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Strategic Management > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

Threats

A

Element in the external environment that could endanger a firm’s integrity and profitability

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2
Q

Opportunities

A

Elements in a company’s environment that allow it to formulate and implement strategies to become more profitable

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3
Q

Industry

A

Group of companies offering products or services that are close substitutes for each other (satisfy the same basic customer need)

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4
Q

Rival

A

A company’s closest competitor

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5
Q

Industry boundaries

A

Basic customer needs served by the market
= boundaries can change

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6
Q

SCP Paradigm

A

Structure - Conduct - Performance

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7
Q

Structure in the SCP

A

Number of buyers and sellers
Product differentiation
Barriers to entry
Cost structure

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8
Q

Conduct in the SCP

A

Pricing behavior
Product strategy
Advertising
R&D
Investment

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9
Q

Performance in the SCP

A

Productivity
Profitability
Allocation efficiency

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10
Q

Competitive force - Risk of entry

A
  • Potential competitors
  • Economies of scale
  • Brand loyalty
  • Absolute cost advantage
  • Switching costs
  • Government regulations
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10
Q

Competitive force - Bargaining power of buyers

A

Bargain down the price or raise costs by demanding better quality
- Buyers can choose sellers and purchase in large quantities
- Low switching costs
- Buyers can threaten to enter the industry

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10
Q

Competitive force - Bargaining power of suppliers

A

Supplier’s power to raise price or industry costs
- Product has few substitute and is vital to the buyer
- Supplier not dependent
- High switching costs for the buyer
- Threaten to enter the industry

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10
Q

Competitive force - Rivalry among competitors

A

Competitive struggle between companies within an industry to gain market share from each other
- Competitive structure
- Demand
- Cost conditions
- Exit barriers

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10
Q

Strategic groups

A

Companies in an industry differ in the way they strategically position products in the market

Product positioning:
- Distribution channels and market segment served
- Quality
- Technological leadership
- Pricing and advertising policies
- Customer service

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10
Q

Competitive force - Complementors

A

Companies that sell products that add value to the other products
= strong complementor provide opportuniy for creating value
= weak complementor slow industry growth and limit profitability

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10
Q

Competitive force - Substitute products

A

Those of different business that satisfy similar customer needs

11
Q

How to draw Strategic group?

A
  1. Select two most important competing factors in the industry
  2. Two factors are not highly correlated
  3. Create a 2x2 matrix
  4. Locate firms in the space
11
Q

Mobility barriers

A

Within industry factors that inhibit the movement of company between strategic groups

12
Q

Entry barriers

A

Factors that make it costly or hard for potential new entrants to enter an industry

13
Q

Exit barriers

A

Factors that keep firms in an unprofitable industry

14
Q

Stages in the industry life-cycle

A
  1. Embryonic
  2. Growth
  3. Shakeout
  4. Mature
  5. Decline
15
Q

Embryonic industry

A

Growth is slow due to:
- buyer’s unfamiliarity with the product
- poor distribution channels
- high price due to lack of economies of scale

16
Q

Growth industry

A

First-time demand expands rapidly due to new customers in the marker
Price falls because:
- economies of scale
- development of distribution channels

But threats from potential competitors are high
Rivalry is low (expand revenue without taking market share away from competitors)

17
Q

Industry shakeout

A

Demand approaches saturation level
- Fewer first-time buyers
- High rivalry
- Price war

18
Q

Mature industry

A

Market is totally saturated, demand is limited to replacement demand, and growth is low or zero
Industries consolidate and become oligopolies

19
Q

Declining industry

A

Growth becomes negative due to:
- technological substitution
- social changes
- demographics
- international competition

20
Q

Macroeconomic forces

A
  • Growth rate of the economy
  • Interest rates
  • Currency exchange rates
  • Inflation or deflation rates
21
Q

Global forces

A

Falling barriers to international trade

Strategic Management (3 decks)

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