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Strategic Management > Day 1 Porter competitive forces pg.79-first half 84 > Flashcards

Day 1 Porter competitive forces pg.79-first half 84 Flashcards

1
Q

what are the 4 competitive forces besides establishd industry rivals?

A
  1. customers 2. suppliers 3. potential entrants 4. substitute products
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2
Q

If the competitive forces are intense, almost no company does what?

A

earn an attractive return on investment

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3
Q

If forces are benign, many companies are what?

A

profitable

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4
Q

industry ____ drives competition and profitability

A

structure

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5
Q

industry structure, manifested in the competitive forces, sets industry profitability in the _____ and _____ run

A

medium long

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6
Q

The structure of your ______ should be as much a competitive concern as your company’s own position

A

industry

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7
Q

understanding industry structure is essential to effective strategic _____

A

positioning

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8
Q

What two actions are crucial to strategy concerning the competitive forces.

A
  1. defending against competitive forces 2. shaping competitive forces in a company’s favor
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9
Q

The ______ of the five forces differs by industry

A

configuration

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10
Q

the ____ competitive force or forces determine the profitability of an industry and become the most important to strategy formulation

A

strongest

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11
Q

the strongest competitive force or forces determine the _____ of an industry and become the most important to strategy formulation

A

profitability

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12
Q

the strongest competitive force or forces determine the profitability of an _____and become the most important to strategy formulation

A

industry

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13
Q

the strongest competitive force or forces determine the profitability of an industry and become the most important to strategy _____

A

formulation

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14
Q

T/F the most salient competitive force is always obvious

A

F

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15
Q

industry ______ grows out of a set of economic and technical characteristics that determine the strength of each competitive force

A

structure

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16
Q

industry structure grows out of a set of_____ and technical characteristics that determine the strength of each competitive force

A

economic

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17
Q

industry structure grows out of a set of economic and _____ characteristics that determine the strength of each competitive force

A

technical

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18
Q

industry structure grows out of a set of economic and technical characteristics that determine the ____ of each competitive force

A

strength

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19
Q

industry structure grows out of a set of economic and technical characteristics that determine the strength of each _____ force

A

competitive

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20
Q

New entrants to an industry bring new capacity and a desire to gain market share that puts pressure on what 3 things? this is especially true for what kind of new entrants?

A
  1. prices 2. costs 3. the rate of investment necessary to compete ones that are diversifying from other markets
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21
Q

New entrants that are diversifying from other markets can leverage existing _____ and ____ ____ to shake up the competition

A

capabilities cash flows

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22
Q

the threat of entry puts a cap on what?

A

the profit potential of an industry

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23
Q

when the threat of entry is high, incumbents must do one of what 2 things to deter new competitors?

A
  1. hold down their prices 2. boost investment
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24
Q

the threat of entry in an industry depends on what 2 things?

A
  1. the height of the barriers that are present 2. the reaction entrants can expect from incumbents.
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25
Q

Which holds down profitability ….the threat of entry or whether the entry actually occurs?

A

the threat

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26
Q

What are the 7 major sources to barriers to entry?

A
  1. supply side economies of scale 2. demand side benefits of scale 3. customer switching costs 4. capital requirements 5. incumbency advantages independent of size-(cost,quality) 6. unequal access to distribution channels 7. restrictive government policy
27
Q

what is an entry barrier?

A

an advantage that incumbents have relative to new entrants

28
Q

an advantage that incumbents have relative to new entrants is called what?

A

an entry barrier

29
Q

what is supply side economies of scale?

A

economies that arise when firms that produce at larger volumes enjoy lower costs per unit

30
Q

economies that arise when firms that produce at larger volumes enjoy lower costs per unit are called?

A

supply side economies of scale

31
Q

what are 3 ways companies obtain supply side economies of scale?

A
  1. they can spread more fixed cost over more units 2. they employ more efficient technology 3. they command better terms from suppliers
32
Q

supply side scale economies deter entry by forcing the aspiring entrant to do one of what 2 things?

A
  1. come into the industry on a large scale which requires dislodging entrenched competitors 2. accept a cost disadvantage
33
Q

T/F Scale economies can be found in virtually every activitiy in the value chain;which one is more important varies by industry

A

T

34
Q

what is demand side benefits of scale?

A

come about in an industry where a buyer’s willingness to pay for a company’s product increases with the number of other buyers who also patronize the company (also called network effects)

35
Q

come about in an industry where a buyer’s willingness to pay for a company’s product increases with the number of other buyers who also patronize the company (also called network effects)

A

demand side benefits of scale

36
Q

demand side benefits of scale discourage entry in what 2 ways?

A
  1. it limits the willingness of customers to buy from a newcomer 2. it reduces the price the newcomer can command until it builds up a large base of customers
37
Q

what are customer switching costs?

A

the fixed costs that buyers face when they change suppliers

38
Q

the fixed costs that buyers face when they change suppliers are what kind of costs?

A

customer switching

39
Q

switching costs may occur because a buyer who switches vendors may have to do certain things. what are 3 examples?

A
  1. alter product specificiations 2. retrain employees to use new product 3. modify processes or information systems
40
Q

T/F the larger the switching costs, the easier it will be for an entrant to gain customers

A

F

41
Q

how do capital requirements deter new entrants?

A

because they would need to invest large financial resources in order to compete. ex. for fixed faciliites, customer credit, inventory, startup losses

42
Q

when is the barrier of capital requirements particularity great?

A

if the capital is required for unrecoverable expenditures which make them harder to finance ex. R&D, upfront advertising

43
Q

why are capital requirements not always a barrier to entry by themselves?

A

if industry returns are attractive and are expected to remain so and if capital markets are efficient, then investors will provide entrants with the funds they need

44
Q

what are examples of the barrier “Incumbency advantages independent of size”?

A

proprietary technology access to the best raw material sources favorable geographic locations established brand cumulative experience allowing them to learn how to produce more efficiently

45
Q

sometimes access to distribution is so high a barrier that new entrants must do one of what two things?

A
  1. bypass distribution channels altoghether 2. create their own distribution channels
46
Q

what is an example of how new airline entrants have avoided distribution channels of travel agents?

A

they encourage passengers to book thier own flights on the internet

47
Q

how does goverment hinder new entry?

A

it can have licensing requirements or restrictions on foreign investment

48
Q

how does government help new entry?

A

subsidies or funding research that is available to all

49
Q

how does governnment hinder entry through heightening other entry barriers?

A

patents that protect proprietary technology from imitation or environmental or safety regulations that raise scale economies for newcomers

50
Q

When assessing the entry barriers for potential entrants, a strategist will want to keep in mind what two things?

A
  1. the capabilities of the potential entrants 2. the creative ways newcomers might find to circumvent apparent barriers
51
Q

T/F How potential entrants believe incumbents will react will influence their decision to enter or stay out of an industry

A

T

52
Q

Newcomers are likely to fear expected retaliation if what 4 things are true?

A
  1. incumbents have previously responded vigorously to new entrants 2. incumbents posses the resources to fight back like excess cash and unused borrowing power, available productive capability, clout with distributors and customers 3. incumbents will most likely cut prices because committed to retaining market share or because has high fixed costs so they have motivation to drop pices to fill excess capacity 4. industry growth is slow so newcomers can gain volume only by taking it from incumbents
53
Q

the challenge for newcomers with regards to entry barriers is what?

A

To surmount the barriers without nullifying through heavy investment the profitability from participating in the industry

54
Q

How do powerful suppliers capture more value for themselves? (3)

A
  1. charge higher prices 2. limit quality or services 3. shift costs to industry participants
55
Q

How do powerful suppliers squeeze profitability out of an industry?

A

by charging higher prices to participants who cant pass on cost increases in their own prices

56
Q

A supplier group is powerful if any of what 6 things are true?

A
  1. It is more concentrated than the industry it sells to 2. the supplier group does not depend heavily on the industry for its revenues. if they account for large portion of profit will want to protect industry with reasonable pricing and helping with stuff like R&D 3. industry participants face switching costs in changing suppliers ex. they have invested heavily in your equipment or learning how to operate it, put their factory by yours 4. suppliers offer products that are differentiated. ex. pharma companies with patented drugs 5. there is no substitute for what supplier group provides. ex. pilots can’t be replaced with technology 6. supplier group can credibly threaten to integrate forward into the industry
57
Q

What are 3 things powerful customers do to capture more value from the industry?

A
  1. forcing down prices 2. demanding better quality or more service (raising costs) 3. play industry participants off one another
58
Q

when are buyers powerful?

A

if they have negotiating leverage relative to industry participants especially if they are price sensitive

59
Q

A customer group has negotiating leverage if one of what 4 things is true?

A
  1. there are few buyers, or each one purchases in volumes that are large relative to the size of a single vendor. large volume buyers very powerful when industry has large fixed costs and low marginal costs which turn up the pressure on rivals to keep capacity filled through discounting 2. the industry’s products are standardized or undifferentiatied. can play one vendor against the other 3. buyers face few switching costs in changing vendors 4. buyers can credibly threaten to integrate backwards and produce product themselves . ex.soda company threatening to make their own packaging
60
Q

A buyer group is sensitive if one of what 4 things is true

A
  1. the product it purchases represents a significant fraction of its cost structure or procurement budget. they will shop around and bargain hard. ex.like home mortgages. 2. buyer group has low profits, is strapped for cash , or is under pressure to trim its costs 3. the quality of the buyers products is little affected by the industry’s product. 4. the industry’s product has little effect on the buyers other costs. if the product can pay for itself by improving performance or reducing labor or other costs, buyers more interested in quality than price
61
Q

Consumer tend to be more price sensitive in what 3 cases?

A
  1. the products are undifferentiatied 2. products expensive relative to their incomes 3. if product is the sort where the performance has limited consequences
62
Q

what are intermediate customers?

A

those who purchase the product but are not the end user (ex. assemblers, distribution channels)

63
Q

Intermediate customers are similar to regular customers except for one major addition regarding bargianing power. what is it?

A

they gain significant bargaining power when they can influence the purchasing decisions of customers downstream ex. jewelry retailers and consumer electronic retailers

Strategic Management (24 decks)

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