Chapter 2

Question 1

industry

Answer 1

A group of firms producing products (goods and/or services) that are similar to each other

Question 2

perfect competition

Answer 2

A competitive situation in which
- price is set by the “market”
- all firms are price takers
- entries and exits are relatively easy

Question 3

industrial organization (IO) economics (industrial economics)

Answer 3

A branch of economics that seeks to better understand how firms in an industry compete and then how to regulate them

Question 4

structure-conduct-performance (SCP) model

Answer 4

An industrial organization economics model suggests that industry structure determines firm conduct (strategy), which in turn determines firm performance

Question 5

structure

Answer 5

Structural attributes of an industry such as the cost of entry

Question 6

conduct

Answer 6

Firm actions such as product differentiation

Question 7

performance

Answer 7

The result of firm conduct

Question 8

monopoly

Answer 8

A situation whereby only one firm provides the goods and/ or services for an industry

Question 9

oligopoly

Answer 9

A situation whereby a few firms control an industry

Question 9

duopoly

Answer 9

A special case of oligopoly that has only two players

Question 9

five forces framework

Answer 9

A framework governing the competitiveness of an industry was proposed by Michael Porter
(1) the intensity of rivalry among competitors
(2) the threat of entrants
(3) the bargaining power of suppliers
(4) the bargaining power of buyers
(5) the threat of substitutes

Question 10

dominance

Answer 10

A situation whereby the market leader has a very large market share

Question 11

incumbent

Answer 11

A current member of an industry that competes against other members

Question 12

scale-based advantage

Answer 12

Advantage derived from economies of scale (the more a firm produces some products, the lower the unit costs become)

Question 13

economies of scale

Answer 13

Reduction in per unit costs by increasing the scale of production

Question 14

non-scale-based advantage

Answer 14

Low-cost advantage that is not derived from the economies of scale

Question 15

product proliferation

Answer 15

Efforts to fill product space in a manner that leaves little “unmet demand” for potential entrants

Question 16

product differentiation

Answer 16

The uniqueness of products that customers value

Question 17

network externality

Answer 17

The value a user derives from a product increases with the number (or the network) of other users of the same product

Question 18

platform

Answer 18

An intermediary that connects two or more distinct groups of users and enables their direct interaction

Question 19

excess capacity

Answer 19

Additional production capacity currently underutilized or not utilized

Question 20

bargaining power of the supplier

Answer 20

The ability of suppliers to raise prices or reduce the quality of goods and services

Question 21

forward integration

Answer 21

Acquiring and owning downstream assets

Question 22

bargaining power of the buyer

Answer 22

The ability of buyers to reduce prices or demand quality improvement of goods and services

Question 23

backward integration

Answer 23

Acquiring and owning upstream assets

Question 24

substitute

Answer 24

Product and service of a different industry that satisfies customer needs currently met by the focal industry

Question 25

industry positioning

Answer 25

Ways to position a firm within an industry in order to minimize the threats presented by the five forces

Question 26

artificial intelligence (AI)

Answer 26

Simulation of human intelligence processes by machines, especially computer systems

Question 27

Big Data (data analytics)

Answer 27

Analyzing extremely large data sets that may reveal previously unknown patterns, trends, and associations

Question 28

Internet of Things (IoT)

Answer 28

A system of interconnected devices and machines linked by the Internet

Question 29

digital strategy

Answer 29

An application of digital technologies to existing business activities and/or to develop new ways of competition Also known as: the digital business model

Question 30

generic strategy

Answer 30

A strategy intended to strengthen the focal firm’s position relative to the five competitive forces, which can be (1) cost leadership (2) differentiation (3) focus

Question 31

cost leadership

Answer 31

A competitive strategy that centers on competing on low costs and prices

Question 32

differentiation strategy

Answer 32

A competitive strategy that focuses on how to deliver products that customers perceive as valuable and different

Question 33

focus strategy

Answer 33

A competitive strategy that serves the needs of a particular segment or niche of an industry

Question 34

ecosystem

Answer 34

A community of organizations interacting as a system

Question 35

complementor

Answer 35

A firm that sells products that add value to the products of a focal industry

Question 36

industry life cycle

Answer 36

The evolution of an industry that typically goes through - introduction phase - growth phase - maturity phase - decline phase

Question 37

strategic group

Answer 37

A group of firms within a broad industry

Question 38

mobility barrier

Answer 38

Within industry differences that inhibit the movement between strategic groups

Question 39

flexible manufacturing technology

Answer 39

Modern manufacturing technology enables firms to produce differentiated products at low costs (usually on a smaller batch basis than the large batch typically produced by cost leaders)

Question 40

additive manufacturing (3D printing)

Answer 40

Manufacturing three-dimensional products from a digital model by using additive processes, where products are created by adding successive layers of material

Question 41

additive manufacturing v. traditional manufacturing

Answer 41

Additive manufacturing contrasts traditional manufacturing, which can be labeled “sub-tractive” processes centered on removing material by methods such as cutting and drilling.

Question 42

mass customization

Answer 42

Mass-produced but customized products

Question 43

servitization

Answer 43

A smart combination of manufacturing and services

Question 44

The title of Chapter 2

Answer 44

Managing Industry Competition