MGMT 481 Ch 3 Quiz 3
Incumbent firms can benefit from several important sources of entry barriers:
- economies of sale - network effects - customer switching costs - capital requirements - advantages independent of size - government policy - credible threat of retaliation
What are the economic factors in a firm's external environment?
- growth rates - levels of employment - interest rates - price stability (inflation and deflation) - currency exchange rates
What are a few major innovations in process technnology?
- lean manufacturing - Six Sigma quality - biotechnology
Which of the following innovative ideas helped Airbnb develop a successful business in the peer-to-peer rental space?
- presenting a well-designed website - fortuitous timing that led to growing demand - ensuring a smooth transaction between hosts and guests
Managers are able to influence which of the following types of external forces?
- the structure of their industry - strategic group composition
Sociocultural factors
capture a society's cultures, norms, and values
Technological factors
capture the application of knowledge to create new processes and products
Co-competition
cooperation by competitors to achieve a strategic objective
capital reqirements
describe the "price of the entry ticket" into a new industry
Industry effects
describe the underlying economic structure of the industry
competitive industry structure
elements and features common to all industries, including the number and size of competitors, the firms' degree of pricing power, the type of product or service offered, and the height of entry barriers
Strategic commitments
firms actions that are costly, long-term oriented, and difficult to reverse
Entry barriers
obstacles that determine how easily a firm can enter an industry and often significantly predict an industry profit potential
exit barriers
obstacles that determine how easily a firm can leave an industry
Which factors result from the processes and actions of government bodies that influence the decisions and behaviors of firms?
political
Political factors
result from the processes and actions of government bodies that can influence the decisions and behavior of firms
Apply these steps to apply the five forces model:
1. Define the relevant industry 2. Identify the key players in each of the five forces and attempt to group them into different categories 3. Determine overall industry structure
The four main competitive industry structures are
1. Perfect competition 2. Monopolistic competition 3. Oligopoly 4. Monopoly
What are the five key competitive forces in Porter's Five Forces Model?
1. Threat of entry 2. Power of suppliers 3. Power of buyers 4. Threat of substitutes 5. Rivalry among existing customers (what the other four point to)
What are the five entry choices?
1. Who are the players? 2. When to enter? 3. How to enter? 4. What type of entry 5. Where to enter?
last E in PESTEL
Ecological
first E in PESTEL
Economic
L in PESTEL
Legal
P in PESTEL
Political
S in PESTEL
Sociocultural
T in PESTEL
Technological
The stronger the five forces, the lower the industry's profit potential
The weaker the five forces, the greater the industry's profit potential
complementor
a company that provides a good or service that leads customers to value your firm's offering more when the two are combined
Strategic position
a firm's strategic profile based on the difference between value creation and cost (V - C)
PESTEL model
a framework that categorizes and analyzes an important set of external factors that might impinge on a firm. These can create both threats and opportunities for the firm
Strategic group model
a framework that explains differences in firm performance within the same industry
Five forces model
a framework that identifies five forces that determine the profit potential of an industry and shape a firm's competitive strategy
Industry
a group of incumbent companies that face more or less the same set of suppliers and buyers
Industry analysis
a method to identify an industry's profit potential and derive implications for a firm's strategic position within an industry
industry convergence
a process whereby formerly unrelated industries begin to satisfy the same customer needs
complement
a product, service, or competency that adds value to the original product offering when the two are used in tandem
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
Switching costs
are incurred by moving from one supplier to another
firm effects
attribute firm performance directly to the actions strategic leaders take
A rise in economic growth is reflected by ___
businesses expanding operations to satisfy demand
Nonmarket strategy
strategic leaders' activities outside market exchanges where firms sell products or provide services to influence a firm's general environment through, for example, lobbying, public relations, contributions, and litigation in ways that are favorable to the firm
Threat of entry
the risk that potential competitors will enter an industry
Strategic group
the set of companies that pursue a similar strategy within a specific industry
Network effects
the value of a product or service for an individual user increases with the number of total users
Legal factors
include the official outcomes of political processes as manifested in laws, mandates, regulations, and court decisions
What is firm performance determined by?
industry and firm effects
mobility barriers
industry-specific that separate one strategic group from another
Ecological factors
involve broad environmental issues such as natural environment, global warning, and sustainable economic growth
Managers have ______ direct influence over the external forces in the firm's general environment than those in the firm's task environment
less
Economic factors are largely
macronomic