Ch.3 Strategy

With which strategic group does California Pizza Kitchen compete the least, according to this map? Cici's Papa John's Mellow Mushroom Domino's Hungry Howie's

Domino's

Is the threat of substitutes greater in the airline industry or the soft drink industry? The airline industry because we have so many alternate means of transportation. The soft drink industry because people can choose other beverages, such as water, tea, or coffee The soft drink industry because all carbonated beverages are the same The airline industry because people value their time The soft drink industry because customers would incur high costs in switching

The soft drink industry because people can choose other beverages, such as water, tea, or coffee

Suppliers with strong bargaining power can erode industry profitability by adopting all of the following, except charging industry members exceedingly higher prices. passing costs to industry members. influencing the terms and conditions of supply in their favor. accounting for a large fraction of the total costs of the industry's products. limiting industry members' opportunities to find a better deal.

accounting for a large fraction of the total costs of the industry's products.

The key success factors in an industry are the major underlying causes of change in industry and competitive conditions affecting the company directly. hinge on how many different strategic groups the industry has. depend on how many rivals are trying to move from one strategic group to another. are those competitive factors that most affect industry members' ability to prosper in the marketplace. are determined by the industry's driving forces.

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

The kinds of factors that might be reviewed... The kinds of factors that might be reviewed when considering the "Economic" aspect of the PESTEL include changes in disposable income per capita. the election of a conservative Congress. changes in the speed of Internet communication capabilities. judicial outcomes that impact product liability within an industry. changes in the average age of different consumer groups.

changes in disposable income per capita.

Effective use of the PESTEL framework can help us identify new competitors. only a few effective trends.emerging substitute products.emerging opportunities and threats within an industry.how a trend is changing buyer behavior in an industry.

emerging opportunities and threats within an industry.

An analysis of driving forces does not normally involve evaluating increasing efforts on the part of industry members to collaborate closely with their suppliers. observing the entry or exit of major firms. assessing technological change and manufacturing process innovation. monitoring changing societal concerns, attitudes, and lifestyles. understanding diffusion of technical know-how across more companies and more countries.

evaluating increasing efforts on the part of industry members to collaborate closely with their suppliers.

Why do you think that no pizza chains are positioned in the area above the Pizza Hut's strategic group? Some strategic groups are less favorably impacted by industry driving forces. Some strategic groups are less favorably positioned than others because they confront stronger competitive forces. No other pizza chain can compete with Pizza Hut. All positions on the map are equally attractive depending upon the prevailing competitive pressures. The area above the Pizza Hut group may not be as attractive a market nor present the same profit potential.

he area above the Pizza Hut group may not be as attractive a market nor present the same profit potential.

Developing and analyzing a strategic group map would not help you understand why some positions on the map are more optimal than others. determine which companies seem destined to struggle because of their position. identify which competitors can or cannot engage in joint lobbying efforts to improve your industry's trade association. draw conclusions about where on the map is the best place to be and why. reveal which companies are close competitors and which are distant competitors.

identify which competitors can or cannot engage in joint lobbying efforts to improve your industry's trade association.

The competitive pressures from potential new entrants tend to be weaker when industry members are willing and able to contest new entries.buyer demand is growing rapidly.existing industry members hope to expand their market reach by entering product segments or geographic areas where they do not have a presence.newcomers can expect to earn attractive profits.there is a large pool of potential entrants, some of which have the capabilities to overcome high entry barriers.

industry members are willing and able to contest new entries.

The impact of baby boomers getting older on an industry would be classified in which PESTEL factor? Economic Socio-cultural Technological Political Legal

Socio-Cultural

Based on the strategic group map in Illustration Capsule 3.2, which pizza chains are Hungry Howie's closest competitors? Cici's and Sbarro Domino's and Pizza Hut Papa John's and Cici's None of these Little Caesar's and Sbarro

Cici's and Sbarro

Bargaining power of buyers is weaker when buyer costs of switching to competing products are low. buyers have the ability to postpone purchases. buyers are large and few relative to the number of industry sellers. buyer demand is weak in relation to industry supply. buyers are not very price-sensitive.

buyers are not very price-sensitive.

The importance of Porter's Five Forces varies by industry. Which element would lead to positive profitability? power of suppliers and power of buyers threat of substitutes and power of buyers suppliers working together to maintain prices threat of entry and threat of substitutes a strong leadership team and power of suppliers

power of suppliers and power of buyers

The most widely encountered barriers entry candidates must overcome include all of the following, except sizable economies of scale in production. small market size and special customer requirements. restrictive government policies. the difficulties of building a network of distributors.

small market size and special customer requirements.

Whether buyers are able to exert strong competitive pressures on industry members depends on (1) how much buyer preferences vary within the industry and (2) whether industry members are spending more or less on advertising. (1) the degree to which buyers have bargaining power and (2) how much buyer preferences vary within the industry. (1) the degree to which buyers have bargaining power and (2) the extent to which buyers are price-sensitive. (1) the extent to which buyers can exercise enough bargaining power to influence the conditions of sale in their favor and (2) whether strategic partnerships between certain industry members can adversely affect other industry members. (1) the extent to which buyers are price-sensitive and (2) the competitiveness of the market.

(1) the degree to which buyers have bargaining power and (2) the extent to which buyers are price-sensitive.

Industry competitive forces are not permanent, changing as firms evolve to compete more effectively. So, why has the profitability of the soft drink industry declined? Prices of soft drinks have increased substantially.The customer base has expanded, but the beverage selection has not.The number of new entrants into the soft drink market has confused consumers.Zero and low calorie drinks have become increasingly popular.Increased health concerns have led consumers to substitute healthier products.

Increased health concerns have led consumers to substitute healthier products.

Rivalry among competing sellers increases when buyer costs to switch brands are high. buyer demand is growing slowly or declining. the rivals face low exit barriers. the firms in the industry have low fixed costs. the firms in the industry have low storage costs.

buyer demand is growing slowly or declining.

Good competitive intelligence enables more accurate predictions about how long it will take a rival to copy most of what the strategy leader is doing. helps in determining whether a rival is gaining or losing market share. helps managers construct up-to-date strategic profiles of rivals. entails drawing the conclusion that companies seem destined to struggle because of their position. points to those things that every firm in the industry needs to attend to in order to retain customers and weather the competition.

helps managers construct up-to-date strategic profiles of rivals.

The primary factors that determine whether competitive pressures from substitute products are strong, moderate, or weak include good substitutes are readily available, attractively priced substitutes have comparable or better performance features, and buyers have low costs in switching to substitutes. buyers' switching costs to obtain substitutes are high and occur regardless of whether or not the substitutes target a small, focused customer group or the mass market. substitutes have worse performance features and are thus priced lower than competitive products, so buyer loyalty in the market remains low. buyers view the substitutes as attractively priced in relation to their quality, performance, and other relevant attributes, and those substitutes target either a small, focused customer group or the mass market. substitutes are not readily available because the rate of innovation is fast or slow, and buyers have high costs in switching to substitutes as a result.

good substitutes are readily available, attractively priced substitutes have comparable or better performance features, and buyers have low costs in switching to substitutes.

Geraldine, the COO of a gourmet food truck business that specializes in Spanish cuisine such as paella and tapas, has been asked to present her company with an evaluation of strong prospects for attractive profits. What would she normally not include in her analysis? whether or not the food truck industry's opportunities for international expansion are promising. whether or not the food truck industry is impacted by changes in the macro-environment. whether or not the company occupies a stronger market position than rivals. whether or not her gourmet food truck company can deliver on the industry's key success factors. whether or not food truck industry profitability will be impacted by the prevailing driving forces

whether or not the food truck industry's opportunities for international expansion are promising

Which of the following scenarios does not exemplify the impact of macro-environment on these companies' strategic opportunities? Manchester, England craft brewer Seven Brothers partners with the American cereal manufacturer Kellogg's to create Throw Away I.P.A., a smooth, mellow beer made from Kellogg's Corn Flakes, in an effort to help reduce the amount of greenhouse gas emissions from food wastes. Jeff Bezos's Amazon.com Inc. announces plans to launch 3,236 communications satellites, joining in a new space race to offer Internet service from low orbits and squaring off to challenge the fleet of communications satellites planned by Elon Musk's SpaceX. Samsung, stung by a burgeoning trade war between the United States and China that is impacting the sales of smartphones in both nations, forecasts a 56 percent drop in quarterly operating profits.Ford and Volkswagen announce a strategic partnership to cooperate on the development of autonomous electric vehicles in order to shorten the development cycle and share the enormous costs of deploying new technologies.Concerned over unfair trade practices and diminishing consumer choices, Great Britain's competition regulator announces an investigation into a $575 million investment led by Amazon in the London-based food-delivery service Deliveroo, one of the top international companies in the business of delivering restaurant meals.

Jeff Bezos's Amazon.com Inc. announces plans to launch 3,236 communications satellites, joining in a new space race to offer Internet service from low orbits and squaring off to challenge the fleet of communications satellites planned by Elon Musk's SpaceX.

The character and complexities of competitive forces are rarely the same from one industry to another and must be thoroughly understood to answer such questions as: "Where are we now?" Michael Porter's Five Forces Competitive Model is the most widely used tool in business today in determining the competitive intensity and therefore attractiveness of a particular industry. This model, as depicted in Figure 3.3, holds that competitive forces affecting industry attractiveness go beyond rivalry among competing sellers and include pressures stemming from four coexisting sources. The five competitive forces affecting industry attractiveness are listed below: 1. Competitive pressures stemming from buyer bargaining power. 2. Competitive pressures coming from companies in other industries to win buyers over to substitute products. 3. Competitive pressures stemming from supplier bargaining power. 4. Competitive pressures associated with the threat of new entrants into the market. 5. Competitive pressures associated with rivalry among competing sellers to attract customers. This is typically the strongest of the five competitive forces. Instructions: Based on the information provided in the Overview, match the competitive pressure to its source of competition. High capital needs; Extremely low switching costs; No proprietary products or services; Little or no profit the first few years; Likelihood of retaliation strong; Consumer preference for well-known brands Mature stage business cycle; High fixed costs; Brand identities and amenities differ; Low switching costs Medium switching costs Limited number of manufacturers; Standardized products; High capital requirements; Long-term contracts; Limited differentiation; High switching costs; Low bargaining power Low switching costs; Some loyalty; Low bargaining power; Price sensitivity

Suppliers Suppliers Open choices for matching No answer 1 2 3 4 5 Buyers Buyers Open choices for matching No answer 1 2 3 4 5 Substitutes Substitutes Open choices for matching No answer 1 2 3 4 5 New Entrants New Entrants Open choices for matching No answer 1 2 3 4 5 Competition (among Airlines) Competition (among Airlines) Open choices for matching No answer 1 2 3 4 5

The COVID-19 pandemic and other societal shocks are not considered to be among the principal components of strategic significance in the PESTEL analysis because they are caused by political factors including the extent to which government intervenes in the economy in an ongoing manner. associated with anticipated sociocultural forces that include societal values, attitudes, cultural factors, and lifestyles that impact business. the result of technological factors that include the pace of change and technical developments that have the potential for improving society. dictated by foreseeable economic conditions that include the general economic climate and specific factors such as interest rates, inflation rate, and unemployment rate, as well as conditions in the stock and bond markets that can affect consumer confidence. much harder for companies to anticipate and prepare for because they often begin with little warning.

much harder for companies to anticipate and prepare for because they often begin with little warning.

You are considering starting a business to provide high-quality bookkeeping services targeted to restaurants and other food service providers in your region. Which factors would you evaluate to determine whether the food service industry offers good prospects for attractive profits? constructing a strategic group map and assessing the attractiveness of the competitive position of each strategic group whether the market leaders enjoy competitive advantages and how difficult it is to promote innovation to develop a strongly differentiated product or service for which a price premium may be charged an assessment of which firms in the industry have the best and worst competitive strategies, whether the number of strategic groups in the industry is increasing or decreasing, and whether economies of scale and experience curve effects are a key success factor the industry's growth potential, whether competition appears destined to become stronger or weaker, how the industry's driving forces might affect overall industry profitability, the company's competitive position relative to rivals, and the company's proficiency in performing industry key success factors whether there are more than five key success factors, more than five barriers to entry, and more than five industry drivers

the industry's growth potential, whether competition appears destined to become stronger or weaker, how the industry's driving forces might affect overall industry profitability, the company's competitive position relative to rivals, and the company's proficiency in performing industry key success factors