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
