external environment correct answers general environment → industry environment → strategic groups → the firm
external influences correct answers - external environment
- stakeholders
strategic groups correct answers cluster of firms that share similar strategies
EX. Ferrari, Lambor...
strategic groups as an analytical tool correct answers - Identify barriers to mobility that protect a group
from attacks
by other groups
- Identify groups whose competitive position may be marginal or tenuous
- Chart the future direction of firms' strategies
- Thinking through the implications of each industry trend for the strategic group as a whole
industry (competitive) environment correct answers - For companies outside the industry,
• Is the industry attractive to enter?
- For companies within the industry,
• Position the company where competitive forces are weakest.
• Change the industry structure to reduce the intensity of competitive forces.
industry correct answers a set of firms that produce similar products or services, sell to similar customers,
and use similar methods of production
,industry analysis correct answers to understand the underpinnings of competition and the root causes of
profitability
Firms make profit by... correct answers adapting their strategies to industry conditions in order to:
- outcompete competitors within the industry and outside of the industry (substitutes and potential
entrants)
- lock in customers
Five Forces Analysis correct answers 1. threat of new entrants
2. bargaining power of buyers
3. bargaining power of suppliers
4. threat of substitute products or services
5. rivalry among existing firms
How does each of these forces influence an industry's
profitability? correct answers - Strong competitive pressure from each force → low industry profitability
- Analysis is from the industry perspective, not from the perspective of a particular firm
threat of new entrants correct answers High entry barriers lead to a low threat of new entries:
- Economies of scale [cost advantage]
- Product differentiation [perception of uniqueness]
- Switching costs [customer loyalty program]
- Capital requirements
- Incumbent's control of (1) knowledge, (2) raw materials, (3) distribution channels
bargaining power of buyers correct answers Buyers are powerful when:
- Number of buyers is small
- Purchase large quantities
- Products are standard/undifferentiated
- Can switch to another product at little cost
- Product is unimportant
,- Buyers can integrate backward into the seller's industry
- Buyers are not earning significant profits
bargaining power of suppliers correct answers Suppliers are powerful when:
- Only a few suppliers exist
- Their products are differentiated or they have built up switching costs for the buyer
- Their product is an important input to the buyer's business
- The industry is not an important customer of the suppliers
threat of substitute products or services correct answers Substitute are a threat if:
- Product has attractive price-performance compared to the industry's products
- Switching costs are low
EX. water vs. fruit juices vs. soda vs. milk vs. sports energy drinks vs. coffee/tea
rivalry among existing firms correct answers High rivalry comes from:
- Numerous or equally balanced competitors
- Homogeneous products (lack of differentiation)
- High fixed costs
- High exit barriers (specialized assets)
- Excess capacity (slow industry growth)
general environment correct answers factors external to an industry, usually beyond a firm's control →
opportunities and threats
EX. demographics, economic, political/legal, sociocultural, technological, global
environmental scanning correct answers identifying early signals
- surveillance of a firm's external environment to predict environmental changes and detect changes
already under way
, - alerts the firm to critical trends before changes have developed a discernible pattern and before
competitors recognize them
- collecting and interpreting data on competitors
- defining and understanding the industry
forecasting correct answers developing projections of environmental changes
scenario analysis correct answers - An in-depth approach to environmental forecasting that involves
experts' detailed assessments of societal trends, economics, politics, technology, or other dimensions of
the external environment
- Provides a set of tools that enable managers to imagine threats and opportunities the future may bring
Porter's Double Diamond Model correct answers
internal perspective correct answers Key Question:
•"What a firm can do"
Focus:
•Resources and Capabilities
Also known as:
•Strengths and Weaknesses
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