analysis, which of the following is the most drastic change caused by the Internet?
a. Specific data and information take longer to find.
b. The analyst is more likely to suffer from severe information overload.
c. Data and information are now more relevant to the question at hand.
d. All competitors now have access to the same data and information.
e. There is now no such thing as secrecy in strategic planning.

27. With respect to conducting a situation analysis, which of the following IS NOT one of the four important issues to
keep in mind?
a. Analysis alone is not a solution.
b. Data are not the same as information.
c. All bits of data are relevant no matter how minor they may seem.
d. The benefits of analysis must outweigh the costs.
e. Conducting a situation analysis is a challenging exercise.

28. In the competitive sports drink market, Gatorade pays very close attention to the activities of Powerade, a major
__________ competitor that markets drinks that are similar in features and benefits.
a. generic b. direct
c. brand d. product
e. total budget

29. Which of the following examples best describes an advance in backstage technology?
a. technology that allows consumers to carry portable music players in their pockets
b. advances in electronics that allow manufacturers to offer 3D television
c. the invention of satellite radio
d. the use of radio frequency identification (RFID) to control inventory and logistics
e. All of the above are examples of advances in backstage technology.

30. Which of the following best describes the definition of data?

a. A collection of numbers or facts that have the potential to provide information.
b. Information that is useful to decison makers.
c. An analysis of information that is used to improve decision making.
d. A synthesis of information that yields insights about the organization.

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e. A variety of sources that are used for organizational planning purposes.

31. Which of the following statements describes a reason why noncustomers do not purchase a firm’s products?
a. Noncustomers have low switching costs.
b. Noncustomers have too many options to choose from.
c. Excessive distribution makes the product undesirable for noncustomers.
d. Noncustomers do not know that the firm’s product exists.
e. There is so much demand for the product that it is often out-of-stock.

32. Between now and 2050, __________ will account for a full 90 percent of the growth in the total U.S. population.
a. increasing birth rates b. immigration from Canada
c. increasing life spans d. declining death rates
e. minority population growth

33. Issues such as marketing’s position and authority in a firm’s hierarchy, the customer orientation of the firm, and the
emphasis on short- or long-term planning are examples of which component of the internal environment?
a. resource availability b. organizational structure
c. marketing objectives d. marketing infrastructure
e. marketing strategy

34. Which of the following is an example of collecting secondary information?

a. Examining an annual report.
b. Surveying the organization's customers.
c. Conducting focus groups.
d. Directly observing consumers in the store.
e. Conducting experiments to measure cause-and-effect.

35. The collection of strategic activities aimed at marketing an organization, its issues, and its ideals to potential
stakeholders is referred to as __________. It typically involves marketing activities that are not directed to the end users
of a firm’s products.
a. external affairs b. corporate affairs
c. public relations d. stakeholder management
e. societal relations

36. Discuss the role of corporate affairs in the analysis of the external environment. What types of activities are conducted
by corporate affairs specialists?

37. Identify and explain each element of the 5W model for customer analysis. What role does this analysis play in an
overall situation analysis?

38. Identify and discuss at least five reasons why potential customers do not purchase a firm’s goods or services. For each
reason, discuss ways that the firm can overcome the resistance of noncustomers.

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39. “Analysis alone is not a solution” is an important piece of advice to keep in mind during a situation analysis. What
does this phrase mean? If analysis alone is not a solution, what other considerations are relevant during a situation
analysis?

40. Identify and discuss the challenges involved in collecting environmental data and information. How can a marketing
manager or analyst overcome these problems?

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Answer Key
1. True

2. False

3. True

4. False

5. False

6. True

7. True

8. False

9. False

10. False

11. b

12. a

13. c

14. d

15. d

16. b

17. e

18. d

19. a

20. e

21. b

22. d

23. e

24. d

25. a
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26. b

27. c

28. c

29. d

30. a

31. d

32. e

33. b

34. a

35. b

36. The external environment encompasses a wide array of important factors that must be analyzed carefully before
developing the marketing plan. These issues are so important that most firms have specialists on staff to track emerging
trends and develop strategies for dealing with external concerns. These specialists are typically housed in corporate affairs
departments.

In its broadest sense, corporate affairs is a collection of strategic activities aimed at marketing an organization, its issues,
and its ideals to potential stakeholders (consumers, general public, shareholders, media, government, etc.). One way to
think about corporate affairs is that it includes all of the organization’s marketing activities not directed at the end users of
its products. The activities that define corporate affairs vary; however, most organizations maintain departments that
engage in the following strategic activities:
∙ Corporate communications includes activities aimed at telling the organization’s story and promoting goodwill among
a variety of stakeholders. It includes such activities as public relations, employee relations, corporate image advertising,
public affairs, and media relations.
∙ Government relations are activities aimed at educating and influencing elected officials, government officials, and
regulatory agencies with respect to key issues that are pertinent to the firm. The most visible form of government relations
is lobbying.
∙ Investor relations are activities designed to promote investment in the organization through the sale of financial
instruments such as stocks and bonds. It includes such activities as developing the annual report, planning shareholders’
meetings, and other customer service activities directed at corporate shareholders.
∙ Corporate philanthropy includes activities aimed at serving the needs of the community at large (either domestically or
globally) through product or cash donations, volunteerism, or support of humanitarian initiatives.
∙ Corporate sustainability includes activities aimed at reducing the organization’s impact on the environment. It includes
activities such as reducing the organization’s carbon footprint, recycling of its products, and promoting environmental
stewardship.
∙ Policy analysis involves activities designed to influence the national or international dialogue with respect to public or
economic policy in an industry-related area. It includes research and analysis designed to provide needed information for
making policy decisions.

37. During the analysis of the customer environment, information should be collected that identifies (1) the firm’s current
and potential customers, (2) the prevailing needs of current and potential customers, (3) the basic features of the firm’s
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and competitors’ products perceived by customers as meeting their needs, and (4) anticipated changes in customers’
needs.
∙ Who Are Our Current and Potential Customers?—Answering the “who” question requires an examination of the
relevant characteristics that define target markets. This includes demographic characteristics (gender, age, income, etc.),
geographic characteristics (where customers live, density of the target market, etc.), and psychographic characteristics
(attitudes, opinions, interests, etc.).
∙ What Do Customers Do with Our Products?—The “what” question entails an assessment of how customers consume
and dispose of the firm’s products. Here the marketing manager might be interested in identifying the rate of product
consumption (sometimes called the usage rate), differences between heavy and light users of products, whether customers
use complementary products during consumption, and what customers do with the firm’s products after consumption.
∙ Where Do Customers Purchase Our Products?—The “where” question is associated mainly with distribution and
customer convenience. Until recently, most firms looked solely at traditional channels of distribution such as brokers,
wholesalers, and retailers. Thus, the marketing manager would have concerns about the intensity of the distribution effort
and the types of retailers that the firm’s customers patronized. Today, however, many other forms of distribution are
available. The fastest growing form of distribution today is nonstore retailing—which includes vending machines; direct
marketing through catalogs, home sales, or infomercials; and electronic merchandising through the Internet, interactive
television, and video kiosks.
∙ When Do Customers Purchase Our Products?—The “when” question refers to any situational influences that may
cause customer purchasing activity to vary over time. This includes broad issues such as the seasonality of the firm’s
products and the variability in purchasing activity caused by promotional events or budgetary constraints.
∙ Why (and How) Do Customers Select Our Products?—The “why” question involves identifying the basic need-
satisfying benefits provided by the firm’s products. The potential benefits provided by the features of competing products
should also be analyzed. The “how” part of this question refers to the means of payment that customers use when making
a purchase.
∙ Why Do Potential Customers Not Purchase Our Products?—An important part of customer analysis is the realization
that many potential customers choose not to purchase the firm’s products. There are many potential reasons why
customers might not purchase a firm’s products.
This analysis is vital because the information can be used to identify and select specific target markets for the revised
marketing strategy. The firm should target those customer segments where it can create and maintain a sustainable
advantage over its competition.

38. There are many potential reasons why customers might not purchase a firm’s products. The reasons given in the text
are:
∙ Noncustomers have a basic need that the firm’s product does not fulfill.
∙ Noncustomers perceive that they have better or lower-priced alternatives such as competing substitute products.
∙ Competing products actually have better features or benefits than the firm’s product.
∙ The firm’s product does not match noncustomers’ budgets or lifestyles.
∙ Noncustomers have high switching costs.
∙ Noncustomers do not know that the firm’s product exists.
∙ Noncustomers have misconceptions about the firm’s product (weak or poor image).
∙ Poor distribution makes the firm’s product difficult to find.
Student responses will vary greatly as to the reasons for nonpurchase, as well as how the firm might overcome the
resistance of noncustomers.

39. Although it is true that a comprehensive situation analysis can lead to better planning and decision making, analysis
itself is not enough. Put another way, situation analysis is a necessary but insufficient prerequisite for effective strategic
planning. The analysis must be combined with intuition and judgment to make the results of the analysis useful for
planning purposes. Situation analysis should not replace the manager in the decision-making process. Its purpose is to
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empower the manager with information for more effective decision making.

A thorough situation analysis empowers the marketing manager because it encourages both analysis and synthesis of
information. From this perspective, situation analysis involves taking things apart: whether it’s a customer segment (in
order to study the heavy users), a product (in order to understand the relationship between its features and customers’
needs), or competitors (in order to weigh their strengths and weaknesses against your own). The purpose of taking things
apart is to understand why people, products, or organizations perform the way they do. After this dissection is complete,
the manager can then synthesize the information to gain a big-picture view of the complex decisions to be made.

40. Despite the best intentions, problems usually arise in collecting data and information. One of the most common
problems is an incomplete or inaccurate assessment of the situation that the gathering of data should address. After
expending a great degree of effort in collecting data, the manager may be unsure of the usefulness or relevance of what
has been collected. In some cases, the manager might even suffer from severe information overload. To prevent these
problems from occurring, the marketing problem must be accurately and specifically defined before the collection of any
data. Top managers who do not adequately explain their needs and expectations to marketing researchers often cause the
problem.

Another common difficulty is the expense of collecting environmental data. Although there are always costs associated
with data collection (even if the data are free), the process need not be prohibitively expensive. The key is to find
alternative data collection methods or sources. For example, an excellent way for some businesses to collect data is to
engage the cooperation of a local college or university. Many professors seek out marketing projects for their students as a
part of course requirements. Likewise, to help overcome data collection costs, many researchers have turned to the
Internet as a means of collecting both quantitative and qualitative data on customer opinions and behaviors.

A third issue is the time it takes to collect data and information. Although this is certainly true with respect to primary data
collection, the collection of secondary data can be quite easy and fast. Online data sources are quite accessible. Even if the
manager has no idea where to begin the search, the powerful search engines and indexes available on the Internet make it
easy to find data. Online data sources have become so good at data retrieval that the real problem involves the time
needed to sort through all of the available information to find something that is truly relevant.

Finally, it can be challenging to find a way to organize the vast amount of data and information collected during the
situation analysis. Clearly defining the marketing problem and blending different data sources are among the first steps
toward finding all of the pieces to the puzzle. A critical next step is to convert the data and information into a form that
will facilitate strategy development. Although there are a variety of tools that can be used to analyze and organize
environmental data and information, one of the most effective of these tools is SWOT analysis. As we will see in the next
chapter, SWOT analysis—which involves classifying data and information into strengths, weaknesses, opportunities and
threats—can be used to organize data and information and used as a catalyst for strategy formulation.

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