Chapter 2

Question 1

Define a sector

Answer 1

Group of closely related industries

So high-tech sector consisting of
embedded chip industry
software verification
etc

Question 2

Lay out the 5 forces model

Answer 2

1. Risk of entry
2. Bargaining power of buyers
3. Bargaining power of suppliers
4. Threat of substitutes
5. Power of complement providers

Question 3

What are 5 important barriers of entry?

Answer 3

1. Brand Loyalty
2. Absolute Cost Advantages
3. Economies of scale
4. Customer switching costs
5. Government regulations

Question 4

What are 4 factors that have a major impact on the intensity of rivalry among established companies within an industry?

Answer 4

1. Industry competitive structure
2. Demand conditions
3. Cost Conditions
   - Such as if fixed costs are too high and profitability is tied to sales volume
4. Hiehght of exit barriers in the industry
   - These are things like having investments such as equiepment, or have to pay out a lot of severance, emotional attachments to an industry, etc

Question 5

What are strategic groups?

Answer 5

These are groups within an industry that you can use to classify companies. So in the Commercial Aerospace industry, you can classify via range and seat capacity, and you see that there are two strategic groups:

Regional jets

• Bombardier
• Embraer
• Fokker

Large Jets

• Boeing
• Airbus

Question 6

What is an embryonic industry?

Answer 6

One that is just starting to develop, so Quantum Computign is a good example

Question 7

What are the 5 stages in the industry life cycle?

Answer 7

1. Embryonic
2. Growth
3. Shakeout
   - So this is kind of interesting, but when demand saturation occurs and everyone has the product already, there becomes a gap where supply keeps growing but demand levels out. That excess supply can cause price wars and intense competition to see who will dominate the mature stage.
4. Mature
5. Decline

Question 8

What is the main technique used to analyze competition in the industry environment?

Answer 8

Competitive Force Model

Question 9

The stronger the forces are in the competitive forces model, the ____

Answer 9

The more competitive an industry and lower rate of return can be earned. Such as airline industry

Question 10

When are buyers a threat?

Answer 10

When the company depend on them for business, but the buyers arent dependent on the company

Question 11

When are suppliers a threat?

Answer 11

When the company depends on their suppliers, but the suppliers are not dependent on the company

Question 12

What represents a sixth powerful competitive force?

Answer 12

The power, visor, and competence of complementors can a strong positive impact on demand in an industry

Question 13

What 5 things make up the macroenvironment?

Answer 13

1. Macroeconomic environment
2. global environment
3. technological environment
4. demographic and social environment
5. political and legal environment

Question 14

What is most important question for strategic management?

Answer 14

We want to Understand why some firms consistently outperform others. On th flip side, why do some fail? Ultimately all about performance

Question 15

A company’s economic performance. Results from what to distinct causes?

Answer 15

Industry structure, so remember the profitability chart of all the differerent industries

And

Relative position within the industry

Question 16

What is the margin equation?

Answer 16

Margin = industry margin + your competitive advantage