Define an industry - Firms producing the same or similar products/services, What does a sector mainly refer to? - A public-service group such as education or health, Define a market - A group of customers with the same needs, what does Porter’s Five Forces determine? - Industry attractiveness and profitability, Name Porter's Five Forces  - Threat of entry, Threat of substitutes, Power of buyers, Power of suppliers, Competitve Rivalry, What is the extra sixth force? - Power of complementors, Rivalry among competitors is high when theres... - Many similar-sized competitors, slow growth, high fixed costs, Theres a Threat of new entrants when theres... - Low capital requirements, The threat of entry is low when... - Barriers are high, There is a Threat of substitutes when they come from... - Outside the industry (substitutes are extra-industry products offering similar benefits.), Threat of substitutes rises when... - Price/performance of substitute is superior or innovative (high-speed trains vs. short-haul flights.), Buyers have high power when... - They are concentrated and can switch easily, Backward integration means... - A firm takes over its supplier’s activity (moves backward in the chain)(bakery buying a wheat farm.), Supplier power is high when... - Suppliers are few or specialised, switching is costly, Forward integration means... - Suppliers start selling directly to customers(low-cost airlines cutting travel agents.), Ehat are demand complementors? - Organisations that make your product more attractive to customers(app developers for smartphones. Iphone with Apple Store), Supply complementors exist when... - Suppliers prefer to supply both you and another firm(Boeing supplying multiple airlines benefits each buyer.), A Five Forces analysis helps decide... - Which industries to enter or exit and how to influence forces, What is one issue in applying Five forces model? - Defining the right industry level (e.g. European low-cost airlines), The industry must not be defined as... - Too broadly or too narrowly, In analysis, how should the different stages of the value chain, be treated? - As Separate industries, List in order the Industry life cycle stages - Development → Growth → Shake-out → Maturity → Decline, In the growth stage - Demand rises, entrants increase, profits grow, What does the shake-out phase mean? - Too many competitors → weak ones exit, when does a Strategic lock-in occur? - Users become dependent and switching is costly, Give an example of a strategic lock in. - iTunes music playable only on iPods, Companies that create an industry standard under their control, like Microsoft Windows, demonstrate... - Strategic lock-in / industry standardisation, Define a market segment - A group of customers with similar needs, What are small, highly distinct segments are called? - Niches, What is a niche strategy? - Specialisation in a distinctive segment for long-term advantage, What are strategic groups? - Firms in the same industry with similar strategies and characteristics (luxury cars vs budget brands.), Environmental analysis is valuable because it identifies which two from SWOT? - Opportunities and threats for strategic choice, What is the difference between Industry vs. Sector ? - Industry = group of companies making similar products or services. → e.g. airline industry, car industry. Sector = broader, often used for public services.→ e.g. education sector, health sector., Define the 5 forces - 1. Rivalry – how strongly firms compete. 2. New entrants – how easy it is for new firms to enter.3. Substitutes – other products that do the same job. 4. Buyer power – how much customers can push prices down. 5. Supplier power – how much suppliers can push prices up. (Weak forces = high profits; strong forces = low profits.), List when an idustry is most attractive - Rivalry is low, Entry barriers are high, Few substitutes exist, Buyers have little power, Suppliers have little power, What type of barriers make it hard for new companies to enter a market? - Big costs (e.g. factories), Brand loyalty, Access to suppliers/distributors, Regulations, Economies of scale (The higher these barriers, the safer existing firms are), Define substitutes - Different products that meet the same need. (Trains vs. planes, Netflix vs. cinema., If substitutes are good and cheap → less profit for you), When does the Buyer & Supplier gain Power ? - Buyers have power when they’re few, big, and can switch easily. Suppliers have power when they’re rare, unique, or hard to replace. → Example: Microsoft (supplier) has strong power because everyone depends on Windows., What are the 3 industry types? - 1. Monopoly → 1 firm dominates (e.g. local water company). 2. Oligopoly → few large firms (e.g. Coca-Cola & Pepsi). 3. Perfect competition → many small firms (e.g. farmers)., Define an ecosystem - group of firms that support each other (e.g. Nespresso + coffee machine brands)., Define a complementor - product that makes yours more valuable (e.g. Apps → smartphones)., what is co-opetition? - cooperation + competition., Define strategic groups - Firms in the same industry but with similar strategies.→ e.g. 1.Luxury cars = BMW, Mercedes. 2. Budget cars = Kia, Dacia. 3. Mass market = Toyota, Ford. → Competition is strongest within the same group.,

Week 3 Industry and sector analysis

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