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SGMA 591 Chapter 2 Exam Questions And Correct Answers
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SGMA 591 Chapter 2 Exam Questions And Correct Answersbusiness environment - Answer all the external influences that affect its decisions and
performance
PEST analysis - Answer Environmental scanning framework used to understand macro
environmental factors affecting industries and marketing in which companies compete.
political economic social technological
why is pest analysis popular - Answer it provides simple yet systematic approach to
identifying factors that are likely to shape the competitive conditions within an industry
Political example: licensing, taxation, trademark and intellectual property
Economic examples: cost of labor, capital and energy, level of economic activity
Social examples: shifting attitudes
Technological: shopping online vs brick and mortar
Strategic analysis approach : macro environment
Immediate industry environment
Specific competitors
Internal analusis
Industry microenvironment: customer
Competition and new entrants
Suppliers
Macro environment: PEST
the more compettion - Answer the less the surplus received by customers
, profit not always surplus - Answer when an industry has powerful / monopolistic
suppliers or employees united by a strong labor union surplus may be appropriated by
suppliers
profit = surplus - Value of the product to customers
Intensity of competition
Bargaining power of the producers relative to their suppliers
horizontal competition - competition from substitutes, entrants and rivals
absence of sunk cost - Answer make an industry vulnerable to hit and run entry
sunk cost - Answer investment whose value cannot be recovered on exit.
capital requirement - Answer cost so large discourage entry
the need to invest large financial resources in order to compete
economies of scale - Answer firms produce larger volumes enjoy lower cost per unit
absolute advantage - Answer result from acquisition of low cost sources of raw material
product differentiation - Answer advantage of brand recognition and customer loyalty.
New entrants would have to spend lots on advertising and gaining brand awareness
Access to channels of distribution - Answer shelf space
Governmental and legal barriers - Answer government grant exclusive right. While the
government can directly affect industry attractiveness it also has a powerful influence on
each of the other five forces.
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