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Flashcards

Strategy Midterm Part 2 - Industry Analysis

Corey Beach English 48 cards

Strategy Midterm Part 2 - Industry Analysis

Cards in this deck (48)

  1. 1What are the five competitive forces that shape strategy?1. Rivalry among existing competitors
    2. Power of customers
    3. Power of suppliers
    4. Threat of entry
    5. Threat of substitutes
  2. 2What should you think about when analyzing each of the Five Forces?The extent to which each force is able to apply downward pressure on industry average profits.
  3. 3What are the two major factors that "threat of entry" depends on?1. Height of entry barriers present
    2. Reaction entrants can expect from incumbents.
  4. 4What are some barriers to entry? (incumbent advantages)Economies of scale
    Network effects
    Customer switching costs
    Capital requirements
    Government policy
    Expected retaliation
    Lack of differentiation
    Cost to access distribution
  5. 5What are some factors that lead to powerful suppliers?Supplier concentration vs. industry concentration
    Does not depend a lot on industry for revenues
    Switching costs for participants
    Differentiated products
    No other substitute for supplier
    Can integrate forward into industry
  6. 6What are three ways that customers can be powerful?1. Force down prices
    2. Demand better quality (drive up costs)
    3. Play industry participants off one another
  7. 7What are other factors to consider when assessing the power of buyers?Price sensitivity
    Bargaining leverage
    Buyer concentration (few buyers)
    Buyer volume
    Buyer switching costs
    How different are the products
    Brand identity
    Switching costs
    Ability of buyers to backwards integrate
  8. 8What is a substitute?Something that performs the same or a similar function as an industry's product by a different mean.
  9. 9True or False. When the threat of substitutes is high, industry profitabilities tend to remain stable.False. When threat of substitutes is high, industry profitability suffers.
  10. 10The threat of a substitute is high if.... (give 2 reasons)1. It offers an attractive price-performance trade-off to the industry's product
    2. The costs of switching to the substitute are low
  11. 11What are the two factors that impact the degree to which rivalry drives down an industry's profit potential?1. Intensity of competition
    2. Basis on which they rivals compete
  12. 12What factors lead to high intensity of rivalry?Numerous number of competitors
    Equal size & power among competitors
    Industry growth is slow
    Exit barriers are high
    Rival committed to business/want to lead
  13. 13Rivalry is especially destructive to profitability if it gravitates solely to.....Price
  14. 14When assessing rivalry among existing competitors, what factors should you consider?Industry growth
    Demand conditions (overcapacity)
    Extent of exit barriers
    Product differentiation
    Brand identity
    Industry concentration
  15. 15—Industry rivalryIndustry rivalry
  16. 16—Potential entryPotential entry
  17. 17—SubstitutesSubstitutes
  18. 18—SuppliersSuppliers
  19. 19—BuyersBuyers
  20. 20What is the purpose of a Five Forces Analysis? (3 things)1. Assess current average industry profitability
    2. Understand impact of trends of industry profitability
    3. Make recommendations to firm on how to improve overall industry & firm's position
  21. 21True or False: Industry Average Profits could decline if any Force is too strong.True
  22. 22What is the "attractiveness" of an industry based on?The long-term expectation of your return.
  23. 23There are 7 steps to applying the Five Forces Framework. What is Step 1?Define the Industry.
  24. 24What do we mean by "define the industry"?- Create clear, concise description of the industry
    - Be as specific as possible about what firms are in the industry
  25. 25There are 7 steps to applying the Five Forces Framework. What is Step 2? (After defining the industry)Identify the organizations/products involved in each relevant force.
  26. 26There are 7 steps to applying the Five Forces Framework. What is Step 3? (after identifying the participants in each force)Asses the Strength of the Forces within the Industry
  27. 27True or False: When applying the Five Forces, you are assessing the firm.False.
    You are assessing the industry.
  28. 28There are 7 steps to applying the Five Forces Framework. What is Step 4? (after assessing the strength of each force)Ascertain the Overall Effect of the Forces (are they strong or weak?)
  29. 29Favorable industries have profits ______ economy-wide averages.Above.
  30. 30Unfavorable industries have profits _______ economy-wide average.Below.
  31. 31There are 7 steps to applying the Five Forces Framework. What is Step 5? (after determining overall effects of each force)Examine trends and changes in the industry. Analyze whether those trends alter the strength of any of the forces & therefore average industry profits.
  32. 32There are 7 steps to applying the Five Forces Framework. What is Step 6? (after analyzing industry trends)Recommendations on how to improve Average Industry Profitability.
    Remember: You want all forces to be labeled "low" to have a favorable industry.
  33. 33There are 7 steps to applying the Five Forces Framework. What is Step 7? (after making recommendations to improve avg industry profitability)Think about the firm in the context of its Industry Environment. Is it better or worse than the industry in each of the forces?
  34. 34True or False: You should consider government influence on each of the Five Forces during your analysis.True
  35. 35True or False: Technological change can only impact threat to entry.False.
    Technological change can impact any of the five forces.
  36. 36When did the Cola Wars case take place?2010
  37. 37How did the soft drink industry create an oligopoly on something so easy to replicate? (2 things)1. Distribution channels
    2. Brand loyalty
  38. 38What are the four steps in the value chain for Coke and Pepsi?1. Suppliers
    2. Concentrate producers
    3. Bottlers
    4. Retailers
  39. 39Is the threat of entry low, medium, or high in the CSD industry? Why?Low:
    - Brand loyalty
    - Access to distribution
    - Capital-intensive
    - Limited shelf space
    - Expected retaliation
  40. 40Is the power of suppliers low, medium, or high in the CSD industry? Why?Low
    - Numerous number of supplies
    - Little differentiation
    - Soda industry is large; can push suppliers around
    - Soda could integrate backwards if it wanted to
  41. 41Is the power of buyers low, medium, or high in the CSD industry? Why?Medium.
    - Volume purchase
    - Consumer demand
    - Big chains have more buyer power
    (not "high" because customer cannot grab all of the power)
  42. 42Is the threat of substitutes in the CSD industry low, medium, or high? Why?Medium.
    - Low switching costs
    - Health related trends
  43. 43Is the extent of rivalry low, medium, or high in the CSD industry? Why?Medium.
    - Globalization
    - Product differentiation
    - Slow growth
    - Small number of players
    - Compete in advertising and distribution
  44. 44What is the greatest source of competitive pressure in the CSD industry?Rivalry
  45. 45Is the CSD industry favorable?Yes, but there is a risk due to the low growth.
  46. 46True or False: When you don't compete on price, then the profitability remains high for everyone.True
  47. 47True or False: Extreme Rivalry means high profit.False.
    Extreme rivalry leads to low profit.
  48. 48Give an example of how Coke & Pepsi could wreck their industry structure.If they decide to compete on price.

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Flashcards on Strategy Midterm Part 2 - Industry Analysis, created by Corey Beach on 29/03/2015.
Created by
Corey Beach · Mar 2015
Updated
Feb 19, 2016
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