MGMT 466 Exam 1 - FLASHCARDS - Chapter 2
True or false: the external environment affects the competitive actions and responses firms take to outperform competitors and earn above-average returns?
TRUE
What is the general environmnt?
Composed of dimensions in the broader society that influence an industry and the firms within it
What are aspects of the general environment?
Demographic
Economic
Political/legal
Sociocultural
Technological
Global
Sustainable physical environment
What is the industry environment?
Set of factors that directly influences a firm and its competitive actions and responses
True or false: How companies gather and interpret information about their competitors is called competitor analysis?
TRUE
What does analysis of the industry environment focus on?
the factors and conditions influencing an industry’s profitability potential
What does analysis of the general environment focus on?
environmental trends and their implications
What are the four parts of an external environmental analysis?
- Scanning
- Monitoring
- Forecasting
- Assessing
What is identifying early signals of potential changes in the general environment and detecting changes that are already under way?
Scanning
What is seeing if an important trend is emerging from among those spotted through scanning?
Monitoring
What is developing feasible projections of what might happen, and how quickly?
Forecasting
What is determining the timing and significance of the effects? Appropriately interpreting– opportunity or threat
Assessing
Must each firm scan, monitor, forecast, and assess the elements in each general environmental segment to predict their effects on it?
Yes
What elements are included in the demographic segment of the general environment?
population’s size, age structure, geographic distribution, ethnic mix, and income distribution
What segment of the general environment deals with the nature and direction of the economy?
Economic segment
What is included in the economic segment of the general environment?
Inflation rates
Interest rates
Trade deficits or surpluses
Budget deficits or surpluses
Personal savings rate
Business savings rates
Gross domestic product
What segment is about how organizations try to influence governments, to understand the current and projected influences of those governments on their competitive actions and responses?
Political/legal segment
What segment is about society’s attitudes and cultural values?
Sociocultural segment
What are examples of the socicultural segment?
caring about health, working from home
Example of adversarial
we didn’t do it
What segment has to do with creating new knowledge and translating that knowledge into new outputs, products, processes, and materials?
Technological segment
What is a group of firms producing products that are close substitutes?
Industry
True or false: coke and pepsi are substitute products because they are in the same industry?
TRUE
What do new entrants do?
bring new capacity and desire to gain market share. Pressure on prices, costs, investment. Put a cap on profit potential of the industry
True or false: Particularly when new entrants are diversifying from other markets, they can leverage existing capabilities and cash flows to shake up competition?
TRUE
True or false: When the threat of new entrants is high, incumbents must hold down prices or boost investments to deter new competitors?
TRUE
What are different barriers to entry?
Switching Costs.
Capital Requirements
Product Differentiation
Economies Of Scale
Access To Distribution Channels
Cost Disadvantages Independent Of Scale
Government Policy
What is it called when the cost of producing each unit declines as the quantity of a product produced during a given period increases?
Economies of scale
True or false: product differentiation is a barrier to entry?
TRUE
True or false: switching costs are a barrier to entry for new firms?
TRUE
True or false: Starbucks has low barriers to entry?
TRUE
True or false: Slow industry growth increases rivalry?
TRUE
What is expected retaliation?
An expectation of swift and vigorous competitive responses reduces the likelihood of entry
When can vigorous retaliation be expected?
when the existing firm has a major stake in the industry, when it has substantial resources, and when industry growth is slow or constrained
True or false: Small entrepreneurial firms are generally best suited for identifying and serving neglected market segments?
TRUE
What is bargaining power of suppliers?
Suppliers can exert power, either increasing prices or reducing quality
What do buyers bargain for?
Higher quality, greater levels of service, and lower prices
True or false: buyers are powerful when they purchase a large portion of an industry’s total output?
TRUE
What are goods or services from outside a given industry that perform similar or the same functions as a product that the industry produces?
Substitute products
True or false: substitute products present a threat to a firm when customers face few, if any, switching costs?
TRUE
True or false: substitute products present a threat to a firm when the substitute product’s price is lower?
TRUE
True or false: substitute products present a threat to a firm when the substitute product’s quality and performance capabilities are equal to or greater than those of the competing product?
TRUE
What can a firm do do differentiate a substitute’s attractiveness?
a firm can differentiate a product along dimensions that are valuable to customers, such as:
Quality
Service after the sale
Location
What are factors that increase the intensity of rivalries among firms?
Numerous or equally balanced competitors
Slow industry growth
High fixed costs or high storage costs
Lack of differentiation or low switching costs
High strategic stakes Strategic Commitments– costly, long-term oriented, and difficult to reverse.
High exit barriers
What are products of careful study and interpretation of data and information from multiple sources?
Effective industry analyses
Within a firm’s effective industry analysis, international markets and rivalries must be included?
Yes
True or false: an attractive industry has low entry barriers?
False. An attractive industry has high entry barriers
True or false: an attractive industry has suppliers and buyers with little bargaining power?
TRUE
True or false: an attractive industry has few competitive threats from product substitutes?
TRUE
True or false: an attractive industry has relatively moderate rivalry?
TRUE
True or false: an unattractive industry has low entry barriers?
TRUE
True or false: an unnatractive industry has suppliers and buyers with strong bargaining power?
TRUE
True or false: an unnatractive industry has strong competitive threats from product substitutes?
TRUE
True or false: an unnatractive industry has intense rivalry among competitors?
TRUE
What is a set of firms emphasizing similar strategic dimensions and using a similar strategy?
Strategic group
True or false: competitive rivalry is greater within a strategic group than between strategic groups?
TRUE
Using strategic groups to understand an industry’s competitive structure requires the firm to plot companies’ competitive actions and responses along strategic dimensions, such as what?
Pricing Decisions
Product Quality
Distribution Channels
True or false: The competitive rivalry among strategic groups can be intense?
TRUE
True or false: The more intense the rivalry between strategic groups, the greater is the threat to each firm’s profitability?
TRUE
True or false: The closer the strategic groups are in terms of their strategies, the greater is the likelihood of rivalry between the groups?
TRUE
What are companies or networks of companies that sell complementary goods or services that are compatible with the focal firm’s good or service?
Complementers
What is example of a complementer?
Intel and Microsoft - using Intel chips in Microsoft products
When is a company a complementer to your company?
A company is a complementor to your company if customers value your product or service offering more when they are able to combine it with the other company’s product or service
Supplier power can erode - appliances in big box stores erode because of online shopping
.
What focuses on each company against which a firm competes directly?
Competitor analysis
What does the firm try to understand during competitor analysis?
- What drives the competitor, as shown by its future objectives
- What the competitor is doing, as revealed by its current strategy
- What the competitor believes about the industry, as shown by its assumptions
- What the competitor’s capabilities are, as shown by its strengths and weaknesses
Porter’s 5 forces pertain to all different industries
.
What are porter’s 5 forces?
Threat of new entrants
Bargaining power of suppliers
Bargaining power of buyers
Threat of new substitutes
Competitive rivalry
What is the current market share of beats?
15.3
