CHAPTER 4 - EXTERNAL ANALYSIS

______ markets are those markets that have no clear dominant competitor and are made up of a large number of similar-sized companies.

Fragmented

Which of the following must a competitive advantage do in order to be valuable to the business?

Help the business earn more profits than competitors.

______ analysis is a theoretical approach and practical methodology that examines business functions in terms of whether a product or service meets the criteria of being rare, durable, non-substitutable, and valuable simultaneously.

Resource-based

Exact competitors are ______.

businesses that directly compete for the same ideal customers

A company's ______ ______ is made up of those things that the company does uniquely well or better than anyone in the same industry.

competitive advantage

An effective industry analysis starts by identifying every potential ______ within a defined distance of the new business's location.

competitor

Entrepreneurs should define the industry broadly enough to be inclusive of all potential ______.

competitors

Elasticity of demand is the ______.

consumer's response to price changes

Most small businesses that directly compete with well-established firm operate at a ______.

cost disadvantage and must compete on some other basis

When entrepreneurs can easily exit an industry, the intensity of industry competition tends to ______.

decrease and the threat posed by new entrants is reduced

Products or services that are considered rare have qualities that competitors find ______.

difficult to obtain

A(n) ______ ______ keeps an entrepreneur from leaving a business he or she interested in.

exit barrier

The ______ step of conducting an external analysis is determining the industry in which the new business will compete.

first

Knowing one's customer is ______ for the effective use of marketing dollars.

important

A(n) ______ is defined as those direct competitors that sell similar products or services within a specified geographic radius that customers are willing to travel.

industry

Associations exist to support and promote their ______.

industry

What provides a competitive advantage in one industry ______ and ______ with time.

is different from other industries; varies

Many companies that are not potential competitors are willing to help industry outsiders improve their operations by sharing their ______.

knowledge

Trends shape the ______ -term prospects of the given industry.

long

While defining a radius from which one believes to draw a majority of one's customers, one should ______.

make this distance reasonable

"Relatively ______" is a determination about whether a service or a product may be easily substituted by something else that a competitor could provide.

nonsubstitutable

Entrepreneurs can create a list of competitors that customers can find ______ when there is no physical restriction to the business's operation.

on the internet electronically

Conducting a ______ analysis will help entrepreneurs better understand what creates the business' advantage.

resource-based

The primary purpose of the NAICS code is to help ______.

the government gather, track, and publish data on specific industries

An important part of a competitor's analysis is gaining an understanding of the industry's ______.

trends

Entrepreneurs must ______.

understand why customers choose their business and focus on those advantages

Products that are not ______ will not provide the business with returns in excess of what competitors earn from their sale.

valuable

A competitive advantage creates ______.

value

Which of the following are examples of sources where an opportunity may come from? (Check all that apply.)

- A vacancy at the perfect location for a business - A new technological advancement - A personal frustration

What is the key to effective opportunity recognition by an entrepreneur?

A detailed understanding of the external environment.

______ competitive factors describes areas of a business that provide an opportunity for it to gain value over and above ordinary returns in the industry.

Unusual or unique

A competitive map ______.

is an analytical tool that helps entrepreneurs compare competitors based on a set of criteria

Understanding the business's competitive advantage is the ______ step in an external analysis.

last

The entrepreneur's local area may be doing well, while other areas around the country are doing ______.

poorly

Data that are aggregated on a national level may have limited value to entrepreneurs ______.

who are interested only in customers from their local area

Benchmarking is ______.

working with and learning from a company outside one's industry that has a particular skill that is potentially critical

A competitive advantage can come from which of the following examples? (Check all that apply.)

- A location that is highly sought after by other businesses - Access to distribution channels that competitors cannot gain access to - A product that is protected by a patent

Which of the following areas provide a business with a competitive advantage? (Check all that apply.)

- Allow the business to charge a higher price - Draw new customers when the price is the same as competitors - Help the business create a lower cost structure

Which of the following are potential sources of a business's competitive advantage? (Check all that apply.)

- An activity that the business does best - A unique structural business attribute

Which of the statements about an industry are true? (Check all that apply.)

- Businesses in the same industry sell similar products - Customers share similar buying criteria, such as price. - It is defined as businesses within a specified geographic radius

Which of the following statements regarding exact or direct competitors are correct? (Check all that apply.)

- Direct competitors can be easily found in the local telephone book - Identifying direct competitors is easier when entrepreneurs are clear regarding their customers' needs - Often, direct competitors are geographically local

Which of the following statements regarding developing competitive maps are true? (Check all that apply.)

- Entrepreneurs must develop a list of criteria that they wish to take away from their visits to customers - One must take a customer perspective from a series of visits - Entrepreneurs should visit all potential competitors

Which of the following statements about unusual or unique competitive factors are correct? (Check all that apply.)

- Entrepreneurs need to focus their resources on these factors - These factors are central to developing a competitive advantage - These factors provide a means for the business to differentiate itself from competitors

Which of the following is the first step in understanding the nature of the external environment?

Define the business's industry.

______ products perform a similar function or achieve the same result, but are not a precise imitation.

Substitute

"______" refers to the ability to gain extraordinary returns for the business's product or service.

Valuable

The product or service must meet ______ in order to develop into a competitive advantage.

all four of the criteria (rare, durable, relatively non-substitutable, and valuable)

Determining a reasonable distance that customers will be willing to travel is more of a(n) ______ than a(n) ______.

art; science

Entrepreneurs should be ______ in defining their customers.

as accurate as possible

Industry ______ exist for nearly any industry and often at the state, national, and even international levels.

associations

Entrepreneurs should ______ when defining their business's industry.

be as specific as possible

Customers who shop online ______.

don't really care where they order things from

Which of the following are criteria that should be considered in developing a competitive map? (Check all that apply.)

- The quality and availability of parking - The facility's square footage - The pricing of products

Which of the following are the three elements that describe how durability helps businesses hold onto the competitive advantage? (Check all that apply.)

- How long it would take for a competitor to imitate the product/service or to wash away the business's advantage. - The length of time that a business might be able to gain and hold a competitive advantage. - The desire of competitors to compete with the business using the same potential resource or capability.

Which of the following are reasons why entrepreneurs should develop their own competitive map? (Check all that apply.)

- It is less experience - It provides the entrepreneur with an understanding of what is right and wrong with each competitor - It will help in developing insights regarding positioning, pricing, and even facility layout.

Which of the following statements are true about developing a competitive map? (Check all that apply.)

- Its purpose is to better understand competitors and their capabilities - It is a step in external analysis - It should be developed by the entrepreneur

Which of the following statements regarding a business's competitive advantage are true? (Check all that apply.)

- New businesses rarely perform better than competition in all areas - New businesses need to develop one or several fundamental characteristics with which it is exceeds the industry's performance - A competitive advantage must provide the opportunity to be more profitable that competitors

Resource-based analysis examines which of the following criteria that products or services must meet? (Check all that apply.)

- Rare - Durable - Valuable

Identify the critical steps in examining the nature of the external environment of a business. (Check all that apply.)

- Research the industry in which one expects to do business - Draw a set of competitive maps - Research the competitors within the industry that one expects to do business