Exam 4: Further Topics in Industry and Competitive Analysis

The key insight from the "prisoners' dilemma" game is:

Video game consoles and video games are complementary products: the availability of one increases the value of the other.In the past the suppliers of consoles were able to appropriate most of the profits generated by video game systems because:

In supplying video game systems,the suppliers of consoles are no longer in such a strong position to appropriate the major profits because of increasingly intense competition among the three of them (Sony,Microsoft and Nintendo),and the growing size and power of the suppliers of video games.

The aim of competitive intelligence is to predict competitor behavior on the basis of verifiable facts.Attempts to "get inside the heads of your rivals" are inherently unreliable and should be avoided.

Competitive intelligence,the systematic collection and analysis of information about rival firms,is:

In the world of business,competition and cooperation seldom coexist.

Strategic groups consist of:

To attempt to predict competitive behaviors,Porter suggests a four-step framework,where analysts must identify:

Industry segmentation is always horizontal-it is based upon the products an industry suppliers and the customers to which they are supplied.The notion of vertical segmentation-segmenting an industry along its value chain is attractive in principle but impossible in practice.

To divide an industry into segments it is always preferable to focus on the characteristics of different customers rather than the characteristics of different products.

The more variables that are deployed to segment a market,the more useful is the resulting segmentation likely ot be.

The main usefulness of strategic group analysis is in analyzing interfirm profitability differences within an industry; it is less useful as a tool for describing the strategic positioning of firms within an industry.

A key limitation of Porter's five forces model of competition is that:

Industry membership is the single most important source of profitability differences between firms.

The principal value of game theory to the field of strategic management is in:

While the profitability of supplying a product tends to be reduced by availability of close substitutes,the effect of complements on profitability is less clear: it depends upon how value is shared among the suppliers of the different complements.

In a market where Firm A and Firm B are leading suppliers,if Firm A initiates a price cut,the likelihood that Firm B responds with an identical price cut will be greater:

When products A and B are complements,the division of profit between the supplier of A and the supplier of B will depend upon which builds the stronger market position and is better able to reduce the value contributed by the other.

Empirical studies on hypercompetition show unanimously that industries are becoming increasingly turbulent and competitive advantage increasingly short-lived

Industries are the central arenas in which competition takes place.Disaggregating industries into segments and groups of firms add little to our understanding of competition.