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Questions and Answers
The elasticity of the price-demand curve for a product has a direct influence on the ease by which customers will switch to substitutes; hence, products with price-inelastic demand face a lower threat of substitution.
The elasticity of the price-demand curve for a product has a direct influence on the ease by which customers will switch to substitutes; hence, products with price-inelastic demand face a lower threat of substitution.
True (A)
The primary effect of reduced barriers to entry within an oligopolistic market structured around innovative technologies is the deceleration of incumbents' economic rents and diminished capacity for sustained competitive advantage.
The primary effect of reduced barriers to entry within an oligopolistic market structured around innovative technologies is the deceleration of incumbents' economic rents and diminished capacity for sustained competitive advantage.
True (A)
The threat of new entrants is amplified in scenarios characterized by substantial initial capital outlays, restricted access to established distribution paradigms, negligible brand differentiation, and stringent regulatory landscapes.
The threat of new entrants is amplified in scenarios characterized by substantial initial capital outlays, restricted access to established distribution paradigms, negligible brand differentiation, and stringent regulatory landscapes.
False (B)
A high degree of supplier concentration and the potential for forward integration by suppliers are inversely proportional to the bargaining power of buyers in an industry.
A high degree of supplier concentration and the potential for forward integration by suppliers are inversely proportional to the bargaining power of buyers in an industry.
The magnitude of innovation-driven market share dynamics reflects a direct correlation to consumer price elasticity, thus, a market characterized by high consumer price sensitivity attenuates the effect of innovation on market share shifts.
The magnitude of innovation-driven market share dynamics reflects a direct correlation to consumer price elasticity, thus, a market characterized by high consumer price sensitivity attenuates the effect of innovation on market share shifts.
A market environment characterized by the presence of numerous, similarly sized firms, low product differentiation, and reduced switching costs between suppliers correlates positively with heightened competitive rivalry.
A market environment characterized by the presence of numerous, similarly sized firms, low product differentiation, and reduced switching costs between suppliers correlates positively with heightened competitive rivalry.
If the absolute value of the cross-price elasticity of demand between two products is significantly greater than zero, the products are generally conceptualized as substitutes, wherein an increase in the price of one product precipitates a decline in the demand for the other.
If the absolute value of the cross-price elasticity of demand between two products is significantly greater than zero, the products are generally conceptualized as substitutes, wherein an increase in the price of one product precipitates a decline in the demand for the other.
A firm's decision to implement strategies aimed at intensifying brand allegiance inherently curtails its susceptibility to competitive pressures from both extant rivals and prospective market entrants.
A firm's decision to implement strategies aimed at intensifying brand allegiance inherently curtails its susceptibility to competitive pressures from both extant rivals and prospective market entrants.
When the number of suppliers within a market is small and their products are highly commoditized, the bargaining power of buyers is amplified due to the abundance of undifferentiated options.
When the number of suppliers within a market is small and their products are highly commoditized, the bargaining power of buyers is amplified due to the abundance of undifferentiated options.
Implementing strategies that induce a state of near-perfect consumer loyalty and substantially increase the perceived value of a firm's products or services ultimately exerts minimal influence on the firm's competitive positioning and long-term sustainability.
Implementing strategies that induce a state of near-perfect consumer loyalty and substantially increase the perceived value of a firm's products or services ultimately exerts minimal influence on the firm's competitive positioning and long-term sustainability.
Flashcards
Threats to New Entry
Threats to New Entry
The risk that new companies will enter and increase competition.
Threats to Substitution
Threats to Substitution
The risk that consumers will switch to alternative products or services.
Supplier Power
Supplier Power
The bargaining power of suppliers to raise prices.
Buyer Power
Buyer Power
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Competitive Rivalry
Competitive Rivalry
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Brand Recognition
Brand Recognition
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Customer Loyalty
Customer Loyalty
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Study Notes
- Porter's Five Forces describes five factors:
- Threats to New Entry
- Threats to Substitution
- Supplier Power
- Buyer Power
- Competitive Rivalry
Threats to New Entry
- Factors to consider when evaluating new entry threats are:
- Capital
- Access in distribution channel
- Brand Recognition and Customer Loyalty
- Technological Barriers
- Threats can be reduced by:
- Building strong brand loyalty
- Continuously innovating
- Achieving economies of scale
- Building a strong distribution network
Threats to Substitution
- Ways to identify threats of substitution include:
- Relative price performance
- Customers willingness to go elsewhere
- The sense that products are similar
- Availability of close substitute
- High Availability of close substitute
- Low Availability of close substitute
- Substitution matters because of:
- Pricing pressures
- Innovation Drives
- Market share impact
Supplier Power
- Factors used to measure supplier power:
- Number of Suppliers
- Uniqueness
- Switching costs
- Forward Integration
- Industry Importance
Buyer Power
- Factors affecting buyer power are:
- Number of buyers versus suppliers
- Availability of substitutes
- Buyer Volume
Competitive Rivalry
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