Ch. 3

In practice, drawing industry boundaries is

A matter of judgment that depends upon the purpose of the analysis

For the purposes of strategy formulation, seeking to identify key success factors

Can guide a company toward the sources of competitive advantage, but must be combined with unique choices for exploiting these success factors

Airlines' frequent flyer programs and retailer loyalty schemes are both examples of efforts to

Establish product differentiation by measures that reward customer loyalty

If an industry earns a return on capital in excess of its cost of capital:

It will attract the attention of potential entrants and, unless protected by high barriers to entry, the return on capital will fall

The core of a firm's business environment is comprised by

Its relationships with customers, competitors, and suppliers

Initiatives to improve an industry's profitability through changing its structure are:

More difficult in fragmented industries than in concentrated industries

The basic premise of industry analysis is that

The level of profitability within an industry is determined by the systematic influence of the industry structure that determines the intensity of competition in the industry

The profits earned by firms in an industry are determined by

The value of the product for customers, the intensity of competition, and the relative bargaining powers of producers, their suppliers, and their buyers

Firms supplying niche markets are often highly profitable because

They tend to be sufficiently small that a single firm can often establish a dominant position

The most useful approach to forecasting industry profitability in the future is

To understand how the industry's structure has determined competitive intensity and profitability in the past, then to use information on an industry's changing structure to predict how profitability is likely to change in the future

Identifying key success factors within an industry requires answers to the following questions:

What do customers want and what should the firm do to survive competition?

To determine whether the cement industry is national or global in scope, we need to consider:

Whether the buyers of cement are willing to substitute between cement supplied by domestic producers and that supplied by foreign producers on the basis of price OR Whether cement producers are willing to shift the supply of cement between countries on the basis of price difference between then