Chapter 2

Question 1

Barriers to Entry

Answer 1

Obstacles to entering an industry, including economies of scale, brand identity and product differentiation, capital requirements, switching costs, access to distribution channels, cost disadvantages independent of size, and government policy.

Question 2

Critical Success Factors (CSFs)

Answer 2

Elements of the strategy that are essential for success among most or all competitors within a given industry.

Question 3

Exit Barriers

Answer 3

Economic, strategic, or emotional obstacles to leaving an industry.

Question 4

Herfindahl-Hirschman Index (HHI)

Answer 4

A sophisticated measure of market concentration calculated by summing the squares of the market shares for each firm competing in an
industry.

Question 5

Hypercompetition

Answer 5

The notion that industries emerge, develop, and evolve so rapidly that identifying the current life cycle stage may be neither possible or worthwhile.

Question 6

Industry

Answer 6

A group of competitors that produces similar products or services.

Question 7

Industry Life Cycle

Answer 7

The stages (introduction, growth, shakeout, maturity, and decline) through which industries are believed to pass

Question 8

Market Share

Answer 8

The percentage of total market sales attributed to one competitor (i.e., firm sales divided by total market sales)

Question 9

Relative Market Share

Answer 9

A firm’s share of industry sales when only the firm and its key competitors are considered (i.e., firm sales divided by sales of the key firms in the industry).

Question 10

Substitute Products

Answer 10

Alternative offerings produced by firms in another industry that satisfy similar consumer needs.

Question 11

Switching Costs

Answer 11

One-time costs that buyers of an industry’s outputs incur as they switch from one company’s products or services to another’s.