bcor 460 exam 2

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The threat of entry

describes the risk that potential competitors will enter the industry

currency exchange rate

determines how many dollars one must pay for a unit of foreign currency

firms within the same strategic group are ____ competitors

direct

growth rates, interest rates, and levels of employment would be considered _____ factors in the firms general environment

economic

Network effects

escribe the positive effect that one user of a product or service has on the value of that product or service for other users

example of a oligopolistic industry

express- delivery industry and the soft drink industry

High oil prices, governmental restrictions, and economic downturn are all examples of _____

external factors

Competitive advantage

flows to the firm that is able to create as large a gap as possible between the value the firm's product or service generates and the cost required to produce it (V - C).

What are some monopoly industries

public utilities supplying water, gas, and electricity

strategic position

relates to its ability to create value for customers (V) while containing the cost to do so (C)

Frequently government policies

restrict or prevent new entrants

The intensity with which companies in an industry jockey for market share and profitability is known as _____

rivalry

exit barriers, strategic commitments, and competitive industry structure are important factors in determining the intensity of ____

rivalry

the cost advantages that a firm obtains by increasing output, such as by spreading fixed costs over more units, are called economies of ______

scale

The PESTEL model provides a relatively straightforward way to

scan, monitor, and evaluate the important external factors and trends that might impinge upon a firm

The cultures, norms, and values of the society in which a firm competes are considered ______ factors

sociocultural

price _____ is the lack of change in price levels of goods and services

stability

a ___ group is a set of companies within a specific industry that seek to achieve competitive advantage in similar ways

Strategic

What is industry convergence

A process whereby formerly unrelated industries begin to satisfy the same customer need

A key feature of an oligopoly is that the competing firms in the industry ____, meaning the actions of any firm will influence the behaviors of other firms

Are interdependent

What are the entry barriers?

Economic of scale, networks effects, customer switching costs, capital requirements, advantages independent of size, government policy, and credible threat of retaliation

cost advantages that accrue for firms with larger output because they can spread fixed costs over more units and can employ technology more efficiently are called ?

Economies of scale

True or false sociocultural factors tend to be fixed

False

In a oligopoly, which of the following conditions exist?

High barriers to entry, differentiated products, and a few large firms

An industry analysis provides

Insight into a firms strategic position within an industry. The level of profitability that can be expected for the average firm in the industry. A rigorous way of identifying the industry profit potential

What is a monopolistically competitive industry

It has many firms, a differential product, some obstacles to entry, and the ability to raise prices for relatively unique product while retaining customers

What is an oligopolistic industry

Its consolidated with a few larges firms, differential products, high barriers to entry, and some degree of pricing power

What is the threat of substitutes

Its the idea that products or services available from outside the given industry will come close to meeting the needs of current customers

Examples of some non-market strategies

Lobbying, public relations, litigation

What are likely outcomes of a competitive rivalry based entirely on price cutting?

Most or all value is transferred to customers, firms struggle to make profits, investments from firms drop off

An example of a recent innovation in PROCESS technology is?

Nanotechnology

Entry barriers

Obstacles that determine how easily a firm can enter an industry and often significantly predict industry profit potential.

What are the four main competitive industry structures

Perfect competition, monopoly , monopolistic competition, and oligopoly

What is a key feature of an oligopoly industry

The competing firms are interdependent and the actions of one firm influence the behaviors of the others

The threat of substitutes is high when

The substitutes offers an attractive price- performance trade off or the buyers cost of switching to the substitute is low

the pressure of rivalry increases when what forces increase in intensity?

The threat of substitutes, the threat of entry, and the power of buyers and suppliers

The power of buyers is high when

There are a few buyers and each buyer purchases large quantities. The industry products are standardized or undifferentiated. Buyers face low or no switching costs.

Demographic

These trends capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class

What are strategic commitments

They are firm actions that are costly, long-term oriented, and difficult to reverse

How can buyers effect an industry

They can demand price discounts of higher quality products

positive externality

When network effects are present, the value of the product or service increases with the number of users

What is a monopoly industry

When there is only one, often large firm supplying the market

What is co-opetition

Which is cooperation by competitors to achieve a strategic objective

According to Michael Porter, the profit potential of an industry is _____

a function of five forces related to competition

Whats a strategic group

a set of companies that pursue a similar strategy within a specific industry in their quest for competitive advantage

real growth rate

adjusts for inflation.

Advantages based on brand loyalty, proprietary technology, preferential access to raw materials, and favorable geographic location are examples of _____

advantages independent of size

Examples of a demographic factor

age, sexual orientation, gender

A group of companies that deal with more for less the same set of suppliers and buyers make up ____

an industry

The most rigorous means of analyzing the profit potential within a specific industry is to conduct _____

an industry analysis

The most rigorous means of analyzing the profit potential within a specific industry is to conduct _______

an industry analysis

Economies of scale

are cost advantages that accrue to firms with larger output because they can spread fixed costs over more units, employ technology more efficiently, benefit from a more specialized division of labor, and demand better terms from their suppliers. These factors in turn drive down the cost per unit, allowing large incumbent firms to enjoy a cost advantage over new entrants that cannot muster such scale.

Switching costs

are incurred by moving from one supplier to another. Changing vendors may require the buyer to alter product specifications, retrain employees, and/or modify existing processes

external factors in the firm's task environment are ones that managers do have some influence over, such

as the composition of their strategic groups (a set of close rivals) or the structure of the industry

Deflation

describes a decrease in the overall price level.deflation is actually a serious threat to economic growth because it distorts expectations about the future.

The power of _____ is the pressure they can put on the margins of producers in the industry by demanding a lower price of higher product quality

buyers

production costs can increase when

buyers demand higher quality and more service

Sociocultural factors

capture a society's cultures, norms, and values

Technological factors

capture the application of knowledge to create new processes and products

The external forces called technological factors ____

captures the application of knowledge to create new process and products

Rivalry among existing competitors describes the intensity with which

companies within the same industry jockey for market share and profitability

ESPN starting a Spanish-Language television channel called ESPN deportes is an example of how companies react to the ______ trend that the hispanic population in the United States sees the income rising and is growing fast

demographic

Capital requirements

describe the "price of the entry ticket" into a new industry

What four factors determine the intensity among existing competitors

competitive industry structure, industry growth, strategic commitments, and exit barrier

examples of monopolistic competition

computer hardware industry

firms have a tendency to change the industry structure in their favor, for example by making industries more ______ through mergers and acquisitions

consolidated

In periods of economic expansion

consumer and business demands are rising, and competition among firms frequently decreases

Incumbent firms often possess

cost and quality advantages that are independent of size. These advantages can be based on brand loyalty, proprietary technology, preferential access to raw materials and distribution channels, favorable geographic locations, and cumulative learning and experience effects.

In the PESTEL model, political factors are those that relate to ____

government bodies

In the PESTEL model, political factors are those that relate to _____

government bodies

What are some important sources of entry barriers

government policy, economies of scale, credible threat of retaliation, network effects, and capital requirements

the weaker the five forces in the porters model, the ____ the industry profit potential

greater

The PESTEL model

groups the factors in the firms general environment into six categories. Political, economic, sociocultural, technological, ecological, and legal

Economic factors

growth rates, levels of employment, interest rates, price stability, currency exchange rates

nonmarket strategies

hat is, through lobbying, public relations, contributions, litigation, and so on

deregulation in industries

have generated significant new entries. Therefore, the threat of entry is high when restrictive government policies do not exist or when industries become deregulated.

. A credible threat of retaliation by incumbent firms

include increased product and service innovation, advertising, sales promotions, and litigation.

Legal factors

include the official outcomes of political processes as manifested in laws, mandates, regulations, and court decisions—all of which can have a direct bearing on a firm's profit potential

Ecological factors

involve broad environmental issues such as the natural environment, global warming, and sustainable economic growth

An industry

is a group of incumbent companies facing more or less the same set of suppliers and buyers. Firms competing in the same industry tend to offer similar products or services to meet specific customer needs

what is a consolidated industry

is dominated by a few firms or even just one firm, and has the potential to be highly profitable

What is a fragmented firm

it consists of many small firms and tend to generate low profitability

In addition to the static nature of the strategic group model, what is its other shortcomings

it does not help us understand why there are performance differences among firms in the same strategic group

What are compliments

its a product, service, or competency that adds value to the original product offering when the two are used in tandem

What is a perfectly competitive industry

its fragmented and has many small firms, a commodity product, ease of entry, and little or no ability for each individual firm to raise its prices

managers have ____ direct influence over external forces in the firms general environment than those in the firms task environment

less

A perfectly competitive industry has ___ entry barriers and ___ small firms

low, many

A perfectly competitive industry has _____ entry barriers and ___ small firms

low, many

With the threat of additional capacity coming into an industry, incumbent firms may

lower prices to make entry appear less attractive to the potential new competitors, which would in turn reduce the overall industry's profit potential, especially in industries with slow or no overall growth in demand. may force incumbent firms to spend more to satisfy their existing customers. This spending reduces an industry's profit potential, especially if firms can't raise prices

external factors in the firm's general environment are ones that managers have little direct influence over, such as

macroeconomic factors (e.g., interest or currency exchange rates)

What are factors in a firms legal environment

mandates, regulations, and laws

When managers understand the forces in the external environment, they are better able to ______

mitigate threats and leverage opportunities

The computer hardware industry is an example of ____

monopolistic competition

The positive effect that one user of a product or service has on the value of that product or service for other users is known as the _____

network effect

The overall economic growth rate is a measure

of the change in the amount of goods and services produced by a nation's economy

Game theory is used in what competitive industry structure

oligopolistic

What are the four main competitive industry structures

perfect competition, monopolistic competition, oligopoly, and monopoly

Although the five forces model is useful in understanding an industry profit potential, it provides only a _____

point in time snapshot of a moving target

In the group of external factors that form the PESTEL model, the P stands for _____ and the L stands for ____

politcal, legal

In the group of external factors that form the PESTEL model, the P stands for ____ and the L stands for _____

political, legal

When suppliers can demand higher prices for their inputs or reduce the quality of the input factor delivered, they demonstrate that they are _____

powerful

What are signs of an industry with slow growth or negative growth

price discounts, frequent new product releases with minor modifications, intense promotional campaigns, and fast retaliation by rivals are all tactics

What are examples of economic factors in the firms general environment

price stability, interest rates, and growth rates

Industry analysis

provides a more rigorous basis not only to identify an industry's profit potential—the level of profitability that can be expected for the average firm—but also to derive implications for one firm's strategic position within an industry

the threat of _____ is one of the five forces and can be exemplified by the threat that videoconferencing presents to business travel

substitutes

The five forces of porters model include the threat of entry and substitutes, rivalry among existing competitors and power of _____?

suppliers and buyers

interest rates

the amount that creditors are paid for use of their money and the amount that debtors pay for that use, adjusted for inflation

the weaker the five forces

the greater the industry's profit potential—making the industry more attractive

Price stability

the lack of change in price levels of goods and services—is rare

the stronger the five forces

the lower the industry's profit potential

What is the competitive industry structure depend on

the number and size of its competitors, the firms degree of pricing power, the type of product or service, the height of entry barriers

Political factors result from

the processes and actions of government bodies that can influence the decisions and behavior of firms

What are some ways that powerful suppliers are a threat to firms

they can capture part of the economic value created by firms, they can reduce the industry profit potential, they can force the cost of production to increase

What is non price competition

this means competing by offering unique product features or services rather than competing based on price alone

What is backward integration

this occurs when a buyer moves upstream in the industry value chain, into the sellers business

When restrictive government policies do not exist or when industries become deregulated, the ____ of entry is high

threat

Porter's Five Forces

threat of entry, power of suppliers, power of buyers, threat of substitutes, and rivalry among existing competitors

five forces that shape competition

threat of entry, power of suppliers, power of buyers, threat of substitutes, and rivalry among existing firms.

Economic value

thus equals V minus C

inflation

too much money chasing too few goods and services

A firms strategic position relates to its ability to create ____ for customer while containing the ____ to do so

value, cost

examples of substitutes

videoconferencing versus business travel and turbo tax instead of an accountant

example of backward integration

walmart

What are the five questions to become a strategic leader

who are the players, when to enter, how to enter, what type of entry,


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