Ch 3 Questions Flashcards
Porter’s Competitive Forces Model
Provides a general view of the firm, its competitors, and the firm’s environment.
Five competitive forces shape the fate of the firm:
1) Traditional Competitors
2) New Market Entrants
3) Substitute Products and Services
4) Customers
5) Suppliers
Traditional Competitors
All firms share market space with other competitors who are continuously devising new, more efficient ways to produce by introducing new products and services and attempting to attract customers by developing their brands and imposing switching costs on their customers.
New Market Entrants
New companies are always entering the marketplace.
New companies have several possible advantages: they are not locked into old PPE, they often hire younger workers who are less expensive and perhaps more innovative, they are not encumbered by old worn-out brand names, and they have more motivation.
These advantages can also be weaknesses: they depend on financing, have little brand recognition, and have a less-experienced work force.
Substitute Products and Services
New technologies create new substitutes all the time. The more substitute products and services in your industry, the less you can control pricing and the lower your profit margins.
Customers
A profitable company depends in large measure on its ability to attract and retain customers and charge high prices.
Suppliers
The more suppliers a firm has, the greater control it can exercise over suppliers in terms of price, quality, and delivery schedules.
What are generic strategies for fighting off new market entrants or fighting off suppliers or substitute products and services?
1) Low-Cost Leadership
2) Product Differentiation
3) Focus on Market Niche
4) Strengthen Customer and Supply Intimacy
Product Differentiation
Manufacturers and retailers are using information systems to create products that are customized and personalized to fit the precise specifications of the individual customer.
Ex. Nike ID
Focus on Market Niche
Information systems enable companies to analyze customer buying patterns, tastes, and preferences closely so that they efficiently pitch advertising and marketing campaigns to smaller and smaller target markets.
Strengthen Customer and Supply Intimacy
Strong linkages to customers and suppliers increase switching costs and loyalty to your firm.
What would Porter recommend for Walmart to fight off new market entrants?
Porter would recommend that Walmart try and focus on low-cost leadership, product differentiation, market niche, and strengthen customer and supplier intimacy.
What are the features of an organization?
1) Routines and Business Procedures
2) Organizational Culture
3) Organizational Politics
4) Organizational Environment
5) Organizational Structure
Routines and Business Processes
Precise rules, procedures, and practices that have been developed to cope with virtually all expected situations.
Organizational Politics
People in organizations occupy different positions with different specialties, concerns, and perspectives.
They naturally have divergent viewpoints about how resources, rewards, and punishments should be distributed.
Political Resistance.
Organizational Culture
Set of assumptions about what products the organization should produce, how it should produce them, where, and for whom.
A powerful unifying force that restrains political conflict and promotes common understanding, agreement on procedures, and common practices.
