CHAPTER 2 STRATBUS PART 2. Flashcards
______ is a group of firms producing products that are close substitutes. In the course of competition, these firms influence one another.
industry
________ (measured primarily in the form of its characteristics) has a more direct effect on the competitive actions and responses a firm takes to succeed
industry environment
One reason________ pose such a threat is that they bring additional production capacity. Unless the demand for a good or service is increasing, additional capacity holds consumers’ costs down, resulting in less revenue and lower returns for competing firms.
new entrants (under threats of new entrants)
This makes it difficult for new firms to enter an industry and often place them at a competitive disadvantage even when they can enter.
Entry Barriers / Barriers to entry
_________ are derived from incremental efficiency improvements through experience as a firm grows larger. Therefore, the cost of producing each unit declines as the quantity of a product produced during a given period increases.
Economies of scale
Indirect relationship: As the the quantity increases, the cost decreases
customers may come to believe that a firm’s product is unique. This belief can result from the firm’s service to the customer, effective advertising campaigns, or being the first to market a good or service.
Greater levels of perceived product uniqueness create customers who consistently purchase a firm’s products.
Product Differentiation
Competing in a new industry requires a firm to have resources to invest. In addition to physical facilities, capital is needed for inventories, marketing activities, and other critical business functions.
Even when a new industry is attractive, the capital required for successful market entry may not be available to pursue the market opportunity.
Capital Requirements
__________are the one-time costs customers incur when they buy from a different supplier.
Switching costs
a decision made by manufacturers to produce a new, innovative product
creates __________ for customers.
high switching costs
If switching costs are high, a new entrant must offer either a substantially ____ price or a much better product to attract buyers.
lower
Over time, industry participants commonly learn how to effectively distribute their products. After building a relationship with its distributors, a firm will nurture it, thus creating switching costs for the distributors.
Access to Distribution Channels
Access to distribution channels can be a strong entry barrier for new entrants,
particularly in consumer ______ goods industries
nondurable
Proprietary product technology, favorable access to raw materials, desirable locations, and government subsidies are examples of what barriers to entry?
Cost Disadvantages Independent of Scale
______This may be the key survival and success in current retail industries
Business model innovation
This may be the key to survival and success incurrent retail industries.
Business model innovation
Through their decisions about issues such as the granting of licenses and permits, government can also control entry into an industry.
Government Policy
Companies seeking to enter an industry also anticipate the reactions of firms in the industry. An expectation of swift and vigorous competitive responses reduces the likelihood of entry.
Expected retaliation
In Expected retaliation, locating ____ not being served by incumbents allows the new entrant to avoid entry barriers.
market niches
Increasing prices and reducing the quality of their products are potential means suppliers use to exert power over firms competing within an industry.
Bargaining Power of Suppliers
If a firm is unable to recover cost increases by its suppliers through its own __________, its profitability is reduced by its suppliers’ actions.
pricing structure
True or False - If false, ano yon oh? HAHAHAH
A supplier group is powerful when: It is dominated by a few small companies and is more concentrated than the industry to which it sells.
False
small-large
True or False - If false, ano yon oh? HAHAHAH
A supplier group is powerful when: Satisfactory substitute products are not available to industry firms.
True
True or False - If false, ano yon oh? HAHAHAH
A supplier group is powerful when: Industry firms are not a significant customer for the supplier group.
True
True or False - If false, ano yon oh? HAHAHAH
A supplier group is powerful when: Suppliers’ goods are critical to buyers’ industry success.
False
industry - marketplace
True or False - If false, ano yon oh? HAHAHAH
A supplier group is powerful when: The effectiveness of suppliers’ products has created high fixed costs for industry firms.
False
fixed- switching
True or False - If false, ano yon oh? HAHAHAH
A supplier group is powerful when: It poses a credible threat to integrate forward into the buyers’ industry. Credibility is enhanced when suppliers have substantial resources and provide a highly differentiated product
true
True or False - If false, ano yon oh? HAHAHAH
A supplier group is powerful when: Some buyers attempt to manage or reduce suppliers’ power by developing a short-term relationship with them.
False
Short-term - Long-term
Firms seek to maximize the return on their invested capital. Alternatively, buyers (customers of an industry or a firm) want to buy products at the lowest possible price—the
point at which the industry earns the lowest acceptable rate of return on its invested capital.
Bargaining Power of Buyers
True or False
To reduce their costs, buyers bargain for higher quality, greater levels of service, and higher prices.
False
higher-lower
True or False
Customers (buyer groups) are powerful when: They purchase a large portion of an industry’s total input.
False
input-output
True or False
Customers (buyer groups) are powerful when: The sales of the product being purchased account for a significant portion of the seller’s quarterly revenues.
False
quarterly - annually
True or False
Customers (buyer groups) are powerful when: They could switch to another product at little, if any, cost.
True
True or False
Customers (buyer groups) are powerful when: The industry’s products are differentiated or standardized, and the buyers pose a credible threat if they were to integrate backward into the sellers’ industry
differentiated - undifferentiated
These are goods or services from outside a given industry that perform similar or the same functions as a product that the industry produces.
Substitute products
____ a product along dimensions that are valuable to customers (such as quality, service after the sale, and location) reduces a substitute’s attractiveness.
Differentiating
Because an industry’s firms are mutually dependent, actions taken by one company usually invite responses. Competitive rivalry intensifies when a firm is challenged by a competitor’s actions or when a company recognizes an opportunity to improve its market position.
Intensity of Rivalry among Competitors
Firms within industries are rarely __________; they differ in resources and capabilitiesband seek to differentiate themselves from competitors.
homogeneous
Sometimes companies continue competing in an industry even though the returns on their invested capital are low or even negative.
High Exit Barriers
Exit barriers are especially high in what industry?
airline industry
Effective _________are products of careful study and interpretation of data and
information from multiple sources.
industry analyses
Because of this, international markets and rivalries must be included in the firm’s analyses.
Globalization
Analysis of the ________within a given industry allows the firm to determine the industry’s attractiveness in terms of the potential to earn average or above-average
returns.
five forces
A set of firms emphasizing similar strategic dimensions and using a similar strategy is
called a__________
strategic group
Common exit barriers that firms face include the following:
not a question
- Specialized assets (assets with values linked to a business or location)
- Fixed costs of exit (such as labor agreements)
-Strategic interrelationships (relationships of mutual dependence, such as those
between one business and other parts of a company’s operations, including shared
facilities and access to financial markets)
-Emotional barriers (aversion to economically justified business decisions because of
fear for one’s own career, loyalty to employees, and so forth)
-Government and social restrictions (often based on government concerns for job
losses and regional economic effects; more common outside the United States)
True or False
The stronger the competitive forces, the higher the potential for firms to generate profits by implementing their strategies.
False
higher-lower
(Indirect)
True or False
An unattractive industry has low entry barriers, suppliers and buyers with strong bargaining positions, strong competitive threats from product substitutes, and intense rivalry among competitors.
True
True or false
The competition between firms within a strategic group is lesser than the competition between a member of a strategic group and companies outside that strategic group.
False
lesser-greater
True or false
intra-strategic group competition is more intense than is inter-strategic group competition.
True
What are some examples of strategic dimensions that firms in a strategic group may treat similarly
- extent of technological leadership
- product quality
- pricing policies
- distribution channels
- customer service
True or false
The strengths of the five forces differ across strategic groups
True
True or false
Firms within a group offer similar products to the same customers, the competitive rivalry among them can be intense
True
True or false
The closer the strategic groups are in terms of their strategies, the lesser is the likelihood of rivalry between the groups.
False
lesser-greater
_________focuses on each company against which a firm competes directly
Competitor analysis
In a competitor analysis, the firm seeks to understand the following:
What drives the competitor, as shown by its future objectives.
What the competitor is doing and can do, as revealed by its current strategy.
What the competitor believes about the industry, as shown by its assumptions.
What the competitor’s capabilities are, as shown by its strengths and weaknesses.
Critical to an effective______________ is gathering data and information that
can help the firm understand its competitors’ intentions and the strategic implications resulting from them
competitor analysis
A set of data and information the firm gathers to better understand and anticipate competitors’ objectives, strategies, assumptions, and capabilities.
competitor intelligence
True or false
what is ethical in one country is similar from what is ethical in other countries
False
similar- different
What will our competitors do in the future?
Future Objectives
- How do our goals compare with our competitors’ goals?
- Where will emphasis be placed in the future?
- What is the attitude toward risk?
Where do we hold an advantage over our competitors?
Current Strategy
- How are we currently competing?
- Does their strategy support changes in the competitive structure?
How will this change our relationship with our competitors?
Assumptions
• Do we assume the future will be volatile?
• Are we operating under a status quo?
• What assumptions do our competitors hold about the industry and themselves?
Capabilities
• What are our strengths and weaknesses?
• How do we rate compared to our competitors?
_________are companies or networks of companies that sell complementary goods or services that are compatible with the focal firm’s good or service.
Complementors
Side note: When a complementor’s good or service contributes to the functionality of a focal firm’s good or service, it in turn creates additional value for that firm.
_________are available to firms as sources of information regarding competitive intelligence practices.
Professional associations
ex. Strategy and Competitive Intelligence Professionals association
What are the three (3) major parts of external environment?
- The general environment (segments and elements in the broader society that affect industries and the firms competing in them)
- The industry environment (factors that influence a firm, its competitive actions and responses, and the industry’s profitability potential)
- The competitor environment (in which the firm analyzes each major competitor’s future objectives, current strategies, assumptions, and capabilities)
By studying ______, a firm can identify a position in an industry where it can influence the forces in its favor or where it can buffer itself from the power of the forces in order to achieve strategic competitiveness and earn above-average returns.
five forces model
True or False
Competitive rivalry is greater within a strategic group than between strategic groups.
True
