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Chapter 2 Strategy analysis
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- 1By what firm's potential profit potential is determined?1. The choice of an industry or a set of industries in which the firm operates.
2. Competitive strategy.
3. The way in which the firm expects to create and exploit synergies across the range of businesses it operates (corporate strategy) - 2What are five forces influencing industry profitability?Rivalry, threat of new entrants, threat of substitute products, bargaining power of buyerrs and bargaining power of suppliers
- 3What are three potential sources of competition in an industry?Rivalry among existing firms, threat of new entrants and threat of substitute products
- 4What are factors that determines the intensity of competition?Industry growth rate;
concentration and balance of competitors;
excess capacity and exit barriers;
degree of differentiation and switching costs;
scale/learning economies and ratio of fixed to variable costs; - 5What is effect of indistry growth rate?If an industry is growing very rapidly, incumbent firms need not grab market share from each other. In contrast, if industry stagnates, then the firms will try to grab market share from each other
- 6What can you tell about excess capacity?When capacity in an insudtry is larger than customer demand, there is a strong incentive for firms to cut prices.
- 7When exit barriers are high?When assets are speicalized or there are regulations that make exit costly.
- 8What can you tell about degree of differentiation and switching costs?How firm can differentiate itself from competitor ifnluences its competitiveness.
When switching costs are low, customers are more inclined to move from one product to another. - 9What can you say about scale/learning economies?If there is a steep learning curve, size becomes an important factor for firms in the industry.
- 10Which factors determine the height of barriers to entry in an industry?Scale, first mover advantage, access to channels of distribution and relationships;legal barriers
- 11What can you say about cost factor?When there ar large economies of scale, new entrants face the choice of having either to invest in a alrge capacity which might not be utilized right away or to enter with less than the optimum strategy. Either way, new entrants will at least initially suffer from a cost disadvnatage in competing with existing firms.
- 12What can you sell about first mover advantage?First movers might be able to set industry standards, or enter into exclusive arrangements with suppliersof cheap raw material
- 13What can you say about access to channels of distribution and realationships?Limited capacity in the existign distriubtion channels and high costs of developing new channels can act as powerful barriers to entry.
- 14What can you say about legal barriers?Patents, copyrights in research industries limit entry. Similarly, licencing regulations limit entry into taxi services, medical servies broadcasting etc.
- 15Which factors determine the bargaining power of buyers?Price sensitivity and relative bargainign power.
- 16What can you tell about price sensitivity?Buyers are mor eprice sensitive when the product is undifferentiated and there are few switiching costs.
- 17What can you tell about importance of product to to the cost structure?When the product represents a large fraction of the buyers' cost, the buyer is likely to expend the resources necessary to shop for a lower-cost alternative.
- 18What does relative bargaining power depend on?Relative bargaining power in a transaction depends, ultimately, on the cost to each party of not doing business with the other party.
- 19What are limitations of industry analysis?The assumption that industries have clear boundaries.
- 20What can you say about competitive strategy analysis?The profitability of a firm is influenced not only by industry structure but also by the strategic choices it makes to cope with or change the insdutry's competitive forces?
- 21What are 2 generic competitive strategies?Cost leadership and differentiation.
- 22What are ways of achieving cost leadership?Economies of scale and scope, economies of learning, efficient production, simpler product design, lower inout costs, and efficient organizational processes.
- 23What is main focus of cost leadership companies?Focus is tight cost control.
- 24What does a firm following differentiation strategy seek?It seeks to be unique in its industry
- 25What makes a competitive strategy unique and successful?Unique core competencies;
system of activities;
positioning. - 26What is meant by unique core competencies?core competencies that cannot be easily be acquired by competitors or substituted by other resources.
- 27What can you tell about system of activities?Coherent system of activities is difficult for competitors to imitate, especially when such activities require a trade-off.
- 28What can you tell about positioning?To achieve a sustainable competitive advantage - or escape competition - firms often identify or carve out a profitable subsegment of an industry.
- 29—
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- Financial statement valuation Fichas sobre Chapter 2 Strategy analysis, creado por Archimed Nemes el 30/10/2017.
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