LM 6: Industry & Competitive Analysis Flashcards

1
Q

What is competitive analysis?

A

Evaluate strategy of firm and determine competitive advantage

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2
Q

What are 3 widely used classification systems & how do they classify companies? GIT

A
  1. global industry classification standard (GICS): classify by primary business activity in developed & developing economies
  2. industry classification benchmark (ICB): classify company based on source of majority of revenues
  3. the refinitiv business classification (TRBC): based on sectors down to activities, includes public, private, and government companies unlike ICB & GICS
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3
Q

What are 3 alternatives methods of grouping companies? GBS

A
  1. geography
  2. business cycle sensitivity
  3. statistical similarities
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4
Q

How does global industry classification standard (GICS) classify from broadest to narrowest?

A
  1. sectors
  2. industry groups
  3. industries
  4. sub-industries
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5
Q

How does industry classification benchmark (ICB) classify from broadest to narrowest?

A
  1. industries
  2. super sectors
  3. sectors
  4. subsectors
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6
Q

How does the refinitiv business classification (TRBC) classify from broadest to narrowest? EBIIA

A
  1. economic sectors
  2. business sectors
  3. industry groups
  4. industries
  5. activities
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7
Q

What are the 5 life cycle stages? EGSMD

A
  1. Embryonic
  2. Growth
  3. Shakeout
  4. Mature
  5. Decline
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8
Q

What is the difference between embryonic and growth?

A

Embryonic: industries are characterized by slow growth, high prices & risk, and significant investment.

Growth: Demand increases rapidly, profitability improves as new customers enter the market, falling prices, low competition.

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9
Q

What is the difference for life cycle changes of shakeout vs mature?

A
  1. Shakeout: Growth & profits decrease as competition intensifies in a saturated market.
  2. Mature: Mature industries have little or no growth, industry consolidation, and high entry barriers.
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10
Q

What is decline?

A

negative growth, excess capacity, high competition

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11
Q

What is cyclical, non cyclical?

A

Cyclical: companies have profits that are strongly correlated with overall economic activity.

Non-cyclical companies enjoy relatively stable demand for their products and/or services throughout the business cycle

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12
Q

What is market share?

A

percentage of an industry’s sales that a particular company owns.

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13
Q

What is Industry Capacity?

A

the maximum amount of goods or services that companies can supply in a period

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14
Q

What is industry concentration?

A

wether market share concentrated among a small number of large firms or fragmented among many small firms

high concentration: Small number of large firms

low concentration: Large number of small firms

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15
Q

What is one way to measure the concentration within an industry?

A

Herfindahl-Hirschman Index (HHI)

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16
Q

What is the formula for the Herfindahl-Hirschman Index (HHI)?

A

sum of squared market shares for each firm

HHI = ((market share % * 100)^2)

17
Q

What does a high and low Herfindahl-Hirschman Index (HHI) indicate?

A

higher HHI score indicates greater concentration.

lower HHI score indicates lower concentration.

18
Q

What are Michael Porter’s five force framework? TBBTR

A
  1. threat of net entrants
  2. bargaining power of suppliers
  3. bargaining power of customers
  4. threat of substitutes
  5. rivalry among existing competitors (intra-industry)
19
Q

What are 6 external influences on an industry growth? PESTLE

A
  1. political influences
  2. economic influences
  3. social influences
  4. technological influences
  5. legal influences
  6. environmental influences
20
Q

What are political influences and economic influences?

A

Political Influences: decisions that governments make with respect to taxes, spending, and regulations.

Economic Influences: economic activity impacts the demand for products and services. (interest rate, inflation, etc)

21
Q

What are social influences and technological influences?

A

social influences: Changes in society occur regarding how people work and spend their leisure time

technology influences: technological advances

22
Q

What is legal influences and enviromental influences?

A

legal influences: the regulations and laws businesses have to abide by or face the consequence of various penalties.

environmental influences: impact of environmental issues, such as climate change and the depletion of natural resources

23
Q

What are 2 ways to characterize technological influences?

A
  1. sustaining innovations
  2. disruptive innovations
24
Q

Whats the difference between sustaining innovations and disruptive innovations?

A

Sustaining innovations: improve products or service without fundamentally changing their functionality. (eg. camera from 1960 has better quality now)

disruptive innovations: fundamentally alter a market (eg. cameras to digital photos on phone)

25
What are 3 corporate strategies that have been used to achieve above average performance? CDF
1. cost leader (operating more efficiently, while offering comparable products) (flight) 2. differentiate (offering unique products sold a premium prices) (luxury watches) 3. focus on specific segments within an industry (mobile phones for older people)
26
What is ROIC and formula?
return on invested capital NOPAT (net operating profit after tax) / total invested capital