Understanding your market and competative advantages Flashcards
Name porters five forces for competative advantage
- threat of new entrents, 2. bargaining power of suppliers and 3.consumers as well as other firms cometative moves
What are the six major sources of barrers to entry
economies of scale, product differentiation (brand loyalty), capital requirements, const advantages (such as experice), access to distribution channels and government policy. A bonus barrier is also the agression of the incumbent firms
Is experience a reliable barrier of entry
Not usually, knowledge can come from many places and is often hard to make proprietary
What can scare off market entrents
Power of the incumbents such as cash, connections, capacity and credit worthyness; Their willingness to compete and lastly if industry growth is slow
What makes suppliers powerful
If they have few competitors, If switching costs are high, if there are few substitutes, if it has the capability to forward integrate (replace you) and if there are many buyers (especially if you are not a major one)
What makes consumers powerful
If they purchase in large volumes, if your products are not differentiated, If your goods are important to them (making them more selective), if they have slim margins, if your products quality has little importance and if they can backwards integrate (replace you)
A company can only sell profitably to powerful consumers if they have a const advantage compared to other industry participants
False, it can also be done through differentiation
What increases competition in and industry
If firms are many and equal, if growth is sllow, if differentiaiton is low, if fixed costs are high, and if exist costs are also. Also if rivals have different strategies
How can a firm improve profitability if competition is high
increase switching costs of customers, differentiate, focuse on parts of the pie that still grow and avoid competing with firms with high switching costs
What is another word for demand size ecconomies of scale
Network effects, when your product becomes better when many are using them
What increases the power of intermediary consumers
If they can influence the buying decitions of their own consumers
When does substitutes become threats
When they are comparable in price and there are low switching costs
What makes price wars more likely
low switching costs, low differentiation, high fixed costs and low marginal costs, need for large capacity expansions and persiahable products
When can competition lead to greater profitability overall
If it pushes firms to nich
What are the dangers with a fast growing industry
it may attract many firms and put suppliers in a strong position
Producing complementing goods and services are always good
Usually but in some cases they errode differentiation and in some cases they may be unsuccessful ventures
Eliminating rivals is a risky strategy
A profit windfall from
removing today’s competitors often attracts new competitors and
backlash from customers and suppliers.
What can a five fore analysis be used for
To differentiate industries, to calculate what effect different changes will have to differnet actors and how changes in one factor may cascade through others
What are the five characteristics of strategically valuable resources
1, difficulty to compy, 2. slow depreciation, 3. are not employees, suppliers or other third forces, 4. cannot be easily substituted and 5 they are superior to similar resources of competitors
What makes resources valuable
The interplay between demand, scarcity and appropriability
What makes a resource hard to copy, give 4 possible reasons for inimmitability
it is physically unique or path dependent (defined by their history), and it can also be causal ambiguity (the resource is unknown like organizational capability) and lastly economic deterrence (the asset is expensive).
Because all resources depreciate, an effective corporate strategy requires continual investment in order to maintain and build valuable resources
True
Many of the best strategic resources are intangible
True
What were the strategis of the cows, stars, dogs and questionmarks from boston consulting group
Sustain the cash-generating cows, divest or harvest the dogs, take cash from the cows and invest in question marks in order to make them stars, and increase the market share of the stars until their industry growth slowed and they became the next generation of cash cows
