MGMT 481 Ch 3 Quiz 3

Incumbent firms can benefit from several important sources of entry barriers:

- economies of sale - network effects - customer switching costs - capital requirements - advantages independent of size - government policy - credible threat of retaliation

What are the economic factors in a firm's external environment?

- growth rates - levels of employment - interest rates - price stability (inflation and deflation) - currency exchange rates

What are a few major innovations in process technnology?

- lean manufacturing - Six Sigma quality - biotechnology

Which of the following innovative ideas helped Airbnb develop a successful business in the peer-to-peer rental space?

- presenting a well-designed website - fortuitous timing that led to growing demand - ensuring a smooth transaction between hosts and guests

Managers are able to influence which of the following types of external forces?

- the structure of their industry - strategic group composition

Sociocultural factors

capture a society's cultures, norms, and values

Technological factors

capture the application of knowledge to create new processes and products

Co-competition

cooperation by competitors to achieve a strategic objective

capital reqirements

describe the "price of the entry ticket" into a new industry

Industry effects

describe the underlying economic structure of the industry

competitive industry structure

elements and features common to all industries, including the number and size of competitors, the firms' degree of pricing power, the type of product or service offered, and the height of entry barriers

Strategic commitments

firms actions that are costly, long-term oriented, and difficult to reverse

Entry barriers

obstacles that determine how easily a firm can enter an industry and often significantly predict an industry profit potential

exit barriers

obstacles that determine how easily a firm can leave an industry

Which factors result from the processes and actions of government bodies that influence the decisions and behaviors of firms?

political

Political factors

result from the processes and actions of government bodies that can influence the decisions and behavior of firms

Apply these steps to apply the five forces model:

1. Define the relevant industry 2. Identify the key players in each of the five forces and attempt to group them into different categories 3. Determine overall industry structure

The four main competitive industry structures are

1. Perfect competition 2. Monopolistic competition 3. Oligopoly 4. Monopoly

What are the five key competitive forces in Porter's Five Forces Model?

1. Threat of entry 2. Power of suppliers 3. Power of buyers 4. Threat of substitutes 5. Rivalry among existing customers (what the other four point to)

What are the five entry choices?

1. Who are the players? 2. When to enter? 3. How to enter? 4. What type of entry 5. Where to enter?

last E in PESTEL

Ecological

first E in PESTEL

Economic

L in PESTEL

Legal

P in PESTEL

Political

S in PESTEL

Sociocultural

T in PESTEL

Technological

The stronger the five forces, the lower the industry's profit potential

The weaker the five forces, the greater the industry's profit potential

complementor

a company that provides a good or service that leads customers to value your firm's offering more when the two are combined

Strategic position

a firm's strategic profile based on the difference between value creation and cost (V - C)

PESTEL model

a framework that categorizes and analyzes an important set of external factors that might impinge on a firm. These can create both threats and opportunities for the firm

Strategic group model

a framework that explains differences in firm performance within the same industry

Five forces model

a framework that identifies five forces that determine the profit potential of an industry and shape a firm's competitive strategy

Industry

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

Industry analysis

a method to identify an industry's profit potential and derive implications for a firm's strategic position within an industry

industry convergence

a process whereby formerly unrelated industries begin to satisfy the same customer needs

complement

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

Economies of scale

are cost advantages that accrue to firms with larger output because they can spread fixed costs over more units, employ technology more efficiently, benefit from a more specialized division of labor, and demand better terms from their suppliers

Switching costs

are incurred by moving from one supplier to another

firm effects

attribute firm performance directly to the actions strategic leaders take

A rise in economic growth is reflected by ___

businesses expanding operations to satisfy demand

Nonmarket strategy

strategic leaders' activities outside market exchanges where firms sell products or provide services to influence a firm's general environment through, for example, lobbying, public relations, contributions, and litigation in ways that are favorable to the firm

Threat of entry

the risk that potential competitors will enter an industry

Strategic group

the set of companies that pursue a similar strategy within a specific industry

Network effects

the value of a product or service for an individual user increases with the number of total users

Legal factors

include the official outcomes of political processes as manifested in laws, mandates, regulations, and court decisions

What is firm performance determined by?

industry and firm effects

mobility barriers

industry-specific that separate one strategic group from another

Ecological factors

involve broad environmental issues such as natural environment, global warning, and sustainable economic growth

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

less

Economic factors are largely

macronomic