week 2 external environment

Question 1

what is an industry

Answer 1

a group of firms producing products that are close substitute

Question 2

what are Michael porters 5 compeotive forces

Answer 2

threat of new entrants
rivavrlu among competing firms
bargaining powerr of suppliers
bargaining power of buyers
threat of substitute products

Question 3

when is rivalry intense

Answer 3

1. numerous or equally balanced competitors
2. lack of difereination or low switching costs
3. slow industry growth
4. high fixed costs or high storage costs
5. hight strategic stakes
6. high exit barriers

Question 4

the significance of new entrants is based on which two factors

Answer 4

1. barriers to entry
2. expected retaliation from existing firms In the industry

Question 5

what are the barriers to entry for new entrants

Answer 5

1. economies of scale (existing companies may have advantages in producing large quantities and thus the cost per unit becomes less)
2. capital requirements (having to invest in financial resources to compete can be expensive)
3. switching costs of consumers (companies that are already in the industry have more value as more people use the company so customers may be reluctant to switch to new companies)
4. access to distribution channels
5. cost disadvantages independent of scale (no matter the new companies size, there are certain avdnatges that existing companies have like being an established brand, experience..)

Question 6

when is expected retaliation likely to occur

Answer 6

if the company has retaliated in the past, public annocunment of intent, have resources to do so

Question 7

when is the threat of substitute products signifiant

Answer 7

goods or services outside of a given industry perform same or similar functions at a competitive price, low switching costs to switch ti this product

Question 8

when are suppliers powerful

Answer 8

1. few large companies and more concentrated than the industry they sell to
   2, no or few subs
2. suppler goods are critical to buyers success
3. suppler products are very different
4. threat of forward integration
5. industry firms not signifiant customer to supplier group

Question 9

when are buyers powerful ?

Answer 9

1. they purchase a large portion of inudtsrys total output
2. oriudct sales accounts for a significant portion of sellers annual revenue
3. low switching costs
4. industry products are undiffereintetd or standardized
5. threat of backward integration

Question 10

common mistakes in applying porters 5 forces?

Answer 10

1. defining an industry too broadly or too narrowly –> should be defined by product and geographic scope
2. confusing products of direct comp with the threat of subs (subs are found outside the industry not within)
3. focusing too much on labelling the 5 forces (overlooking their impact on industry profits, trends, strategic actions)

Question 11

defining an industry too broadly or narrowly

Answer 11

1. too broadly–> obscures differences among products, customers or geographic regions that are important to competition, strategic positioning and porfitbailtu
2. too narrowly–> overlooks commonalities and linkages across related products and geprgajphic markets that are crucial to a competitive advantage

Question 12

external environ,ent

Answer 12

economic (what’s the economy like for the firm competing in it), demographic (income, geographic), sociocultural (society attituees and culture), political (how does gvt influence), global (new markets), technological (creating new technology, leading to outputs) , sustainable physical (potential and actual changes in the environment like looking at global warming)

Question 13

opportunity

Answer 13

General environment condition that, if exploited, helps a company achieve strategic competitivenes

Question 14

threat

Answer 14

General environment condition that may hinder company’s efforts to achieve strategic competitivenes

Question 15

factors

Answer 15

industry growth rate, complementary products and services, gvt, techonology