Exam 2: Evaluating a Firms External Environment

Understanding a firm's general environment can help the firm identify some of the threats and opportunities it faces.

Describe the difference between a competitor and a complementor and identify the role complementors play in an industry.

The objective of divestment is to extract a firm from a declining industry.

A fragmented industry is an industry that has experienced an absolute decline in unit sales over a sustained period of time.

The ________ consists of broad trends in the context in which a firm operates that can have an impact on a firm's strategic choices.

________ costs exist when customers make investments in order to use a firm's particular products or services.

Which type of competition is characterized by a large number of firms, heterogeneous products and low cost of entry and exit?

Frequent price cutting by firms in an industry, frequent introduction of new products by firms in an industry and intense advertising campaigns are indications of

Hickory Divine is one of the leading manufacturers in the hardwood furniture industry. Hickory Divine has many small competitors, none of which controls a significant portion of the industry. Hickory, like most of the furniture manufacturers, sells its products to a broad variety of small furniture stores throughout the country, none of which represents a large percentage of Hickory's sales. When purchasing the products it uses for manufacturing its furniture, Hickory is able to choose from many suppliers since the wood it uses is an undifferentiated commodity, and Hickory is able to easily switch to any supplier that has the best price and delivery times. While growth in the hardwood furniture industry has historically been in the double digits, the industry growth rate has slowed considerably into the single digits, to approximately 5% in recent years; consumers have been purchasing less expensive furniture made of composite wood that is considerably less expensive than hardwood furniture but that looks and functions very similarly once it is painted. -Based on the above description, the hardwood furniture industry can best be described as a(n) ________ industry.

A firm's general environment consists of broad trends in the context within which the firm operates that can have an impact on the firm's strategic choices.

If your customers value your products more when they have your product and another firm's product rather than when they have your product alone, the other firm is considered to be a

The products or services provided by a firm's substitutes meet ________ customer needs in ________ ways as the product provided by the firm itself.

Mature industries are characterized by

In general, technological change creates opportunities, but not threats.

Sophisticated software can enhance the value that customers receive from a personal computer. Therefore, software can be said to be a complementor of a personal computer.

Firms in industries characterized by ________ can expect to earn only competitive parity.

Suppliers are a greater threat to firms in an industry when suppliers are threatened by substitutes.

According to Bradenburger and Nalebluff, a firm's competitors help increase the size of a firm's markets while complementors divide this market among a set of firms.

First movers that invest only in technology usually obtain sustained competitive advantages, even if they do not tie up strategically valuable resources in an industry before their full value is widely understood.

In the structure-conduct-performance model, the term "performance" refers solely to the performance of individual firms.