Day 1 Porter competitive forces pg 88

Question 1

strategic decision of leading competitors often have a major impact on the threat of entry. what is an example of this with walmart?

Answer 1

they had investments in procurement,distribution, and inventory control technologies with large fixed costs that increase the economies of scale and make it more difficult for small retailers to enter or existing ones to survive

Question 2

what is the most common reason for substituetes to become more or less threatening over time?

Answer 2

advances in technology create new substitutes or shift price performance comparisons in one direction or the other. ex. micros used to be expensive now that they are not becuase of tech they are more serious substitutes for ovens

Question 3

why does rivalry often intensify naturally over time? (3)

Answer 3

1. growth slows as an industry matures
2. competitiors become more alike as industry conventions emerge, tech diffused, and consumer tastes converge.
3. industry profitability falls

Question 4

T/F

Intensifying price competition and other types of rivalry are inevitable.

Answer 4

F

Question 5

why is eliminating rivals through mergers and consolidation risky?

Answer 5

because a profit windfall from removing today’s competitors attracts new competitors and backlash from customers and suppliers

Question 6

What are 3 possibilities for strategic action when you understand an industry’s structure?

Answer 6

1. position the company to better cope with the current competitive forces
2. anticipate and exploit shifts in the forces
3. shape the balance of forces to create a new industry structure that is more favorable to the company

Question 7

What are the 2 ways strategy can be viewed when it comes to the competitive forces?

Answer 7

1. build defenses against the competitive forces

2. find a position in the industry where the forces are weakest

Question 8

why is it important to use the five forces framework to analyze entry and exit?

Answer 8

exit- when industry structure is poor or declining and the company has no prospect of a superior positioning
entry- can spot an industry with a good future before it’s reflected in the prices of acquistion candidates. also can reveal industries that may not be attractive for the average entrant but the company has reason to beleive it can surmount the entry barriers at lower cost than most or it believes it has an unique capability to cope with that industry’s competitive forces

Question 9

when a company reshapes structure, it wants its competitors to follow. why?

Answer 9

so that the entire industry will be transformed. if it can shift competition in direction in can excel,all the better for them