Chapter 3

Question 1

Two facets of the company’s situation

Answer 1

 The industry and competitive environments in which
the company operates—its external environment
 The company’s resources and organizational
capabilities—its internal environment

Question 2

PESTAL Analysis:

Answer 2

Political, Economic, Technology, Sociocultural, Environmental, Legal and regulatory factors

Question 3

7 Questions:
Assessing the Company’s Industry
& Competitive Environment

Answer 3

1. Do the dominant economic characteristics
   of the industry offer sellers opportunities
   for growth and attractive profits?
2. What kinds of competitive forces are
   industry members facing, and how strong
   is each force?
3. What forces are driving industry change,
   and what impact will these changes have
   on competitive intensity and industry
   profitability?
4. What market positions do industry rivals
   occupy—who is strongly positioned and
   who is not?
5. What strategic moves are rivals likely to
   make next?
6. What are the key factors of competitive
   success?
7. Does the industry outlook offer good
   prospects for profitability?

Question 4

Is the most powerful and widely used tool for
assessing the strength of the competitive forces that
affect an industry’s attractiveness.

Answer 4

The Five-forces Model of Competition

Question 5

Competitors engage in protracted price wars
or habitually employ other aggressive tactics
that are mutually destructive to profitability.

Answer 5

Cutthroat (Brutal)

Question 6

The battle for market share is so vigorous that
the profit margins of most industry members
are squeezed to bare-bones levels.

Answer 6

Fierce (Strong)

Question 7

The maneuvering among industry members,
while lively and healthy, still allows most
industry members to earn acceptable profits.

Answer 7

Moderate (Normal)

Question 8

Most industry members are satisfied with their
sales growth and market share and rarely
undertake offensives against their competitors.

Answer 8

weak

Question 9

• Driving forces analysis has three steps:

Answer 9

1. Identifying the present driving forces, as only 3–4
   factors qualify as real drivers of change
2. Assessing how strongly the forces are, individually or
   collectively, impacting industry attractiveness by
   affecting demand, competition, and profitability.
3. Determining what strategy changes are needed to
   prepare for the impact of the driving forces.

Question 10

Common Driving Forces

Answer 10

1. Changes in the long-term industry growth rate.
2. Increasing globalization.
3. Emerging new Internet capabilities and applications.
4. Changes in who buys the product and how they use it.
5. Product innovation.
6. Technological change and manufacturing process innovation.
7. Marketing innovation.
8. Entry or exit of major firms.
9. Diffusion of technical know-how across more companies and more countries.
10. Changes in cost and efficiency.
11. Growing buyer preferences for differentiated products instead of a
    standardized commodity product (or for a more standardized product instead
    of strongly differentiated products).
12. Regulatory influences and government policy changes.
13. Changing societal concerns, attitudes, and lifestyles.

Question 11

Is a technique for graphically displaying the different
market or competitive positions that rival firms occupy
in the industry.

Answer 11

Strategic Group Mapping

Question 12

 Is a cluster of industry rivals that have similar

competitive approaches and market positions.

Answer 12

Strategic Group

Question 13

• Profiling key rivals involves gathering

competitive intelligence about:

Answer 13

 Thinking and leadership styles of top executives
 Identifying trends in the timing of new product
launches and marketing promotions
 Considering which rivals have the motivation and
capability to make major strategy changes

Question 14

are those
competitive factors that most affect the
ability of all firms in an industry to prosper

Answer 14

Key Success Factors

Question 15

KSFs include:

Answer 15

 Specific product attributes
 Necessary resources, competencies, and capabilities
 Specific intangible assets
 Competitive capabilities

Question 16

Questions to Ask in Identifying

Industry Key Success Factors

Answer 16

1. On what basis do buyers of the industry’s product
   choose between the competing brands of sellers?
   That is, what product attributes are crucial?
2. Given the nature of the competitive forces
   prevailing in the marketplace, what resources and
   competitive capabilities does a company need to
   have to be competitively successful?
3. What shortcomings are almost certain to put a
   company firm at a significant competitive
   disadvantage?

Question 17

Examples of Industry

Key Success Factors

Answer 17

• Expertise in a particular technology
• Scale economies
• Experience curve benefits
• High capacity utilization
• Strong network of wholesale distributors
• Brand building skills
• Convenient retail locations

Question 18

Determining whether an industry’s outlook presents
sufficiently attractive opportunities for growth and
profitability based on:

Answer 18

 The industry’s growth potential
 The effect of industry competition on its future profitability
 The effect of prevailing driving forces on industry profitability
 The firm’s competitive position in its industry vis-à-vis its rivals
 The firm’s competence in performing the industry’s key success
factors

Question 19

Summary of the “7 Questions:

Answer 19

1. Dominant economic characteristics of industry
2. Five competitive forces and how strong
3. Driving forces impacting industry
4. Market positioning of industry rivals
5. Anticipated strategic moves of rivals
6. Key success factors (KSFs) to compete
7. Industry outlook for profitability