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12 Cards in this Set
- Front
- Back
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Industry
-Definition -Government |
-set of players that more less sell the same thing; can be a whole firm or division of a firm
-SIC and NAICS: classification system used to put firms in industries *firms may be in multiple industries |
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Substitutability
-Two Types and Definitions -How are two firms placed in the same industry -Buyer's Perspective |
-Demand side: possibility of customers switching between suppliers
-Supply side: what other firms make or have the technology to make what I make -if they are DS and SS substitutable -SS may be better if they can wait to get what they want; DS might be better if they need the item ASAP |
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Benefit of Focus/Avoidance of Risk
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-Benefit of Focus: when a firm is in one industry it can focus on that but in many industries it loses focus
-Avoidance of Risk: when in multiple industries there is a smaller risk of failing |
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Focused firm vs. Diversified firm
-Related Diversified vs. Unrelated Diversified |
firm in one industry vs. firm in many industries
-industries overlap vs. industries do not overlap |
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Forces that Affect Competitive Situation
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-Competition from rivals
-Competition from new entrants -Competition from substitutes -Relative power of customers -Relative power of suppliers |
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Competition from rivals
-Larger or smaller makes it more profitable -What makes it large (4) |
-smaller
-many small producers, weak or negative demand growth, high exit costs, excess capacity that is expensive to shut down |
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Competition from New Entrants
-what inhibits new entrants |
-Barriers to entry: brands, intellectual property, economies of scale (if entering too small, unit price will not be high enough to keep firm alive)
*nudge towards perfect competition |
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Competition from Substitutes
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will push rival prices down
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Relative Power of Customers
-Brand Loyalty -Switching Costs -Low or high power gives you high profit |
-Customers are willing to pay more for a certain brand
-Costs asc. with switching firms (ex. ending a cell phone contract early) -low power can create high profit |
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Relative Power of Suppliers
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monopoly will have better control over industry
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Industry Analysis (Porter Model)
-what does it ask -how does it answer |
-how attractive an industry is
-analyzes forces that affect competition |
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Potential Economic Performance
-Attractiveness of Industry and Unique Competitive Advantage -What is CA dependent on |
-Has both: potentially high economic profit
-Attractive/No CA: small potential and may attempt to build CA -Not Attractive/Has CA: high potential that those w/o CA -Neither: most likely fail or exit the industry -resources, history, past choices made by DC |
