Ch. 2

Question 1

general environment

Answer 1

composed of factors that can have dramatic effects on firm strategy

Question 2

demographics

Answer 2

root of many changes in society

• aging population, rising or declining affluence, changes in ethnic composition, geographic distribution of the population, and disparities in income level

Question 3

sociocultural forces

Answer 3

influence the values, beliefs, and lifestyles of a society

Question 4

politcal/legal segment

Answer 4

how a society creates and exercises power, including rules, laws, and taxation policies

Question 5

technological segment

Answer 5

innovation and state knowledge in industrial arts, engineering, applied sciences, and pure science; and their interaction with society

Question 6

economic segment

Answer 6

characteristics of the economy, including national income and monetary conditions

Question 7

global segment

Answer 7

influences from foreign countries, including foreign market opportunities, foreign-based competition, and expanded capital markets

Question 8

Data analytics

Answer 8

a leading and highly visible component of broader technological phenomenon - the emergence of digital technology

big data - to help better customize their product and service offerings to customers while more efficiently and fully using the resources of the company

Question 9

industry

Answer 9

the nature of competition, as well as the profitability of a firm, is often directly influenced by developments in the competitive environment

Question 10

competitive environment

Answer 10

factors that pertain to an industry and affect a firms strategy

Question 11

porters five forces model

Answer 11

1 - the threat of new entrants
2 - the bargaining power of buyers
3 - the bargaining power of suppliers
4 - the threat of substitute products and services
5 - the intensity of rivalry among competitors in an industry

Question 12

threat of new entrants

Answer 12

refers to the possibility that the profits of established firms my have new competitors

Question 13

six major sources of entry barriers

Answer 13

• economies of scale - spreading the cots of production over the number of units produced
• product differentiation - creates a barrier to entry by forcing entrants to spend heavily to overcome existing customer loyalties
• capital requirements - the need to invest large financial resources to compete creates a barrier to entry, especially if the capital is required for risky upfront advertising or research and development
• switching costs - a barrier to entry is created by the existence of one time costs that the buyer faces when switching from one suppliers product or service to another
• access to distribution channels - the new entrant need to secure distribution for its product can create a barrier to entry
• cost disadvantages independent of scale - some existing competitors may have advantages that are independent of size or economies of scale

Question 14

bargaining power of buyers

Answer 14

buyers threaten an industry by forcing down prices, bargaining for higher quality or more services and paying competitors against each other

Question 15

bargaining power of suppliers

Answer 15

can exert bargaining power by threatening to raise prices or reduce the quality of purchased goods and services.

• the threat that suppliers may raise prices or reduce the quality of purchased goods and services

Question 16

threat of substitute products and services

Answer 16

the threat of limiting the potential returns of an industry by placing ceiling on the prices that firms in that industry can profitability charge without losing too many customers to substitute products

Question 17

the intensity of rivalry among competitors in an industry

Answer 17

firms use tactics like price competition, advertising battles, product introductions, and increased customer service or warrantees

• occurs when competitors sense the pressure or act on an opportunity to improve their position

Question 18

intense rivalry is the result of several interacting factors such as

Answer 18

numerous equally balanced competitors

slow industry growth

high fixed or storage costs

lack of differentiation or switching costs

capacity augmented in large increments

high exit barriers

Question 19

the threat of new entrants

Answer 19

digital technologies have influenced this

Question 20

the bargaining power of buyers

Answer 20

the internet and wireless technologies may increase buyer power by providing consumer with more information to make buying decisions and by lowering switching costs

Question 21

disintermediation

Answer 21

removing the organization or business process layers responsible for intermediary steps in the value chain of many industries

Question 22

reintermediation

Answer 22

the introduction of new types of intermediaries

Question 23

the intensity of competitive rivalry

Answer 23

only those competitors that van use digital technologies and the web to give themselves a distinct image, create unique product offerings, or provide “faster, smarter, cheaper” services are likely to capture greater profitability with the new technology

Question 24

complements

Answer 24

typically are products or services that have a potential impact on the value of a firms own products or services

Question 25

strategic groups

Answer 25

cluster of firms that share similar strategies

1 - no two firms are totally
2 - no two firms are exactly the same