Chapter 2

Question 1

Opportunities

Answer 1

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

Question 2

Threats

Answer 2

Elements in the external environment that could endanger the integrity and profitability of the company’s business.

Question 3

Industry

Answer 3

A group of companies offering products or services that are close substitutes for each other.

Question 4

Potential Competitors

Answer 4

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

Question 5

Economies of scale

Answer 5

Reductions in unit costs attributed to large output.

Question 6

Brand Loyalty

Answer 6

Preference of consumers for the products of established companies.

Question 7

Absolute Cost Advantage

Answer 7

A cost advantage that is enjoyed by incumbents in an industry and that new entrants cannot expect to match.

Question 8

Switching Costs

Answer 8

Costs that consumers must bear to switch from the products offered by one established company to the products offered by a new entrant.