Ch. 3

Buyer-bargaining power

Buyers with strong bargaining power can limit industry profitability by demanding price concessions, better payment terms, or additional features and services that increase industry members' costs.

Substitute products

Companies in one industry are vulnerable to competitive pressures from the actions of companies in another industry whenever buyers view the products of the two industries as good substitutes.

What is the strongest of the five competitive forces?

Rivalry among competing sellers

Buyer-bargaining power is influenced by:

- If buyers' costs of switching to competing brands or substitutes are low - If number of buyers is small or if a customer is important to seller - If buyer demand is weak - If buyers are well informed about sellers' products, prices, and costs - If buyers pose a credible threat of integrating back into the business of sellers.

Six principal components of broad macro environment

- Political factors - Economic conditions - Sociocultural forces - Technological factors - Environmental forces - Legal/regulatory factors

Entry barriers

- Presence of sizable economies of scale in production - Cost and resource disadvantages not related to scale of operation - Strong brand preferences and high degree of customer loyalty - High capital requirements - Difficulty of building a network of distributors-retailers - Restrictive regulatory policies - Tariffs - Ability of industry incumbents to launch vigorous initiatives to block a newcomer's successful entry.

What influences supplier-bargaining power?

- Readily available from other suppliers - Cost of switching suppliers - Cost benefit of producing one's own product - Short supply of supply

Which of the following statements is accurate about competitive pressures created by the rivalry among competing sellers?

- Rivalry is usually stronger in slow-growing markets and weaker in fast-growing markets. - Rivalry intensifies when competing sellers regularly launch fresh actions to boost their market standing and business performance. - Rivalry is usually weaker in industries comprised of vast numbers of small rivals; likewise, it is often weak when there are fewer than five competitors. - Rivalry is stronger in industries where competitors are equal in size and capability All of these are correct.

Which of the following is/are true of a company's macro-environment?

- The impact of the macro-environment on a company's strategy can be big or small. - Some factors in the macro-environment could change slowly or have a low impact on the company's business situation. - Managers should always scan the environment and pay attention to relevant macro-environmental factors. - A PESTEL analysis can be used to assess the strategic relevance of the macro-environment. All of these.

State of competition

- The stronger the collective impact of the five competitive forces, the lower the combined profitability of industry participants. - The weaker the collective impact, an industry is competitively attractive.

3 factors of substitute products

- Whether substitutes are readily available and attractively priced - Whether buyers view the substitutes as comparable or better - Whether the costs that buyers incur by switching products are high or low

Suppliers with strong bargaining power can erode industry profitability by _____________

- charging industry members exceedingly high prices. - passing costs to industry members. - limiting industry members' opportunities to find a better deal. - influencing the terms and conditions of supply in their favor. All of these are correct.

Strategic group maps

A strategic group consists of those industry members with similar competitive approaches and positions in the market.

Broad macro environment

Encompasses all the relevant factors making up the broad environmental context in which a company operates (relevant, meaning the factors are important enough that they should shape management's decisions regarding the company's long-term direction, objectives, strategy, and business model)

Which of the following is a good example of a manufacturing-related key success factor?

High capacity utilization

Which is the following is a benefit of good competitive intelligence?

It helps managers to avoid the damage to sales and profits that comes from being caught napping by the surprise moves of rivals.

Which of the following is not a purpose of using a strategic group map as an analytical tool?

Strategic group maps reveal which companies have the highest profit margins.

Supplier-bargaining power

Suppliers with strong bargaining power can erode industry profitability by charging industry members higher prices, passing costs on to them, and limiting their opportunities to find better deals.

Driving forces of fundamental change

The most powerful of change agents because they have the biggest influences in reshaping the industry landscape and altering competitive conditions.

Industry and competitive conditions

Uses well-validated concepts and analytical tools to get clear answers to seven questions:

Which are among the primary factors that determine whether competitive pressures from substitute products are strong, moderate, or weak?

Whether substitutes are readily available and whether the costs that buyers incur in switching to the substitutes are low or high.

Key Success Factors

competitive factors that most affect industry members' ability to prosper in the marketplace.

Supplier bargaining power is weaker when ___________________________________

industry members have the potential to integrate backward and self-manufacture their own requirements.

As a part of the macro-environment, __________ include the societal values, attitudes, cultural factors, and lifestyles that impact businesses, as well as demographic factors such as the population size, growth rate and age distribution.

sociocultural forces

Rivalry can be considered fierce to strong__________________

when the battle for market share is so vigorous that the profit margins of most industry members are squeezed to bare-bones levels.