Mqm 385 Ch 2 Test 1

Front 1

external analysis requires an assessment of

Back 1

industry environment in which company operates
the country or national environments in which company competes

the wider socioeconomic or macroenvironment that may affect the company and its industry

Front 2

opportunities

Back 2

conditions in the environment that a company can take advantage of to become more profitable

Front 3

threats

Back 3

conditions in the environment that endanger the integrity and profitability of the company's business

Front 4

industry

Back 4

a group of companies offering products or services that are close substitutes for each other and that satisfy the same basic customer needs

industry boundaries may change as customer needs evolve and technology changes

Front 5

sector

Back 5

a group of closely related industries

Front 6

market segments

Back 6

distinct groups of customers withing an industry

can be differentiated from each other with distinct attributes and specific demands

Front 7

industry analysis begins by:

Back 7

focusing on the overall industry before considering market segment or sector level issues

Front 8

porters five forces model

Back 8

risk of entry by potential competitors
industry rivalry
bargaining power of buyers
bargaining power of suppliers
threat of substitutes

Front 9

a weak competitive force :

Back 9

may be viewed as an opportunity as it allows company to earn greater profits

Front 10

a strong competitive force:

Back 10

may be viewed as a threat as it depresses industry profits

Front 11

Strength of forces may:

Back 11

change as industry conditions change

Front 12

potential competitors

Back 12

companies that are not currently competing in an industry but have the capability to do so if they choose.

Front 13

barriers to new entrants (5)

Back 13

economies of scale
brand loyalty
absolute cost advantages
customer switching cost for buyers
government regulation

Front 14

economies of scale

Back 14

as firms expand output unit costs fall

cost reductions - mass production
discounts on bulk purchases - raw mats
cost advantages/savings -
spreading cost over large volume

Front 15

brand loyalty

Back 15

achieved by creating well-established customer preferences

difficult for new entrants to take market share

Front 16

absolute cost advantages

Back 16

accumulated experience
control of particular inputs required for production
lower financial risks

Front 17

competitive rivarly

Back 17

the competitive struggle between companies in the same industry to gain market share from each other

Front 18

industry competitive structure

Back 18

number and size of distribution of companies

consolidated versus fragmented industries

Front 19

demand conditions

Back 19

growing demand - moderate competition - reduce rivalry

declining demand - encourages rivalry

Front 20

exit barriers

Back 20

write off of investment in assets
economic dependence on industry
maintain assets
high fixed costs
emotional attachment
bankruptcy regulations

Front 21

rivalry among established companies

Back 21

industry competitive structure
demand conditions
cost conditions
exit barriers

Front 22

bargaining power of buyers

Back 22

buyers are dominant
purchase in large quantities
dependent on buyers
switching costs for buyers are low
buyers can purchase from several supplying companies at once
buyers can threaten to enter the industry themselves

Front 23

bargaining power of suppliers

Back 23

product is vital to industry with few substitutes
suppliers are not sig. affected by the industry
switching costs for companies is significant
suppliers can threaten to enter the industry
companies in the industry cannot threaten to enter their supplier's industry by making their own inputs

Front 24

substitute products

Back 24

products from different businesses or industries that can satisfy similar customer needs

Front 25

the closest competitors

Back 25

are within the same strategic group and may be viewed by customers as substitutes

may face different O and T

Front 26

mobility barriers

Back 26

factors within an industry that inhibit the movement of companies between strategic groups

include barriers to enter or exit

Front 27

industry life cycle model

Back 27

analyzes the affect of industry evolution on competitive forces over time and is characterized by five life cycle stages

Front 28

5 stages of industry life cycle

Back 28

embryonic
growth
shakeout
mature
decline

Front 29

embryonic

Back 29

industry just beginning to develop

rivalry based on perfecting products, educating, and opening up channels

Front 30

growth

Back 30

first time demand takes off with new customers

low rivalry as focus is keeping up with high industry growth

Front 31

shakeout

Back 31

demand approaches saturation, replacements

rivalry intensifies with emergence of excess productive capacity

Front 32

mature

Back 32

market totally saturated with low to no growth

industry consolidation based on market share, driving down price

Front 33

decline

Back 33

industry growth becomes negative

rivalry further intensifies based on rate of decline and exit barriers

Front 34

hypercompetitive industries

Back 34

permanent and ongoing innovation and competitive change

Front 35

macro-economic forces

Back 35

growth rates, interest rates, currency exchange rates, inflation or deflation rates