Chapter 2 Notes

Question 1

general environment

Answer 1

consists of broad trends in the context within which a firm operates that can have an impact on a firm's strategic choices 
Technological Change
Demographic Trends
Cultural Trends
Economic Climate
Legal and Political Conditions
Specific International Events

Question 2

Technological Change

Answer 2

creates both opportunity and threats as a firm expands

Question 3

Demographics

Answer 3

the distribution of individuals in a society in terms of age, sex, marital status, etc

Question 4

Culture

Answer 4

the values, beliefs, and norms that guide a society

Question 5

recession

Answer 5

when activity in an economy is relatively low

Question 6

depression

Answer 6

a severe recession that lasts for several years

Question 7

business cycle

Answer 7

alternating pattern of prosperity followed by recession, followed by prosperity

Question 8

legal and political conditions

Answer 8

laws and the legal systems impact on business

Question 9

specific international events

Answer 9

events such as civil wars, political coups, terrorism, etc

Question 10

Five Force Model of Environmental Threats

Answer 10

Threat of entry
threat of rivalry
threat of buyers
threat of substitutes
threat of suppliers

Question 11

environmental threat

Answer 11

any thing that seeks to reduce the performance of an organization

Question 12

threat of new entrants

Answer 12

firms that have recently started or that threaten to begin in an industry

Question 13

perfectly competitive

Answer 13

when there are large numbers of competing firms

Question 14

monopolistically competitive industries

Answer 14

when there are large numbers of competing firms and low cost entry into and exit from the industry

Question 15

oligopolies

Answer 15

characterized by a small number of competing firms, by homogeneous products, and by high entry and exit costs

Question 16

monopolistic industries

Answer 16

consist of only one firm

Question 17

barriers to entry

Answer 17

attributes of an industry’s structure that increase the cost of entry

1. economies of scale
2. product differentiation
3. cost advantages independent of scale
4. government regulation of entry

Question 18

economies of scale

Answer 18

exist in an industry when a firm’s costs fall as a function of its volume of production

Question 19

diseconomies of scale

Answer 19

exist when a firm’s cost rise as a function of its volume of production

Question 20

product differentiation

Answer 20

means that incumbent firms possess brand identification and customer loyalty that potential entrants do not

Question 21

sources of cost advantage

Answer 21

proprietary technology
managerial know how
favorable access to raw materials
learning curve cost advantages

Question 22

proprietary technology

Answer 22

secret or patented tech

Question 23

managerial know how

Answer 23

knowledge needed to compete in an industry

Question 24

favorable access to raw materials

Answer 24

firms already have favorable access to materials

Question 25

learning curve cost advantages

Answer 25

firms who have more experience have an advantage

Question 26

rivalry

Answer 26

the intensity of competition among a firm's direct competitors

Question 27

substitutes

Answer 27

meet approximately the same customer needs

Question 28

threat of suppliers

Answer 28

they can raise the cost of materials

Question 29

forward vertical integration

Answer 29

when suppliers cease to be suppliers and become suppliers and rivals

Question 30

threat of buyers

Answer 30

people can threaten not to buy your product if they are large enough

Question 31

backward vertical integration

Answer 31

when the buyer wants to get into the suppliers market and take some business

Question 32

five forces model and average industry performance

Answer 32

``` threat of entry threat of rivalry threat of substitutes threat of powerful suppliers threat of powerful buyers ```

Question 33

competitor

Answer 33

if your customers value your product less when others firms have your product

Question 34

complementor

Answer 34

a firm is this if your customers value your firm more when another firm is in business

Question 35

fragmented industries

Answer 35

industries in which a large number of small or medium sized firms operate and no small set of firms has dominant market share or creates dominant technologies ex: service industries, retailing, fabrics, and commercial printing

Question 36

emerging industry

Answer 36

newly created or newly re-created industries formed by technological innovation, changes in demand, the emergence of new customer needs, and so forth

Question 37

first mover advantages

Answer 37

advantages that come to firms that make important strategic and technological decisions early in the development of an industry

Question 38

technological leadership strategy

Answer 38

firms that make early investments in particular technologies in an industry are implementing this

Question 39

strategically valuable assets

Answer 39

resources required to successfully compete in an industry

Question 40

customer switching costs

Answer 40

exist when customers make investments in order to use a firm's particular products or services

Question 41

mature industries

Answer 41

characteristics include: 1. slowing growth in total industry demand 2. the development of experienced repeat customers 3. slowdown in increased in production capacity 4. slowdown in the intro of new products or services 5. an increase in the amount of international competition 6. an overall reduction in the profitability of firms in the industry

Question 42

processes

Answer 42

the activities it engages in to design, produce, and sell its products or services

Question 43

process innovation

Answer 43

a firm's effort to refine and improve its current processes

Question 44

declining industry

Answer 44

an industry that has experienced an absolute decline in unit sales over a sustained period of time

Question 45

market leader

Answer 45

firm with largest market share

Question 46

niche strategy

Answer 46

reducing your scope and focus on narrow segments of the declining industry

Question 47

harvest strategy

Answer 47

engaging in long, systematic, phased withdrawal, extracting as much value as possible during the withdrawal period

Question 48

divestment

Answer 48

extracting a firm from a declining industry