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Questions and Answers
What is the most important aspect when considering demand from clients?
What is the most important aspect when considering demand from clients?
In which industry would you expect key success factors to emphasize cost efficiency due to strong price competition?
In which industry would you expect key success factors to emphasize cost efficiency due to strong price competition?
What characteristic distinguishes an oligopoly from perfect competition?
What characteristic distinguishes an oligopoly from perfect competition?
What is a common feature of the supermarket industry regarding consumer demand?
What is a common feature of the supermarket industry regarding consumer demand?
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Which statement best describes ‘barriers to entry’ in a monopoly structure?
Which statement best describes ‘barriers to entry’ in a monopoly structure?
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Which of the following best exemplifies the key success factor of product differentiation?
Which of the following best exemplifies the key success factor of product differentiation?
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What do customers typically prioritize in the fashion clothing industry?
What do customers typically prioritize in the fashion clothing industry?
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Which industry would likely not experience high product differentiation?
Which industry would likely not experience high product differentiation?
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What is the main purpose of the SCP model?
What is the main purpose of the SCP model?
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Which of the following factors does NOT directly impact market performance according to the SCP model?
Which of the following factors does NOT directly impact market performance according to the SCP model?
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Which component of Porter's Diamond refers to the rare and specialized resources available in a region?
Which component of Porter's Diamond refers to the rare and specialized resources available in a region?
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How do external factors affect the SCP model?
How do external factors affect the SCP model?
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What is one of the main benefits of conducting a PEST analysis?
What is one of the main benefits of conducting a PEST analysis?
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Which part of Porter's Diamond refers to the influence of domestic demand on innovation?
Which part of Porter's Diamond refers to the influence of domestic demand on innovation?
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What primary relationship is established in the SCP model?
What primary relationship is established in the SCP model?
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Which factor could negatively impact a firm's economic conduct in a competitive market?
Which factor could negatively impact a firm's economic conduct in a competitive market?
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What is a key influence on industry profitability related to competition intensity?
What is a key influence on industry profitability related to competition intensity?
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Which factor increases the bargaining power of buyers in a market?
Which factor increases the bargaining power of buyers in a market?
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How does product differentiation affect the threat of new entry into a market?
How does product differentiation affect the threat of new entry into a market?
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What does the rivalry between established competitors not consider?
What does the rivalry between established competitors not consider?
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Which of the following best describes the concept of market concentration?
Which of the following best describes the concept of market concentration?
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What is NOT a barrier to exit from a market?
What is NOT a barrier to exit from a market?
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What aspect is NOT a determinant of the bargaining power of suppliers?
What aspect is NOT a determinant of the bargaining power of suppliers?
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Which of the following best defines the threat of substitutes in a market?
Which of the following best defines the threat of substitutes in a market?
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What does a Herfindahl index (HHI) score below 0.01 indicate?
What does a Herfindahl index (HHI) score below 0.01 indicate?
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Which of the following factors contributes to the bargaining power of suppliers?
Which of the following factors contributes to the bargaining power of suppliers?
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What does a Normalized Herfindahl index quantify?
What does a Normalized Herfindahl index quantify?
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What is a necessary consideration when analyzing the threat of substitutes?
What is a necessary consideration when analyzing the threat of substitutes?
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Which of the following is a potential indicator of high bargaining power among customers?
Which of the following is a potential indicator of high bargaining power among customers?
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When is an established firm viewed as a new entry in a market?
When is an established firm viewed as a new entry in a market?
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What is the implication of a Herfindahl index between 0.15 and 0.25?
What is the implication of a Herfindahl index between 0.15 and 0.25?
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Which condition would most likely indicate a low threat of new entry?
Which condition would most likely indicate a low threat of new entry?
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What do entry barriers primarily enable incumbents to do?
What do entry barriers primarily enable incumbents to do?
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Which of the following is a type of endogenous entry barrier?
Which of the following is a type of endogenous entry barrier?
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Which statement accurately reflects the perspective on industry structure?
Which statement accurately reflects the perspective on industry structure?
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What is a characteristic of exogenous entry barriers?
What is a characteristic of exogenous entry barriers?
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Why might industries that are dynamic not be well represented by static perspectives?
Why might industries that are dynamic not be well represented by static perspectives?
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Which of the following emphasizes the importance of firm-level factors over industry structure?
Which of the following emphasizes the importance of firm-level factors over industry structure?
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Which is an example of a difficulty in defining industry boundaries?
Which is an example of a difficulty in defining industry boundaries?
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How can changes in industry structure forecast future profitability?
How can changes in industry structure forecast future profitability?
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Study Notes
Industry Analysis
-
Structure-Conduct-Performance (SCP) Model:
- A theoretical model explaining firm performance through economic conduct.
- Has influenced models like Porter's Five Forces.
- Market environment (PEST) directly impacts market structure.
- Market structure affects firm conduct, which impacts market performance.
- Feedback loops exist, where market performance impacts conduct and structure.
- Conduct and external factors (legal, political) affect the market framework.
Pest Analysis
- Considers political, economic, social, and technological factors impacting a firm.
Porter's Diamond
- Explains why industries become competitive in specific locations/countries.
-
Factor Conditions:
- Access to rare, inimitable factors (e.g., skilled labor, resources).
- Example: Software engineers in Silicon Valley
- Human, physical resources, infrastructure, and capital resources.
-
Factor Conditions:
Objectives of Industrial Analysis
- Explains the spectrum of industry structures.
-
Structure Types: Perfect Competition, Oligopoly, Duopoly, Monopoly.
- Characteristics (by structure): Concentration, Entry/Exit Barriers, Product Differentiation, Product Information Availability.
-
Structure Types: Perfect Competition, Oligopoly, Duopoly, Monopoly.
Key Success Factors
- Important elements for a company's success in the target markets.
Porter's Five Forces
- Determinants of industry profitability:
- Value proposition of the product to customers.
- Intensity of competition.
- Relative bargaining power at value chain stages (suppliers & customers).
- Example: BME (Spanish Stock Exchange)
Threat of New Entry
- Factors affecting the likelihood of new firms entering a market.
- Capital requirements
- Economies of scale
- Absolute cost advantage
- Product differentiation
Threat of Substitutes
- Substitutes provide similar functions at lower prices/higher quality
- Consider relative prices and switching costs
Bargaining Power of Suppliers
- The ability of suppliers to influence prices/negotiations.
Bargaining Power of Buyers
- The ability of buyers to influence prices/negotiations.
Rivalry Between Established Competitors
- Factors influencing competition intensity in a sector.
- Concentration, Diversity of competitors, etc
Measurement of Concentration
- Market/Industry Concentration: Number of firms competing.
- Concentration Rate (CR): Sum of market share of the largest firms.
- Herfindahl Index (HHI): Sum of squares of market shares.
Industry Structure
- How competition, structure, and firm conduct interact.
- Industry structure influences competition, but competition also influences industry structure.
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Description
Test your understanding of key concepts in business economics, including demand considerations, market structures, and competitive strategies. This quiz covers essential topics such as the SCP model and Porter's Diamond framework, providing insights into various industries and their dynamics.
