reading 3 How competitive forces shape strategy

Question 1

what are the five basic forces in industry

Answer 1

competitive rivalry
bargaining power of suppliers
power of buyers
threat of new entry
threat of substitute

Question 2

6 major sources of barriers to entry of an industry

Answer 2

1 economies of scale-either come in large or accept cost disadvantage
2 product differentiation , -brand identification , overcome customer loyalty
3 capital requirements -limits pool of likely entrants
4 cost advantages independant of size-best tech, raw materials,
5 access to distribution channels, if too high barrier just create your own distribution
6 government policy- can foreclose entry, eg ski developement, water pollutoin etc,

Question 3

other reasons entrant may not want to enter industry

Answer 3

• previously lashed out at new entrants
  -have resrouces
  likely to cut pricesses to save shares
  -industry growth is slow

Question 4

a supplier group is powerful if

Answer 4

-dominated by few companies, more concentrated than the industry it sells to
-product is unique/differentiated, has built up switching costs-dependatn on one supplier bc specialised product
-not obligated to content with other products
poses threat of integration forward into the industries business
-industry is not an important customer

Question 5

a Buyer group is powerful if

Answer 5

• is concentrated
• large volume buyers
• products it buys are indifferent
• it earns low profits
• industries product is unimportant to the quality of the buyers products
• industries product does not save buyer money
• buyers pose threat of intergrating backward to make there own product

Question 6

what is price sensitivity

Answer 6

Price sensitivity is the degree to which the price of a product affects consumers purchasing behaviors. The degree of price sensitivity varies from product to product and from consumer to consumer. In economics, price sensitivity is commonly measured using the price elasticity of demand.

Question 7

effect of subsitutes on industry profits

Answer 7

limit profits

Question 8

what tactics are used to jokey for position

Answer 8

price competition, product introduction, advertising slugfests.

Question 9

rivalry is related to the following factors

Answer 9

numerous equal sized competitors
slow industry growth
product lacks differentiation
-can only order in large increments
exit barrierers are high-keep competing despite losses
-rivals have many different tactitcs

Question 10

three ways oin which a stratergist may overcome other forces

Answer 10

use companies capabilities to defend agains tforce,
influence force through moves
antipiate shifts in factors and respond to them

Question 11

what is vertical integration

Answer 11

the combination in one firm of two or more stages of production normally operated by separate firms.