Chapter 3: Ext. Analysis

Question 1

The PESTEL model groups….;
aimed to be a straightforward way….

Answer 1

environmental factors into segments;

to monitor and evaluate external factors

Question 2

PESTEL stands for..

Answer 2

Political
Economic
Sociocultural
Technological
Ecological
Legal

Question 3

political factors

Answer 3

processes/actions of the govt that influence the firm
ex. lobbying, litigation

Question 4

Political and legal forces are _____ ______, and _____ ______ often results in changes to legislation

Answer 4

closely related
political pressure

Question 5

economic factors

Answer 5

largely macroeconomic and affect economy-wide phenomena
ex. growth rates, employment levels

Question 6

sociocultural factors

Answer 6

society’s cultures, norms, values are constantly in flux and differ across groups
trends should be monitored.

Question 7

technological factors include (4)

Answer 7

1. application of knowledge (new processes, products)
2. innovations in process technology (lean manufacturing)
3. innovations in product technology (smartphones)
4. AI, machine learning

Question 8

ecological factors

Answer 8

broad environmental issues; ex. global warming

Question 9

Relationships between organizations and the environment can be ______ and can provide _____ ______

Answer 9

adversarial
business opportunities

Question 10

legal factors

Answer 10

official outcomes of political processes (laws, mandates)

Question 11

many industries have become ______.
such as airlines, energy, ….

Answer 11

deregulated
trucking

Question 12

what affects Firm Performance? __% firm effects; __% industry effects; __% other factors/unexplained variance

Answer 12

55, 20, 25

Question 13

some industry effects may include… (2)

Answer 13

1. economic structure
2. entry/exit barriers

Question 14

some firm effects include… (1)

Answer 14

manager actions

Question 15

industry analysis seeks to understand…

Answer 15

how structural factors of an industry determines profit

Question 16

industry

Answer 16

group of firms producing similar products/services

Question 17

industry attractiveness

Answer 17

some industries are more profitable than others – but why? different factors!

Question 18

Five Forces Model helps… (2)

Answer 18

1. strategic leaders understand the profit potential of different industries
2. how they can position their firms to gain and sustain competitive advantage

Question 19

2 key insights of the Five Forces Model

Answer 19

1. competition is viewed more broadly in the 5 competitive forces
2. profit potential is a function of the 5 forces

Question 20

Porter’s 5 Forces

Answer 20

Threat of New Entrants
Power of Suppliers
Power of Buyers
Threat of Substitutes
Internal Rivalry

Question 21

Porter’s 5 Forces are industry-level analysis, we’re looking at a _____, not just one company

Answer 21

group

Question 22

Threat of New Entrants depresses profits by… (2)

Answer 22

1. capping prices to prevent entry
2. driving up costs; incumbents are spending more to satisfy customers

Question 23

You can analyze threat of entry by examining an industry’s _____ _____ – an advantage that incumbent firms have over entrants

Answer 23

entry barriers

Question 24

Power of Suppliers are pressures an industry supplier can exert on profit potential.
Lowers profit potential if…(2)

Answer 24

1. suppliers demand higher prices for their inputs
2. suppliers capture part of the economic value created

Question 25

Power of Buyers depends on...

Answer 25

relative bargaining power of buyers; pressure firms to cut prices and add value

Question 26

Threat of Substitutes

Answer 26

meeting the same need in a different way; can originate from a different industry ex. videoconferencing vs business travel

Question 27

Rivalry Amongst Existing Competitors

Answer 27

intensity with which companies in the same industry jockey for market share and profitability

Question 28

greater intensity of rivalry -->

Answer 28

lower industry profitability

Question 29

complements

Answer 29

a product/service adding value when used with original product

Question 30

strategic groups

Answer 30

set of companies pursuing similar strategy in a specific industry

Question 31

strategic group model/framework

Answer 31

clusters different firms into groups based on key strategic dimensions

Question 32

dimensions of strategic group modeling may include...

Answer 32

pricing, breadth of offering, R&D, etc.

Question 33

3 insights from strategic group mappings

Answer 33

1. competitive rivalry is strongest b/w firms in same strat group 2. external environ and 5 forces will affect groups differently 3. some groups are more profitable than others