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Honors Business Policy > Chapter 3 > Flashcards

Chapter 3 Flashcards

1
Q

Political Factors

A

Processes and actions of government bodies that
influence the firm

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2
Q

Examples of Political Factors

A
  • Lobbying
  • Public Relations
  • Contributions
  • Litigation
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3
Q

Examples of Economic Factors

A
  • Growth rates
  • Levels of employment
  • Interest rates
  • Price stability
  • Exchange rates
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4
Q

Sociocultural Factors

A

Society’s cultures, norms, and values. Demographic trends.

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5
Q

Technological Factors

A

Application of knowledge and innovations in process/product technology

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6
Q

Ecological Factors

A

Broad environmental issues and the relationship
between organizations and the environment

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7
Q

Legal Factors

A

Official outcomes of political processes

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8
Q

Examples of Legal Factors

A
  • Court decisions
  • Laws.
  • Mandates
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9
Q

Industry Effects

A

Describes the economic structure of the industry and affects firms performance by about 20%

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10
Q

Firm Effects

A

Attribute firm performance to the manager’s actions and are more important than industry effects with up to 55% effect

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11
Q

Industry Analysis

A

A method to
- Identify an industry’s profit potential
- Derive implications for a firm’s strategic position

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12
Q

Strategic Positioning

A

A firm’s ability to
- Create value for customers (V)
- While containing costs (C)

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13
Q

The Goal of Strategic Positioning

A

To generate a large gap between the cost of items and the value of the firm’s product or service creates

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14
Q

The Five Forces Model

A
  • Threat of New Entrants
  • Bargaining Power of Buyers
  • Threat of Substitute Products or Services
  • Bargaining Power of Suppliers
  • Competitive Rivalry

And helps strategic leaders understand
- The profit potential of different industries.
- How they can position their firms to gain and sustain competitive advantage

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15
Q

Two Key Insights About The Five Forces Model

A
  • Competition is viewed more broadly in the five forces model
  • Profit potential is a function of the five competitive forces
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16
Q

Threat of Entry

A

The risk that potential competitors will enter an
industry
- Lowers industry profit potential
- Increases spending among incumbent firms

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17
Q

Entry Barriers examples

A
  • Economies of scale
  • Capital requirements
  • Government policy
  • Network effects
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18
Q

Power of Suppliers

A

Pressures that industry suppliers can exert on an
industry’s profit potential

19
Q

Power of Suppliers Lowers Profit Potential If

A
  • Suppliers demand higher prices for their inputs
  • Suppliers capture part of the economic value created
20
Q

Power of Buyers (Customers) Lowers Profit Potential If

A
  • Buyers get discounts
  • Buyers demand higher quality raising costs
  • Buyers earn low profits or are short of cash
21
Q

Threat of Substitutes

A

Meet the same basic customer needs in a different way

22
Q

Examples of Threat of Substitutes

A
  • Software vs. professional services
  • Energy drinks vs. coffee
  • Videoconferencing vs. business travel
  • Wireless phone services vs. internet-based
    services (Skype)
23
Q

Rivalry Among Competitors

A

The intensity with which companies in the same
industry jockey for market share and profitability

24
Q

Competitive Industry Structure is Defined By

A
  • Number and size of competitors
  • Firm’s degree of pricing power
  • Type of product or service
  • Height of entry barriers
25
Q

Industry Competitive Structures

A
  • Monopoly
  • Oligopoly
  • Monopolistic Competition
  • Perfect Competition
26
Q

Monopoly

A
  • One Firm
  • Considerable Pricing Power
  • Unique Product
  • Very High Entry Barriers
27
Q

Oligopoly

A
  • Few (large) Firms
  • Some Pricing Power
  • Differentiated Product
  • High Entry Barriers
28
Q

Monopolistic Competition

A
  • Many Firms
  • Some Pricing Power
  • Differentiated Product
  • Medium Entry Barriers
29
Q

Perfect Competition

A
  • Many Small Firms
  • Firms are price takers
  • Commodity Product
  • Low Entry Barriers
30
Q

Periods of High Industry Growth

A
  • Consumer demand rises
  • Price competition among firms decreases
31
Q

Periods of Negative Industry Growth

A
  • Rivalry is fierce
  • Rivals can only gain at the expense of one another
  • Discounts, promotional campaigns, and retaliation abound
32
Q

Strategic Commitments

A

Firm actions that are costly, long-term oriented, and difficult to reverse

33
Q

Exit Barriers

A

Obstacles (mainly economic and social factors) that determine how easily a firm can leave that industry

34
Q

The Sixth Force

A

Complements

35
Q

Complements

A

A product, service, or competency that adds value
when used with the original product

36
Q

Co-opetition

A

Cooperation among competitors to achieve a strategic objective

37
Q

Entry Choices

A
  • When?
  • How?
  • What?
  • Where?
  • Who?
38
Q

Industry Dynamics

A

provides insight about:
- The changing speed of an industry
- The rate of innovation
- Helps capture structural changes in the industry

39
Q

Industry Convergence

A

When unrelated industries begin to satisfy
the same customer needs. It’s caused by technological advances.

40
Q

Strategic Groups

A

A set of companies pursue a similar strategy in the same industry.

41
Q

Strategic Group Model (Framework)

A

Clusters different firms into groups and is based on key strategic dimensions

42
Q

How to Create a Strategic Group Model

A
  • Identify the important strategic dimensions
  • Choose two key dimensions
  • Graph the firms in the strategic group
43
Q

Insights from Strategic Group Mapping

A
  • Competitive rivalry is strongest between firms in the same strategic group
  • The external environment affects strategic
    groups differently
  • Five competitive forces affect strategic
    groups differently
  • Some strategic groups are more profitable than others
44
Q

Mobility Barriers

A
  • Restrict movement between strategic groups
  • Industry-specific factors that separate one group from another
  • Based on hard-to-reverse investments (strategic commitments)

Honors Business Policy (16 decks)

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