Term
| List Porter's Five Forces |
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Definition
–Buyer Power
–Supplier Power
–Substitutes
–Threat of Entry
–Rivalry |
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Term
| Why is it important to understand the environment or, better yet, the industry structure? |
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Definition
| Because we need to know how the industry structure drives competition, which determines profitability |
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Term
| What is the environment made up of? |
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Definition
| Political, Economic, Social and Technological factors |
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Term
| What are the general environmental factors important to all industries? |
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Definition
–Customers
–Suppliers
–Competition |
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Term
| How do we define an industry? |
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Definition
| A group of firms that supplies a market |
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Term
| What are other organizations in our industry, that can enter our industry, or are in other industries that can satisfy similar customer needs? |
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Definition
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Term
| What do customers effect in all industries? |
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Definition
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Term
| What do suppliers effect in all industries? |
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Definition
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Term
| What does competition effect in all industries? |
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Definition
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Term
| Competition within strategic groups is higher than what? |
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Definition
| Competition between different strategic groups. |
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Term
| What is a Strategic Group? |
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Definition
| Firms in the same group, with the same business model. |
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Term
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Definition
| One firm controls the entire market. |
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Term
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Definition
| A small group of firms (5<) control the entire market. |
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Term
| Market Concentration Ratio |
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Definition
| Shows the market share of each company. |
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Term
| High Market Concentration |
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Definition
Each firm has a larger market share (>50%) in their Market Concentration ratio.
This can indicate an oligopoly market. |
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Term
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Definition
| Each firm has a lower market share in their Market Concentration. |
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Term
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Definition
| A firms ability to increase prices without changing anything else, due to having little to no competition. |
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Term
| What is the purpose of Porter's Five Forces? |
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Definition
| To analyze the attractiveness of an industry. |
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Term
| What are the industry conditions that facilitate rivalry? |
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Definition
Large # of competitiors
Low Product Differentiation
Slow or Declining Industry Growth
High fixed cost as exit barriers |
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Term
| Why does low product differentiation in an industry cause more competition? |
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Definition
| The products increase competition, because there are more substitutes. |
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Term
| Why does slow/declining industry growth affect competition? |
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Definition
| Competition becomes more intense between firms within the industry. |
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Term
| Why do high fixed costs affect competition? |
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Definition
| They slow down a firm's ability to exit an industry. |
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Term
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Definition
| The cost of a customer switching from one firm to another. |
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Term
| High switching costs means that customers have what? |
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Definition
| Low bargaining power, due to difficulty to attain substitutes. |
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Term
| Greater Supplier Power affects profitability of the industry in what way? |
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Definition
| Decreases profitability, due to their ability to control costs and therefore control price. |
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Term
| What is Porter's definition of a substitute? |
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Definition
| Products which can be replaced with current items, but from different industries. |
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Term
| If a firm can't produce the minimum efficient scale they can't what? |
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Definition
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Term
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Definition
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Term
| What are three barriers of entry? |
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Definition
Economies of Scale
Product Differentiation
Government Policies |
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