The strategically relevant factors outside a company's industry boundaries—economic conditions, political factors,
sociocultural forces, technological factors, environmental factors, and legal/regulatory conditions—are known as:
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a company's "macro-environment."
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Managers must chart a company's strategic course by:
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developing a thorough understanding of the company's external and internal environment.
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The most powerful and widely used conceptual tool for diagnosing the principal competitive pressures in a market is:
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The five forces framework.
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The competitive pressures on companies within an industry come from all of the following, EXCEPT:
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those associated with environmental factors such as water shortages.
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Using the five forces model of competition to determine the character and strength of the competitive forces within a given industry involves:
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building the picture of competition in three steps: (1) identify the different parties involved, along with specific factors that bring about competitive pressures; (2) evaluate how strong the pressures stemming from each of the five forces are (strong, moderate or weak); and (3) determining whether the collective impact of the five competitive forces is conducive to earning attractive profits in the industry.
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Market maneuvering among industry rivals:
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Is ongoing and dynamic, with moves and countermoves of rivals producing a continually evolving competitive landscape that delivers winners and losers.
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The rivalry among competing sellers tends to be less intense when:
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industry rivals are not particularly aggressive or active in making fresh moves to improve their market standing and business performance.
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The competitive battles among rival sellers striving for better market positions, higher sales and market shares, and competitive advantage, suggest the rivalry force:
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tends to intensify when strong companies with sizable financial resources, proven competitive capabilities, and respected brand names hurdle entry barriers looking for growth opportunities and launch aggressive, well-funded moves to transform into strong market contenders.
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In analyzing the strength of competition among rival firms, an important consideration is:
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the diversity of competitors in terms of long-term direction, objectives, strategies, and countries of origin.
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Potential entrants are more likely to be deterred from actually entering an industry when:
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incumbent firms are willing and able to be aggressive in defending their market positions against entry.
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The best test of whether potential entry is a strong or weak competitive force is:
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to ask if the industry's growth and profit prospects are strongly attractive to potential entry candidates.
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The competitive threat that outsiders will enter a market is weaker when:
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buyers have little loyalty to the brands and product offerings of existing industry members.
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The competitive pressures from substitute products tend to be stronger when:
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good substitutes are readily available.
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Determining how strong the threat of substitutes will be entails:
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identifying the relative price/performance relationship of the substitutes, the switching costs, and the overall buyer demand for the substitute.
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Whether supplier-seller relationships in an industry represent a strong or weak source of competitive pressure is a function of:
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whether demand for supplier products is high and they are in short supply.
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The strength of competitive pressures that suppliers can exert on industry members is MAINLY a function of:
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whether needed inputs are in short supply and whether suppliers provide differentiated input that enhances performance of the product.
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When an industry member is a major customer of the supplier, and the relationship (partnership) is unusually effective and mutually advantageous:
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there is a strong likelihood such partnerships will put increased competitive pressure on those industry members who lack productive collaborative relationships with their suppliers.
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The higher the switching costs for industry members, the more it can
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enhance supplier bargaining power.
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Whether buyer-seller relationships in an industry represent a strong or weak source of competitive pressure is a function
of:
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the extent to which buyers can exercise enough bargaining power to influence the conditions of sale in their favor and whether strategic partnerships between certain industry members can adversely affect other industry members.
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Whether buyer bargaining power poses a strong or weak source of competitive pressure on industry members depends in
part on:
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whether demand-supply conditions represent a buyer's market or a seller's market.
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Collaborative relationships between particular sellers and buyers in an industry can represent a source of strong
competitive pressure when:
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sales are made to buyer groups with either strong bargaining power or high sensitivity.
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Not all buyers of an industry's product have equal degrees of bargaining power with sellers, because:
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some sellers may be less sensitive than others to price, quality, or service differences.
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A competitive environment where there is weak to moderate rivalry among sellers, high entry barriers, weak competition
from substitute products, and little bargaining leverage on the part of both suppliers and customers:
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Is conducive to industry members earning attractive profits.
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A competitive environment where there is strong rivalry among sellers, low entry barriers, strong competition from
substitute products, and considerable bargaining leverage on the part of both suppliers and customers:
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Is competitively unattractive from the standpoint of earning good profits.
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The stronger the collective impact of competitive pressures associated with the five competitive forces:
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the stronger are the industry's driving forces.
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A company's strategy is increasingly effective the more it can match the company strategy to competitive conditions, so the
firm can:
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shift the competitive battle in favor of the firm by altering the underlying factors driving the five forces.
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The "driving forces" in an industry:
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are major underlying causes of changing industry and competitive conditions and have the biggest influences in reshaping the industry landscape and altering competitive conditions.
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Industry conditions change because of:
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Important forces enticing or pressuring certain industry participants (competitors, customers, suppliers) to alter their actions in important ways.
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The task of driving forces analysis is to
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Identify the driving forces, assess whether their impact will make the industry more or less attractive, and determine what strategy changes are needed to prepare for the impacts of the driving forces.
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Which of the following is MOST likely to qualify as a driving force?
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successful introduction of innovative new products or new ways to market products
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Increasing globalization of the industry can be a driving force because:
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companies need to spread their operating reach into more and more country markets to meet consumer demand and take advantage of available operating activities.
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Evaluating the industry's driving forces, as a whole, requires understanding their influence on the attractiveness of
industry environment and generally are:
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defined in ways that will strengthen or weaken market demand, competition, and industry profitability in future years.
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The real payoff of driving forces is to help managers understand:
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what strategy changes are needed to prepare for the impacts of the driving forces.
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What is the best technique for revealing the different market or competitive position that rival firms occupy in the
industry?
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strategic group mapping
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A strategic group:
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is a cluster of industry members with similar competitive approaches and market positions in the market.
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Not all positions on a strategic group map are equally attractive because:
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Industry driving forces and competitive pressures favor some groups and disadvantage others.
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An industry contains one strategic group when all sellers:
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pursue essentially identical strategies and have similar market positions.
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Strategic group mapping is a visual technique for displaying:
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The different market or competitive positions that rival firms occupy in an industry and for identifying each rival's closest competitors.
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The concept of strategic groups is relevant to industry and competitive analysis because:
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strategic group maps help identify how each competing firm is positioned and the relationship to their closest competitors.
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With the aid of a strategic group map, one can:
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reveal which companies are close competitors and which are distant rivals, and that not all positions on the map are equally attractive.
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To succeed in predicting a competitor's next moves, company strategists need to appraise a rival's;
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current strategy, financial health, market share, resources and capabilities.
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Having good competitive intelligence about rivals' strategies and moves to improve their situation is important because:
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it allows a company to anticipate what moves rivals are likely to make next and to craft its own strategic moves with some
confidence.
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A rival's strategic moves and countermoves are:
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enabled and constrained by the set of capabilities they have at hand.
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Competitive intelligence can be gleaned from:
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company press releases, company websites, management presentations, and annual reports and 10-K filings.
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The key success factors in an industry:
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are those competitive factors that most affect industry members' abilities to prosper in the marketplace—the particular strategy elements, product attributes, operational approaches, resources, and competitive capabilities that spell the difference between being a
strong competitor and a weak one, and between profit and loss.
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An industry's key success factors can always be deduced by asking what factors:
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such as product attributes and service characteristics are crucial, and what resources and competitive capabilities are needed, and what shortcomings are evident to put a company at a competitive disadvantage.
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In identifying an industry's key success factors, strategists should
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consider on what basis customers choose between competing brands, what resources and competitive capabilities firms need to be competitively successful, and what shortcomings are almost certain to put a company at a significant competitive disadvantage.
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Correctly diagnosing an industry's key success factors
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raises a company's chances of crafting a sound strategy.
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Which of the following is particularly pertinent in evaluating whether an industry presents a sufficiently attractive business opportunity?
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The industry's growth potential, whether competition appears destined to become stronger or weaker, and whether the industry's overall profit prospects are above average, average, or below average
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Which of the following factors should a company consider when determining if an industry offers good prospects for
attractive profits?
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The industry's growth potential, whether competition appears destined to become stronger or weaker, how the industry's driving forces might affect overall industry profitability, the company's competitive position relative to rivals, and the company's proficiency in performing industry key success factors
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