SM_L2

Question 1

What is strategy according to Quinn (1982)?

Answer 1

Strategy:
- Marshals and allocates an organisation’s resources.
- Adapts to relative strengths and weaknesses.
- Responds to environmental changes and opponents’ moves.

Question 2

What are the three layers of the business environment?

Answer 2

• Macro-environment (analysed with PESTEL).
• Industry (examined with Five Forces).
• Competition/Strategic Group (firms with similar strategies).

Question 3

Explain the PESTEL framework.

Answer 3

PESTEL covers external factors:
- Political
- Economic
- Sociocultural
- Technological
- Environmental
- Legal

Question 4

List Porter’s Five Forces.

Answer 4

• Threat of new entrants
• Intensity of rivalry among competitors
• Threat of substitutes
• Bargaining power of suppliers
• Bargaining power of buyers

Question 5

Name two main barriers to entry.

Answer 5

• Economies of scale
• Product differentiation
  (Other examples include capital requirements, switching costs, distribution channels, cost disadvantages, government policies.)

Question 6

When is the bargaining power of suppliers high?

Answer 6

• Suppliers more concentrated than the industry.
• Few or no substitute products.
• High switching costs or supplier can integrate forward.

Question 7

When is the bargaining power of buyers high?

Answer 7

• Buy in large volumes.
• Low switching costs.
• Product is undifferentiated.
• Buyers can integrate backward.

Question 8

What is a substitute product?

Answer 8

• Different product meeting the same need.
• Limits price and profit of incumbent.
• Often from emerging technologies with low switching costs.

Question 9

What influences the intensity of competition?

Answer 9

• Number and balance of competitors.
• Slow industry growth.
• High exit barriers.
• Low differentiation and high fixed costs.

Question 10

Explain structure-conduct-performance (SCP) paradigm.

Answer 10

SCP connects:
- Industry structure → conditions for competition.
- Firm conduct → strategies and behaviour.
- Performance → firm and societal outcomes.

Question 11

What are strategic groups?

Answer 11

• Firms in the same industry with similar strategies.
• Vary in price, image, and target.
• Mobility barriers may prevent moving between groups.

Question 12

Summarise the industry vs. firm effects in performance.

Answer 12

• Industry Effects ^{≈ 20%}
• Firm Effects ^{≈ 30–45%}
• Other Effects (e.g. corporate parent, year) _{≈ 35–50%}
  Industry matters, but firm-specific strategies are crucial.