Why Does External Analysis Usually Start with the Macro- Environment

question 2

Multiple Choice

Why does external analysis usually start with the macro- environment and proceed to industry analysis?

• A) Because knowledge of the wider environment facilitates a more grounded interpretation of the operating environment as the wider context shaping the industry is understood better.
• B) This is just a convention that has developed over time. It does not matter what order the analysis is done in.
• C) Because managers know about the operating environment already but need to study those issues they do not interact with on a daily basis such as PEST factors.
• D) Because it is important that the data on the operating environment data is very up- to- date so this should be collected last.

---

Definitions:

Area Under

Refers to the space beneath the curve of a graph in mathematics and statistics, often used to calculate integrals.

Average Cost

The total cost of production divided by the total quantity produced, indicating the cost per unit of output.

Marginal Costs

The additional cost incurred by producing one more unit of a good or service.

Declining

A term indicating a decrease or reduction in quantity, quality, or importance over time.