chapter 3 competition Flashcards
brainstorm mind map of porter’s five forces model.
Porter’s Five Forces Model
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|— Threat of New Entrants
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| |— Barriers to entry
| |— Economies of scale
| |— Brand recognition
| |— Capital requirements
| |— Access to distribution channels
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|— Threat of Substitute Products or Services
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| |— Price
| |— Quality
| |— Convenience
| |— Customer loyalty
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|— Bargaining Power of Buyers
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| |— Buyer concentration
| |— Buyer bargaining power
| |— Buyer switching costs
| |— Buyer information
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|— Bargaining Power of Suppliers
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| |— Supplier concentration
| |— Supplier bargaining power
| |— Supplier switching costs
| |— Supplier dependence
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|— Rivalry Among Existing Competitors
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|— Market share
|— Industry growth rate
|— Industry profitability
|— Diversity of competitors/fragm
|— Exit barriers
what should be strategies for the question mark?
if the growth prospects are good then the entity should invest in the product and if the growth prospects are low then should formulate an exit strategy
Differentiation or focus strategy might be used to gain the market share
Invest cash from the product 1 into this product
what should be strategies for the DOG Product?
Use the work NPV ROI can be used instead of positive cashflows
If the product is still generating positive cashflows then entity should keep the product untill its cashflows are no longer positive
what should be the strategies for Star Product?
Stars are the cash cows of the future.
An entity should market a star product aggressively, to maintain or increase market share.
A large continuing investment in new equipment and R&D will probably be needed.
Stars should at some stage generate enough cash to be self-sustaining. Until then, the cash from cash cows can finance their development
what should be the strategy for cashcow products?
Defend and maintain market share.
Spending on innovation (R&D) should be limited.
The cash generated by a cash cow can be used to develop other products in the portfolio.
Market penetration, although difficult to implement in a low-growth market, should be used when expansion is required as it is the least risky approach. For example, this can be obtained through cost leadership and acquisition of competitors, etc.
Outline of BCG matrix
BCG Matrix
Stars High market share High market growth rate Generate high revenue Require high investment Have strong competitive position Examples: iPhone, Tesla Question Marks Low market share High market growth rate Have potential to become stars or dogs Require high investment to grow Have uncertain future prospects Examples: TikTok, Netflix Cash Cows High market share Low market growth rate Generate high cash flow Require low investment to maintain Have stable and loyal customer base Examples: Coca-Cola, Microsoft Office Dogs Low market share Low market growth rate Generate low revenue Require low investment to sustain Have weak competitive position Examples: Kodak, Blackberry