Exam 3: External Analysis: the Identification of Opportunities and Threats

The bargaining power of buyers is the ability to bargain down prices charged by companies in the industry or to raise the costs of companies in the industry by demanding better product quality and service.

Which of the following is not a barrier to entry?

In mature industries, companies tend to recognize their interdependence and try to avoid price wars.

Which of the following is not one of Porter's five forces?

Within Porter's framework, a _________ competitive force can be regarded as a(n) __________.

In growth industries,

The starting point of strategy formulation is an analysis of the forces that shape competition in the industry in which a company is based.

All of the following are forces in the wider macroenvironment except

Switching costs are those costs that consumers must bear to switch from the products offered by one established company to the products offered by another established company.

As an industry enters the shakeout stage of the industry life cycle, the rivalry between companies decreases.

Normally, the importance of control over technological knowledge as a barrier to entry has diminished by the time an industry enters its growth stage.

Brand loyalty exists when consumers have a preference for the products of established companies.

Historically, government regulation has constituted a minor entry barrier into many industries.

The risk of entry by potential competitors is a function of the height of barriers to entry.

As an industry enters maturity, barriers to entry decrease, and the threat of entry from potential competitors increases.

Opportunities arise when a company can take advantage of conditions in its environment to formulate and implement strategies that allow it to be more profitable.

Once the boundaries of an industry have been identified, the task facing managers is to analyze competitive forces in the industry environment to identify opportunities and threats.

Describe one major limitation of each of the following models for competitive analysis: the five forces model, the strategic groups model, and the industry life cycle model. Does the existence of these limitations mean that the models are not useful? Why or why not?

Many fragmented industries are characterized by low entry barriers and commodity-type products that are hard to differentiate.

Economies of scale arise when unit costs increase as a firm expands it output.