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92 Cards in this Set
- Front
- Back
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business research that focuses on the potential of an industry |
industry analysis |
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a group of firms producing a similar product or service |
industry |
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a detailed evaluation of a firm's competitors |
competitor analysis |
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An entrepreneur must answer three questions before pursuing the idea of starting a firm: |
1. Is the industry accessible? 2. Does the industry contain markets that are ripe for innovation or are underserved? 3. Are there positions in the industry that will avoid some of the negative attributes of the industry as a whole? |
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A firm's position determines how the company is... |
situated relative to its competitors |
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Regardless of how eager they are to start a business, they are... |
not adequately prepared until they are "familiar with the face of the country" |
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8 to 30 percent of the variation in firm profitability is... |
directly attributable to the industry in which a firm competes |
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What are two techniques entrepreneurs have available for assessing industry attractiveness?
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studying industry trends using the five forces model |
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What are the two most important trends for entrepreneurs to evaluate?
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environmental and business trends |
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The strength of an industry often surges or wanes not so much because... |
of the management skills of those leading firms in a particular industry, but because environmental trends shift in favor or against the products or services sold by firms in the industry |
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The firms in some industries benefit from... |
an increasing ability to outsource manufacturing or service functions to lower-cost foreign labor markets, while firms in other industries don't share this advantage. |
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The five forces determine... |
the average rate of return for the firms competing in a particular industry or a particular segment of an industry |
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What are the five forces? |
threat of substitutes threat of new entrants rivalry among existing firms bargaining power of suppliers bargaining power of buyers |
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Each of Porter's five forces affects the average rate of return for the firms in an industry by... |
applying pressure on industry profitability |
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Industries are more attractive when the threat of substitutes is... |
low
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When close substitutes for a product do exist, industry profitability is suppressed because... |
consumers will opt not to buy when the price is too high |
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The extent to which substitutes suppress the profitability of an industry depends on... |
the propensity for buyers to substitute alternatives |
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Industries are more attractive when the threat of entry is... |
low |
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a condition that creates a disincentive for a new firm to enter an industry |
barrier to entry |
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Six major sources of barriers to entry: |
1. economies of scale 2. product differentiation 3. Capital requirements 4. cost advantages independent of size 5. access to distribution channels 6. government and legal barriers |
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Industries that are characterized by large economies of scale are... |
difficult for new firms to enter, unless they are willing to accept a cost disadvantage |
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occur when mass producing a product results in lower average costs |
economies of scale |
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Product innovation is... |
a way that a firm can differentiate its good or service from competitors' offerings |
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The need to invest large amounts of money to gain entrance to an industry is... |
another barrier to entry |
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Entrenched competitors may have cost advantages... |
not related to size that are not available to new entrants |
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Distribution channels are often... |
hard to crack. This is particularly true in crowded markets. |
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Three major barriers to entry |
patents trademarks copyrights |
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When the start-ups create their own industries or create new markets within existing industries, they must.. |
create barriers to entry of their own to reduce the threat of new entrants |
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The biggest threat to a new firm's viability is that.. |
larger, better-funded firms will step in and copy what is is doing |
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The major determinant of industry profibility is.. |
the level of competition among the firms already competing in the industry |
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There are four primary factors that determine the nature and intensity of the rivalry among existing firms in an industry: |
number and balance of competitors Degree of difference between products growth rate of an industry level of fixed costs |
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With a larger number of competitors, it is more likely that... |
one or more will try to gain customers by cutting prices |
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Commodity industries tend to compete on price because... |
there is no meaningful difference between one manufacturer's products and another's |
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The competition among firms in a slow growth industry is... |
stronger than among those in fast-growth industries |
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Firms that have high fixed costs must... |
sell a higher volume of their product to reach the break-even point than firms with low fixed costs |
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Industries are more attractive when... |
the bargaining power of suppliers is low |
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If a supplier reduces the quality of the components it supplies... |
the quality of the finished product will suffer, and the manufacturer will eventually have to lower its price |
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Several factors have an impact on the ability to suppliers to exert pressure on buyers and suppress the profitability of the industries they serve. These include the following (4): |
Supplier concentration Switching costs Atttractiveness of Substitutes Threat of Forward Integration |
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When there are only a few suppliers to provide a critical product to a large number of buyers, the supplier... |
has an advantage |
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Switching costs are the.. |
fixed costs that buyers encounter when switching or changing from one supplier to another. |
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If switching costs are high... |
a buyer will be less likely to switch suppliers |
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Supplier power is enhanced if... |
there are no attractive substitutes for the products or services the supplier offers |
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The power of supplier is enhanced if there is... |
a credible possibility that the supplier might enter the buyer's industry |
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Industries are more attractive when the bargaining power of buyers is... |
low. |
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Buyers can suppress the profitability of the industries from which they purchase by... |
demanding price concessions or increases in quality |
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Several factors affect buyer's ability to exert pressure on suppliers and suppress the profitability of the industries from which they buy. These include the following (4) |
Buyer group concentration buyer's costs degree of standardization of supplier's products threat of backward integration |
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If the buyers are concentrated and they buy from a large number of suppliers, they can... |
pressure the suppliers to lower costs and thus affect the profitability of the industries from which they buy |
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The greater the importance of an item is to a buyer... |
the more sensitive the buyer will be to the price it pays |
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The degree to which a supplier's product differs from it's competitors' offering affects... |
the buyer's bargaining power |
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The power of a buyer is enhanced if there is... |
a credible threat that the buyer might enter the supplier's industry. |
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The five forces model can be used in two ways: |
1. to help a firm determine whether it should enter a particular industry 2. whether it can carve out an attractive position in that industry |
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By doing so, a new venture can assess the thresholds it may have to meet to be successful in a particular industry (4) |
Is the industry a realistic place for our new venture? If we do enter the industry, can our firm do a better job than the industry as a whole in avoiding or diminishing the impact of the forces that suppress industry profitability? Is there a unique position in the industry that avoids or diminishes the forces that suppress industry profitability? Is there a superior business model that can be put in place that would be hard for industry incumbents to duplicate? |
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The five most prevalent industry types |
emerging industries fragmented industries mature industries declining industries global industries |
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What are the characteristics of emerging industries? |
Recent changes in demand or technology New industry standard operating procedures have yet to be developed |
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What are the characteristics of fragmented industries? |
Large number of firms of approximately equal size |
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What are the characteristics of Mature industries? |
Slow increases in demand Numerous repeat customers Limited product innovation |
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What are the characteristics of Declining Industries? |
Consistent reduction in industry demand |
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What are the characteristics of global industries? |
Significant international sales |
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is the opportunity for emerging industries? |
first-mover advantage |
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What is the opportunity for fragmented industries? |
consolidation |
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What is the opportunity for mature industries? |
process and after-sale service innovation |
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What is the opportunity for declining industries? |
Leaders Niche Harvest Divest |
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What is the opportunity for global industries? |
Multinational and Global |
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a new industry in which standard operating procedures have yet to be developed |
emerging industry
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sometimes insurmountable advantage gained by the first company to establish a significant position in a new market |
first-mover advantage |
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Many new ventures enter emerging industries because... |
barriers to entry are usually low and there is no established pattern of rivalry |
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one that characterized by a large number of firms of approximately equal size |
fragmented industry |
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The primary opportunity for start-ups in fragmented industries is to... |
consolidate the industry and establish industry leadership as a result of doing so. |
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one firm starts acquiring similar firms that are located in different geographic areas |
geographic roll-up strategy |
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an industry that is experiencing slow or no increase in demand, has numerous repeat customers, and has limited product innovation |
mature industry |
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an industry or part of an industry that is experiencing a reduction in demand |
declining industry |
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entrepreneurs shy away from declining industries because... |
the firms in the industry do not meet the tests of an attractive opportunity |
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Entrepreneural firms employ three different strategies in declining industries: |
leadership strategy niche strategy cost reduction strategy |
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the firm tries to become the dominant player in the industry |
leadership strategy |
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focuses on a narrow segment of the industry that might be encouraged to grow through product or process innovation |
niche strategy |
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accomplished through achieving lower costs than industry incumbents through process improvements |
cost reduction strategy |
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an industry that is experiencing significant international sales |
global industry |
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He two most common strategies pursued by firms in global industries are... |
multi domestic strategy global strategy |
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compete for market shares on a country-by-country basis and vary their product or service offerings to meet the demands of the local market |
multidomestic strategy |
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use the same basic approach in all foreign markets |
global strategy |
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The key to achieving success is gaining... |
a clear understanding of the customers' needs and interests in each market in which the firm intends to compete |
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a detailed analysis of a firm's competition
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competitor analysis |
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A competitor analysis helps a firm understand... |
the positions of its major competitors and the opportunities that are available to obtain a competitive advantage in one or more areas. |
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The first step in a competitive analysis is to... |
determine who the competition is. |
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Businesses that offer products or services that are identical or highly similar to those of the firm completing the analysis |
Direct competitors |
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These competitors offer close substitutes to the product the firm completing the analysis sells |
indirect competitors |
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there are companies that are not yet direct or indirect competitors but could move into one of these roles at any time |
future competitors |
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If a firm does not have a direct competitor, it shouldn't forget that the status quo can be... |
the toughest competitor of all. |
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In general, people are...
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resistant to change and can always keep their money rather than spend it |
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The information that is gathered by a firm to learn about its competitors |
competitive intelligence |
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a tool for organizing the information that a firm collects about its competitors |
competitive analysis grid |
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To be a viable company, a new venture must have at least... |
one clear competitive advantage over its major competitors |
