Smdm Chapter 2 Review

1. What are the three major areas of the external environment?

1) Internal 2) Political 3) Economic

Divided into 3 major areas (environments):
1) General
2) Industry
3) Competitor

The correct answer refers to the three major areas of the external environment which include General, Industry, and Competitor.

Explanation

The correct answer refers to the three major areas of the external environment which include General, Industry, and Competitor.

2. What does the General Environment refer to in the context of an industry?

The specific regulations and policies set by the industry association governing a particular sector.

The overall profitability and financial health of individual firms within an industry.

The internal factors within a specific company that impact its operations and performance.

Composed of dimensions in the broader society that influence an industry and the firms within it.
6 SEGMENTS:
1) Demographic, 2) Economic, 3) Political/Legal, 4) Sociocultural, 5) Technological, 6) Global

The general environment includes external factors outside of the industry that influence it, such as demographics, economics, politics, society, technology, and the global landscape.

Explanation

The general environment includes external factors outside of the industry that influence it, such as demographics, economics, politics, society, technology, and the global landscape.

3. What are the four activities included in External Environmental Analysis?

The continuous process includes four activities:
1) scanning- identifying early signals of potential change or detecting changes that are already underway
2) monitoring- Observing environmental changes to see if an important trend is emerging
3) forecasting- developing feasible projections of what might happen and how quickly
4) assessing- determining the timing and significance of the effects of environmental changes and trends on strategy

1) analyzing internal stakeholders

2) implementing organizational strategies

3) conducting market research

External Environmental Analysis focuses on activities related to scanning, monitoring, forecasting, and assessing environmental changes, not internal stakeholders, organizational strategies, or market research.

Explanation

External Environmental Analysis focuses on activities related to scanning, monitoring, forecasting, and assessing environmental changes, not internal stakeholders, organizational strategies, or market research.

4. What is Industry Environment Analysis?

A) is a group of firms producing products that are close substitutes

B) Has a more direct effect on the firm's strategic competitiveness and AAR. The intensity of industry competition and an industry's profit potential are functions of the 5 Forces of Competition

C) Refers to analyzing the political climate within an industry

B) Is the process of analyzing the weather patterns within an industry

D) Is a term used to describe the amount of pollution produced by an industry

Industry Environment Analysis is the process of evaluating the competitive forces within an industry that have a direct impact on a firm's strategic competitiveness and Average Accounting Returns (AAR). The correct answer emphasizes the importance of understanding industry competition and profit potential through the 5 Forces of Competition.

Explanation

Industry Environment Analysis is the process of evaluating the competitive forces within an industry that have a direct impact on a firm's strategic competitiveness and Average Accounting Returns (AAR). The correct answer emphasizes the importance of understanding industry competition and profit potential through the 5 Forces of Competition.

5. What are the five components of the Five Forces Model?

1. Bargaining Power of Consumers 2. Industry Growth Rate 3. Technology Advancement 4. Social Media Impact

1. Threat of new entrants
2. Bargaining Power of Suppliers
3. Bargaining Power of Buyes
4. Threat of Substitute Products
5. Rivalry Among Competing Firms

The Five Forces Model includes components related to the competitive forces in an industry, such as threats of new entrants, bargaining power of suppliers and buyers, threat of substitute products, and rivalry among competing firms. Incorrect options do not fit within the framework of the Five Forces Model.

Explanation

The Five Forces Model includes components related to the competitive forces in an industry, such as threats of new entrants, bargaining power of suppliers and buyers, threat of substitute products, and rivalry among competing firms. Incorrect options do not fit within the framework of the Five Forces Model.

6. What is the impact of the Threat of New Entrants on existing competitors?

The threat of new entrants has no impact on market dynamics

-New entrants can threaten market share of existing competitors
-They bring additional production capacity
-Likelihood that firms will enter an industry is a function of 2 factors: Barriers to Entry and Retaliation

Existing competitors typically welcome new entrants as it fosters healthy competition

New entrants pose no threat to market share of existing competitors

The threat of new entrants can indeed threaten the market share of existing competitors as they bring additional production capacity. The likelihood of firms entering an industry depends on the barriers to entry and potential retaliation from existing competitors.

Explanation

The threat of new entrants can indeed threaten the market share of existing competitors as they bring additional production capacity. The likelihood of firms entering an industry depends on the barriers to entry and potential retaliation from existing competitors.

7. What are the barriers to entry in a market?

1. Economies of Scale- incremental efficiency improvements thru experience as a firm grows larger
2. Product Differentiation- Uniqueness of product develops over time
3. Capital Requirements- competing in a new industry requires a firm to have resources to invest. Capital to invest may not be available to pursue the market opportunity even when a new industry is attractive
4. Switching Costs- the one-time costs customers incur when they buy from a different supplier.
5. Access to Distribution Channels- New entrants have to persuade distributors to carry their products, either in addition to or in place of those currently distributed
6. Cost Disadvantages Independent of Scale- Established competitors have cost advantages that new entrants cannot duplicate
7. Government Policy- can control entry into an industry thru licensing and permit requirements

1. Brand Loyalty2. Market Research3. Employee Turnover

Barriers to entry are factors that make it difficult for new firms to enter a market and compete with existing firms. The correct answers provided are commonly recognized barriers that new entrants face.

Explanation

Barriers to entry are factors that make it difficult for new firms to enter a market and compete with existing firms. The correct answers provided are commonly recognized barriers that new entrants face.

8. What factors contribute to the intensity of rivalry among competitors?

Competitive rivalry intensifies when a firm is challenged by a competitor's actions or when a company recognizes an opportunity to improve its market position.
Most prominent factors:
-Numerous or Equally balanced competitors
-Slow Industry Growth
-High fixed costs or storage costs
-Lack of differentiation or low switching costs
-High strategic stakes
-High exit barriers

A firm experiences less competitive rivalry when faced with high strategic stakes.

Low exit barriers contribute to high intensity of rivalry among competitors.

Competitive rivalry is intensified by high industry growth rates.

The correct answer highlights that factors such as numerous or equally balanced competitors, slow industry growth, high fixed costs or storage costs, lack of differentiation or low switching costs, high strategic stakes, and high exit barriers contribute to the intensity of rivalry among competitors. Thus, options that suggest the opposite or incorrect factors are incorrect.

Explanation

The correct answer highlights that factors such as numerous or equally balanced competitors, slow industry growth, high fixed costs or storage costs, lack of differentiation or low switching costs, high strategic stakes, and high exit barriers contribute to the intensity of rivalry among competitors. Thus, options that suggest the opposite or incorrect factors are incorrect.

9. What are Strategic Groups?

A group of firms competing for market dominance

A group of firms with no competitive rivalry

Is a set of firms emphasizing similar strategic dimensions to use a similar strategy
Implications:
-Firms within a group offer very similar products and provide intense competitive rivalry
-The closer the strategic groups, the greater the likelihood of rivalry. The greater the rivalry the greater the threats

A collection of firms with various strategies within an industry

Strategic Groups refer to a set of firms within an industry that emphasize similar strategic dimensions and use a similar strategy, leading to intense competitive rivalry among them. The closer the strategic groups are, the higher the likelihood of rivalry and threats in the industry.

Explanation

Strategic Groups refer to a set of firms within an industry that emphasize similar strategic dimensions and use a similar strategy, leading to intense competitive rivalry among them. The closer the strategic groups are, the higher the likelihood of rivalry and threats in the industry.

10. What is Competitor Analysis?

-Conducting internal audits of a firm's financial statements and performance indicators.

-About a firm's direct and indirect competitors
-Gives details about the competitive dynamics expected to impact on a firm's efforts to generate performance

-Analyzing customer preferences and buying patterns of a firm.

-Assessing market trends and industry regulations.

Competitor Analysis involves studying direct and indirect competitors to understand the competitive landscape and potential impact on a firm's performance.

Explanation

Competitor Analysis involves studying direct and indirect competitors to understand the competitive landscape and potential impact on a firm's performance.