Chapter 1 & 2 Flashcards
When has a firm competitive advantage?
A firm has a firm competitive advantage when it creates more economic value than rival firms
Value = 40
Price = 30
Cost = 15
Give the Consumer/Producer Surplus and the Economic Value Created
Consumer Surplus (40-30)
Producer Surplus (30-15)
Economic Value Created (40-15)
Competitive advantage can be Temporary and Sustainable. Why?
> Competitive advantage typically results in high profits
Profits attract competition
Competition limits the duration of competitive advantage
Why do we perform an external analysis?
Make more informed strategic choices
>Discover opportunities and threats
>Analyse potential for profits
>Understand the nature of competition
Levels of analysis
> General Environment
Industry
Strategic group
Individual firm
Give the different aspects of the general environment of a firm
> Technological change
Demographic trends
Cultural Trends
Economic Climate
Legal and political conditions
Specific international events
Industry model - explain the 5 forces model of porter
> Entery
Rivalry
Substitutes
Suppliers
Buyers
Name 4 types of competition
Perfect competition
Monopolistic competition
Oligopoly
Monopoly
What is the sixth force of porters 5 forces model, and what does it mean?
Complementors additional products that are complementary.
Ex. PS4-Games
What type of industry structures do you have?
> Emerging
Fragmented
Mature
Declining
Name characteristics of the Emerging industry
> Upcoming market
No technology standards
No dominant firm
New customers
Opportunity:
> First mover
> Locking - up assets
> Creating switching costs
Name characteristics of the Fragmented industry
> Large number of small firms
No dominant firms
No dominant technology
Commodity type products
Low barriers of entry
Few, economies of scale
Oppotunities:
Consolidation
Name characteristics of the Mature industry
> Slowing growth
Technology standards
Increasing international competition
Industry wide profits declining
Opportunities
> Refine products
> Improve service
> Process innovation
Name characteristics of the Declining industry
> Sales declining
Wel established firms
Stopped investing in maintenance
Opportunities
> Market leadership
>niche
>harvest
>Divest
Name an example of strategic group
Porsche-ferrari Opel-Fiat
