Industry Competition and New Entrants Quiz

Environmental Scanning

• External environment includes factors that affect an organization's performance, such as customers, suppliers, competitors, and government regulations.

Threat of New Entrants

• New entrants bring new capacity, a desire to gain market share, and substantial resources to an industry.
• Entry barriers make it difficult for a company to enter an industry.
• Possible barriers to entry include:
  • Economies of scale
  • Product differentiation
  • Capital requirements
  • Switching costs
  • Access to distribution channels
  • Cost disadvantages independent of size
  • Government policy

Rivalry among Existing Firms

• Corporations in an industry are mutually dependent, and a competitive move by one firm can affect its competitors and lead to retaliation.
• Intense rivalry is related to the presence of several factors, including:
  • Number of competitors
  • Rate of industry growth
  • Product or service characteristics
  • Amount of fixed costs
  • Capacity
  • Height of exit barriers
  • Diversity of rivals

Forecasting Techniques

• Identify uncertainties in the six forces of the task environment.
• Make a range of plausible assumptions about future trends.
• Combine assumptions about individual trends into internally consistent scenarios.
• Analyze the industry situation under each scenario.
• Determine the sources of competitive advantage under each scenario.
• Predict competitors' behavior under each scenario.
• Select the scenarios that are most likely to occur or have a strong impact on the company's future.

External Factor Analysis Summary (EFAS)

• List opportunities and threats in Column 1.
• Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2.
• Rate each factor from 5.0 (Outstanding) to 1.0 (Poor) in Column 3.
• Multiply each factor's weight times its rating to obtain each factor's weighted score in Column 4.
• Use Column 5 for the rationale used for each factor.
• Add the individual weighted scores to obtain the total weighted score for the company in Column 4.

Test your knowledge on analyzing the external environment of industries, competitive forces, and the threat of new entrants. Explore concepts like market share, entry barriers, and industry capacity.