Chapter 2

Question 1

What is an industry?

Answer 1

A group of companies offering products or services that are CLOSE SUBSTITUTES for each other

Question 2

What is potential competitors?

Answer 2

Companies that are currently NOT competing in the industry but have the potential to do so

Question 3

What is economies of scale?

Answer 3

Reduction in unit costs attributed / thanks to large total output (volume)

Question 4

What is brand loyalty?

Answer 4

Preferences of customer for the product of established companies

Question 5

What is absolute cost advantage?

Answer 5

A cost advantage that is enjoyed by incumbents in an industry and that NEW ENTRANTS CANNOT expect to match

Question 6

What is switching cost?

Answer 6

Cost that consumer must bear to switch from one company to another - included non monetary cost

Question 7

What are porter’s five competitive forces?

Answer 7

Risk of entry - potential competitors, bargaining power of suppliers, bargaining power of buyers, bargaining power of complements, and the threat of substitutes

Question 8

What is industry life cycle?

Answer 8

Model/tool for analyzing the effects of industry evolution on competitive forces

Question 9

What are the stages of the industry life cycle?

Answer 9

Embryonic/Introduction, Growth, Shakeout, Mature, Decline

Question 10

What are the macroenvironment

Answer 10

The PESTLE = Political, economic, social, technological, legal, and environmental