M1 Strategic Position Environment

Question 1

List the elements of the PESTEL model

Answer 1

Political
Economic
Social
Technological
Environmental
Legal

Question 2

Long lists can be generated through PESTEL analysis. How can management avoid being overwhelmed by detail?

Answer 2

They should identify KEY DRIVERS FOR CHANGE

Question 3

With respect to PESTEL analysis what three concepts are useful for identifying key drivers for change?

Answer 3

Megatrends
Inflexion Points
Weak Signals

Question 4

XXX are large-scale social economic political ecological or technological changes that are typically slow to form but which influence many other activities and views.

Answer 4

Megatrends

Question 5

XXX are moments when trends shift in direction.

Answer 5

Inflexion points

Question 6

XXX are advanced signs of future trends and are helpful in identifying inflexion points.

Answer 6

Weak signals

Question 7

What type of analysis allows management to avoid focussing on a single view of environmental factors?

Answer 7

Scenario analysis

Question 8

What are the five basic steps of scenario analysis?

Answer 8

Define scenario scope
Identify key drivers for change
Develop scenario stories
Identify impacts of alternative scenarios
Establish early warning systems

Question 9

When we talk about defining scenario scope what do we mean by ‘scope’?

Answer 9

The subject of the scenario analysis and the time span

Question 10

When identifying the key drivers for change what are the three relevant criteria?

Answer 10

High impact
High uncertainty
High mutual independence

Question 11

When identifying scenario impacts what two essential actions should the organisation perform for each scenario?

Answer 11

Robustness checks

Contingency plans

Question 12

With respect to scenario analysis establishing early warning systems means identify key XXX

Answer 12

Indicators

Question 13

With respect to the number of scenarios what should be avoided in scenario analysis?

Answer 13

Three scenarios - this encourages management to settle for a median solution

Question 14

An XXX is a group of firms producing products and services that are essentially the same.

Answer 14

Industry

Question 15

An industry is?

Answer 15

A group of firms producing products and services that are essentially the same

Question 16

Industries may also be described as xxx - especially in the public sector.

Answer 16

Sectors

Question 17

A xxx is a group of customers for specific products or services that are essentially the same.

Answer 17

Market

Question 18

A market is?

Answer 18

A group of customers for specific products or services that are essentially the same

Question 19

What is the best known model for industry analysis?

Answer 19

Porter’s Five Forces Model

Question 20

What are the five competitive forces described by the Five Forces Model?

Answer 20

Threat of entry
Threat of substitutes
Power of buyers
Power of suppliers
Extent of industry rivalry

Question 21

If the five competitive forces are high the industry will be seen as attractive/unattractive to compete in.

Answer 21

Unattractive

Question 22

Why would high competition discourage potential entrants into an industry

Answer 22

Low profitability

Question 23

Within an industry xxx xxx are organisations with similar products or services aimed at the same customer group

Answer 23

Competitive rivals

Question 24

What five factors define the extent of rivalry in an industry?

Answer 24

Competitor balance
Industry growth rate
High fixed costs
High exit barriers
Low differentiation

Question 25

In terms of competitor balance what would present a danger of intensely rivalrous behaviour?

Answer 25

Competitors of roughly equal size

Question 26

In terms of competitor balance under what circumstances would we expect to see reduced industry rivalry?

Answer 26

Where there are one or two dominant organisations

Question 27

In terms of industry growth rates under what circumstances - and why - would we expect to see higher levels of industry rivalry?

Answer 27

Low growth rates - because organisation growth will be at expense of rivals

Question 28

Why would industries with high fixed costs tend to be more rivalrous?

Answer 28

High investment requirements mean companies seek to spread costs by increasing volume. This is typically done through cutting prices.

Question 29

Why would high exit barriers tend to increase industry rivalry?

Answer 29

In declining industries excess capacity persists and incumbents fight to maintain market share.

Question 30

Why is industry rivalry increased in an industry characterised by low differentiation?

Answer 30

There is little to stop customers switching between competitors. Only way to compete is on price.

Question 31

With respect to the 'threat of entry' force - what are the five key barriers to entry into an industry?

Answer 31

``` Scale and experience Access to supply or distribution channels Expected retaliation Legislation or government action Differentiation ```

Question 32

xxx are products or services that offer a similar benefit to an industry's products or services - but have a different nature.

Answer 32

Substitutes

Question 33

Substitutes are?

Answer 33

Products or services that offer a similar benefit to an industry's products or services but have a different nature.

Question 34

List three examples of substitutes.

Answer 34

Aluminium and steel Tablets and laptops Charities and public services

Question 35

When considering the significance of subsititutes as a competitive force what two points should be borne in mind?

Answer 35

Price/performance ratio | Extra-industry effects

Question 36

Under what three conditions is buyer power likely to be high?

Answer 36

Concentrated buyers Low switching costs Buyer competition threat

Question 37

In the Five Forces Model from what should BUYERS be carefully distinguished?

Answer 37

Ultimate consumers

Question 38

Under what three conditions is supplier power likely to be high?

Answer 38

Concentrated suppliers High switching costs Supplier competition threat

Question 39

Five forces analysis allows us to identify four main types of industry structure. What are they?

Answer 39

Monopolistic Oligopolistic Hypercompetitive Perfectly competitive

Question 40

In terms of the Five Forces what are the key characteristics of a monopoly?

Answer 40

``` Low industry rivalry Low threat of entry Low supplier power Low buyer power Potentially low substitution threat ```

Question 41

In terms of the Five Forces what are the key characteristics of an oligopolistic industry?

Answer 41

Limited industry rivalry Low supplier power Low buyer power

Question 42

In terms of the Five Forces what are the key characteristics of a hypercompetitive industry?

Answer 42

High industry rivalry

Question 43

In terms of the Five Forces what are the key characteristics of perfect competition?

Answer 43

High industry rivalry High threat of entry High buyer power

Question 44

When considering the implications of Five Forces analysis what three questions should the analyst ask?

Answer 44

Which industries to enter? What influence can be exerted? How are competitors differently affected?

Question 45

What are the five stages of the industry life cycle?

Answer 45

``` Development Growth Shake-out Maturity Decline ```

Question 46

Industry lifecycle - what are typical five forces in developmental stage?

Answer 46

High differentiation | High innovation

Question 47

Industry lifecycle - what are typical five forces in growth stage?

Answer 47

High growth Weak buyers Low entry barriers

Question 48

Industry lifecycle - what are typical five forces in shake-out stage?

Answer 48

Slower growth | Some exits

Question 49

Industry lifecycle - what are typical five forces in maturity stage?

Answer 49

Low growth Standard products Higher entry barriers

Question 50

Industry lifecycle - what are typical five forces in decline stage?

Answer 50

Many exits | Price competition