chapter 3 bus policy

when buyers can credibly threaten to backwardly integrate into the industry, the power of buyer is _____-

high

when suppliers offer products that are differentiated, the power of suppliers is

high

the pace of technological change seems to be

increasing

in general, a firm improves its strategic position by

increasing its competitive advantage

changes over time

industries are dynamic, industry convergence, and industry divergence

when a firm enters an industry, which of the following often occur

industry profit potential declines, incumbent firms spend more to satisfy customers and lower prices

the closer firms are on the strategic group map, the more __________________ they are competing with each other

intensely and directly

as strategic commitments increase, rivalry within an industry

intensifies

the relationship between the natural environment and business organizations can best be described as

interdependent

power of suppliers

pressures that industry suppliers can exert on profit potential -supplier industry concentration, dependence of supplier on your industry, switching costs, differentiation of products, substitutes, threat of forward integration

the lack of change in price levels of goods and services

price stability

which of the following are advantages, independent of size, that incumbent firms possess

proprietary technology, brand loyalty, cumulative experience effects, and preferential access to distribution channels

which of the following are employed as nonmarket strategies to influence government bodies

public relations, lobbying, and litigation

economic factors

represented by largely marcoeconomic, economy wide phenomena (growth rates, interest rates, levels of employment, price stability like inflation and deflation, and currency exchange rates

political factors

result from the processes and actions of government bodies - nonmarket strategies (lobbying, PR, and contributions) -closely related to legal factors

threat of new entrants

risk that potential competitors will enter the industry. new firms may lower prices to attract customers. Incumbent firms may increase costs to satisfy existing customers

performance differences

rivalry is strongest between firms within the same strategic group, external environment impact strategic groups differently, the industry's forces impact strategic groups differently, and some strategic groups are more profitable than others

the cultures, norms, and values of the society in which a firm competes are considered

sociocultural factors

a set of companies within a specific industry that seek to achieve competitive advantage in similar ways

strategic group

the key take away from the five forces model is that

the stronger the forces, the lower the industry's ability to earn profits

which of the following are ways that powerful suppliers are a threat to firms

they can capture part of the economic value created by firms, they can force the cost of production to increase, and they can reduce the industry's profit potential

when restrictive government policies do not exist or when industries become deregulated, the _____________ is high

threat of entry

Five Forces Model

threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitutes products or services all centered around rivalry among existing competitors

which of the following conditions lead to a strong threat of substitutes

when the price performance trade off is attractive and when the cost of switching to the substitute is low

which of the following are essential questions that strategic leaders need to consider to increase the probability of entering an industry successfully

who are the players? what type of entry should be made? how to enter? when to enter?

industry

a group of incumbent companies facing more or less the same set of suppliers and buyers

in a perfect competitive industry, firms have difficulty

achieving competitive advantage

examples of demographic factors

age, gender, and sexual orientation

walmart producing private label brands, such as equate health and beauty items and parent's choice baby products, is an example of

backward integration

which of the following are ways in which the power of buyers affects producers

by demanding higher quality, by requesting more service, and by obtaining price discounts

sociocultural factors

captures a society's cultures, norms, and values (includes demographic trends)

when samsung and google cooperate as complementors to compete against apple's strong position in the mobile device industry while at the same time becoming increasingly competitive with each other, this is referred to as

co-operation

rivalry among existing competitors

intensity with which companies within the same industry jockey for market share and profitability -industry structure, industry growth, strategic commitments, and exit barriers

the threat of entry is high when capital requirements are ____________ in comparison to the expected returns

low

features of monopoly

one firm, considerable pricing power, unique product, and very high entry barrier

performance differences

strategic groups are sets of companies that pursue a similar strategy within a specific industry, intra-group rivalry exceeds inter group rivalry, and mobility barriers restrict movement between groups

the expected competitive intensity is stronger when the other four forces are __________, and weaker when the other four forces are _____________

stronger; weaker

the positive effect that one user of a product or service has on the value of that product or service for other users is known as

the network effect

in a period of economic boom, unemployment is _________, and human resources become expensive

low

which of the following are likely outcomes of a competitive rivalry based entirely on price cutting

investments from firms drop off, firms struggle to make profits, and most or all value is transferred to customers

ecological factors

involve broad environmental issues (natural environment, global warming, and sustainability

an example of a recent innovation in process technology is

lean manufacturing

managers have __________ direct influence over external forces in the firm's general environment than those in the firm's task environment

less

consumers tend to buy homes, automobiles, and computers when interest rates are ___________ because credit is inexpensive

low

recessions are less likely to harm ______________ airlines, which appeal more to budget conscious travel legacy carriers

low cost

entry barriers to threat of new entrants

make entering an industry more difficult -economies of scale, network effects, customer switching cost, capital requirements, threat of retaliation, and other advantages

legal factors

manifested in the form of laws, mandates, regulations, and court decisions

features of monopolistic competition

many firms, some pricing power, differentiated product, medium entry barrier

features of perfect competition

many small firms, firms are price takers, commodity product, and low entry barriers

in the airline industry, the ___________________ of offering international routes restricts movements between hub and spoke and point to point airlines

mobility barrier

the computer hardware industry is an example of

monopolistic competition

as utility companies tend to serve a whole market exclusively, they are known as ___________________ because the governments involved believe that the product or service would not be supplied otherwise

natural monopolies

occurs when a firm has accrued significant market power and is changing the industry structure in its favor

near monopoly

according to the five forces model, a firm seeking to compete in an established industry should seek to do which of the following

position itself in a way that leverages weak forces and position itself in a way that relaxes the constraints of strong forces

complements

product, service, or competency that adds value to the original product offering when used in tandem

if a business considers changing vendors, but doing so would require that business to alter product specifications, retrain employees, and/or modify existing processes, we would say the business faces signifcant

switching costs

which of the following have helped increase the rate of convergence in the media industries

telecommunications advances, improved IT, digital media

which of the following statements about industry dynamics is true

the five forces model is a static model and over time, industry structures are not stable

when companies seek ways to recharge car batteries in a sustainable way, it is an example of _____________ creating business opportunities

ecological factors

exit barriers are composed of

economic and social factors

the cost advantages that a firm obtains by increasing output, such as spreading fixed costs over units are called

economies of scale

obstacles that determine how easily a firm can enter an industry are called

entry barriers

through use of the PESTEL model, firms are able to do which of the following

evaluate external trends and monitor external factors

the obstacles that determine how easily a firm can leave an industry, are called

exit barriers

PESTEL Framework

external environment is made up of Political, Economic, Sociocultural, Technological, Ecological, and Legal factors

features of oligopoly

few (large) firms, some pricing power, differentiated products, and high entry barrier

which of the following are characteristics of a perfectly competitive industry

firms in the industry sell a commodity product, individual firms have little or no ability to raise prices, and the industry is fragmented

profit potential of an industry

five forces model -stronger forces lower and industry's profit potential in order to success, firms must maximize the space between economic value and costs

the weaker the five forces in porter's model, the _______ the industry's profit potential

greater

which of the following are examples of economic factors in the firm's general environment

growth rates, price stability, interest rates

which of the following are ways in which the power of buyers affects prodcuers

by obtaining price discounts, by demanding higher quality, and by requesting more service

technological factors

captures the application of knowledge to create new processes and products (product and process innovations)

which of the following are important factors in determining the intensity of rivalry among existing competitors

competitive industry structure, industry growth, exit barriers

a group of companies that deal with more or less the same set of suppliers and buyers is called

an industry

power of buyers

pressure an industry's customers can put on the producer's margins in the industry -number of buyers, differentiation of products, switching costs, and threat of backward integration

threat of substitutes

pressure from products or services OUTSIDE THE GIVEN INDUSTRY that come close to meeting the needs of current customers -price/performance trade off, switching costs

which of the following are important strategic dimensions in mapping strategic groups

product and service offerings, cost structure, and expenditures on research and development