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Questions and Answers
What is NOT a factor that influences barriers to entry in an industry?
What is NOT a factor that influences barriers to entry in an industry?
Which of the following best describes ex-ante costs in relation to new market entrants?
Which of the following best describes ex-ante costs in relation to new market entrants?
Which of the following factors would increase buyer power in a B2B context?
Which of the following factors would increase buyer power in a B2B context?
What is an example of an endogenous barrier to entry?
What is an example of an endogenous barrier to entry?
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In the context of supplier power, which of the following is a significant determinant?
In the context of supplier power, which of the following is a significant determinant?
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What is the primary consequence of deregulation in the airline industry?
What is the primary consequence of deregulation in the airline industry?
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What limitation of industry analysis does excessive emphasis on industry structure represent?
What limitation of industry analysis does excessive emphasis on industry structure represent?
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Which of the following is a measure of how efficiently a company is filling its available seating capacity?
Which of the following is a measure of how efficiently a company is filling its available seating capacity?
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What does the term 'strategic fit' refer to?
What does the term 'strategic fit' refer to?
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How can a firm create value through commerce?
How can a firm create value through commerce?
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What does B-C represent in value creation?
What does B-C represent in value creation?
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What condition allows a firm to achieve profit greater than zero in a competitive industry?
What condition allows a firm to achieve profit greater than zero in a competitive industry?
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Which of the following best describes sustainable competitive advantage?
Which of the following best describes sustainable competitive advantage?
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What is the primary goal a firm must achieve to maximize its market value?
What is the primary goal a firm must achieve to maximize its market value?
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What is indicated when Tobin's Q is greater than 1?
What is indicated when Tobin's Q is greater than 1?
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How can net present value be calculated if cash flows grow at a constant rate?
How can net present value be calculated if cash flows grow at a constant rate?
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What does ROE measure in a firm's performance?
What does ROE measure in a firm's performance?
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Backward looking performance measures are primarily based on which of the following?
Backward looking performance measures are primarily based on which of the following?
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What is the relevance of Corporate Social Responsibility (CSR) for firms?
What is the relevance of Corporate Social Responsibility (CSR) for firms?
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What does the SCP paradigm focus on in regards to industry performance?
What does the SCP paradigm focus on in regards to industry performance?
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Which of the following best identifies the highest profitable industry?
Which of the following best identifies the highest profitable industry?
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What is a key principle when defining industries or markets?
What is a key principle when defining industries or markets?
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What role does industry analysis play in corporate strategy?
What role does industry analysis play in corporate strategy?
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Which classification system categorizes industries into groups based on their nature?
Which classification system categorizes industries into groups based on their nature?
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What is a major reason for high exit barriers in the airline industry?
What is a major reason for high exit barriers in the airline industry?
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Which factor contributes to the medium to high buyer power in the airline industry?
Which factor contributes to the medium to high buyer power in the airline industry?
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Why do airlines employ price discrimination and yield management?
Why do airlines employ price discrimination and yield management?
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What contributes to the high supplier power in the airline industry?
What contributes to the high supplier power in the airline industry?
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What is a key aspect of segmentation analysis in markets?
What is a key aspect of segmentation analysis in markets?
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What do the steps of segmentation analysis begin with?
What do the steps of segmentation analysis begin with?
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What is a possible medium threat of entry in the airline industry?
What is a possible medium threat of entry in the airline industry?
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Which of the following accurately describes the threat from substitutes in the airline industry?
Which of the following accurately describes the threat from substitutes in the airline industry?
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What is the primary distinction between price competition and nonprice competition?
What is the primary distinction between price competition and nonprice competition?
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Which measure indicates a lower level of competition in an industry?
Which measure indicates a lower level of competition in an industry?
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What factor could lead to a negative correlation between competition and profitability?
What factor could lead to a negative correlation between competition and profitability?
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What does a high Herfindahl index indicate about an industry?
What does a high Herfindahl index indicate about an industry?
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Which of the following is a common result when firms engage significantly in price competition?
Which of the following is a common result when firms engage significantly in price competition?
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Which of the following best defines a concentration rate in an industry?
Which of the following best defines a concentration rate in an industry?
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What is a potential outcome for a firm that decides to exit a market?
What is a potential outcome for a firm that decides to exit a market?
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What is a likely effect of high entry barriers in an industry?
What is a likely effect of high entry barriers in an industry?
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What is the primary focus of a broad strategy?
What is the primary focus of a broad strategy?
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Which of the following best describes the purpose of segmentation in a business strategy?
Which of the following best describes the purpose of segmentation in a business strategy?
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In strategic group analysis, which of the following is essential for identifying strategic variables?
In strategic group analysis, which of the following is essential for identifying strategic variables?
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What distinguishes focused differentiation from broad scope differentiation?
What distinguishes focused differentiation from broad scope differentiation?
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Which of the following is NOT considered a strategic variable in identifying strategic groups?
Which of the following is NOT considered a strategic variable in identifying strategic groups?
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What is the role of strategic group analysis within market competition?
What is the role of strategic group analysis within market competition?
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Which aspect of a strategy does positioning primarily affect?
Which aspect of a strategy does positioning primarily affect?
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How is a strategic group best represented for analysis?
How is a strategic group best represented for analysis?
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Study Notes
Strategies for Competing in Industries & Markets
- Strategies for Competition (IE Universidad) course material
- Studocu document
Session 2: Value Creation and Capturing
- Strategy: Focuses on the firm, its goals, resources, capabilities, and industry environment (competitors, customers, suppliers)
- Strategic Fit: Strategy must align with external and internal environments (goals and values)
- Value Creation: Two ways: production (physical transformation of products) and commerce (repositioning products in space and time)
- Value is distributed to stakeholders (employees, lenders, government, owners, and customers.)
- Value Created: Consumer surplus + Producer surplus = (willingness to pay - price) + (price - costs)
- Profit: Price - Costs to maximize shareholder (profit) or stakeholder (value creation) interests
- Competitive Advantage: A firm leads in value creation (B-C) compared to other firms in the industry
Session 4: Industry Analysis
- Industry Analysis: Economic analysis of industries
- SCP (Structure-Conduct-Performance) Paradigm: Industry structure (competitors, buyers, suppliers) shapes firm conduct, affecting industry performance.
- Industry structure assumed to be stable
- Identifying Best Position: Understanding industry structure allows for optimal firm position to achieve profitability
- Key factors influential in firm success include: competitors, suppliers, customers, and external actors that affect firm success (industrial organisation).
Two Ways to Measure Firm Performance
-
Backward-Looking: Based on financial data:
- Return on Equity (ROE)
- Return on Investment (ROI)
- Return on Assets (ROA)
- Gross and Net Profit Margins
-
Forward-Looking: Based on stock market values:
- Tobin's Q (market value of firm relative to its tangible assets)
Session 6: Segmentation and Positioning
- Segmentation: Detailed market analysis.
- Market: A niche within an industry.
- Segmentation Process: Disaggregating an industry into smaller, specific markets
- Segmentation Variables: Identify key variables to segment target market
- Steps in Segmentation Analysis: . Identify relevant segmentation variables (2-3 max). . Construct a segmentation matrix. . Analyze segment attractiveness. . Identify key success factors (KSFs) for each segment. . Analyze broad vs. narrow scope benefits
- Broad Strategy: Company serves all customer groups.
- Focus Strategy: Focuses on niche markets based on customer groups, geographic areas, and products.
- Strategic Groups: Firms in an industry that follow similar strategies.
- Porter's 5 Forces: Threat of new entrants, rivalry, threat of substitutes, bargaining power of buyers and suppliers.
Session 7: Resources and Capabilities
- Firm-Strategy Interface: Matching firm strengths (core resources and capabilities) with market opportunities.
- Environment-Strategy Interface: Link between firm strategy and its environment.
-
Resources: Productive assets (tangible and intangible).
- Tangible: Financial (borrowing capacity), Physical (plant, land)
- Intangible: Technology (patents, copyrights), Reputation (brands, relationships)
- Human: Skills/know-how, training
Session 8: Harley Davidson
- Competitive Advantage measurement:
- profitability, market value (Tobin's Q)
- External Forces: Industry structure affects firms within that industry.
- Internal Forces: Companies operate within a framework guided by resources and capabilities within the firm itself.
- Strategic Strategies affect the ability to perform better.
- VRIO Framework (valuable, rare, inimitable, organized): Assessing resources to identify and sustain competitive advantage
Session 9: Competitive Advantage
- Industries and Markets:
- Short Term → Balance Sheet information (ROI, ROE, ROA)
- Long Term → Market Value (Tobin's Q)
- Cost and Differentiation Advantage
- Pre-emption Strategies: Taking action to prevent future outcomes or gain advantage.
- Competitive advantage= profitability compared to similar industries or competitors
Session 10 and 11 : Asynchronous
- Cost-Cutting Strategies for Model T: Mass production, assembly line, standardized parts, and efficient employee motivation.
- Arrogant Bastard Ale: Case study on growing competitive advantages within the craft beer sector.
Session 13: Al
- Al: Use algorithms and recognize patterns to solve problems and make decisions.
- Al Trends: Generative Al, Reinforcement Learning.
- Al Potential Concerns: Bias, privacy, accountability.
- Regulatory Concerns: Unacceptable, high-risk, and limited-risk criteria.
Session 14: Game theory
- Game Theory: Analyzing strategic interactions where outcomes depend on all players' choices.
- Key Elements: Set of players, strategies, outcomes.
- Dominant Strategies: Choosing the best strategy regardless of other players' choices.
- Dominated Strategies: Inferior strategies that should never be chosen.
- Nash Equilibrium: Stable state where no player can improve their outcome by changing their strategy.
- Backward Induction: Analyzing sequential games by reasoning from the end.
Session 17: Oligopoly
- Oligopoly: A market with a few firms; their actions impact each other and market.
- Cournot Equilibrium: Firms produce less than perfect competition levels to maintain higher prices.
- Revenue Destruction Effect: Actions by one or more firms can lead to lower revenue for all.
- Market Power: The ability of firms to influence market prices.
Session 18: Entry Dynamics
-
Barriers to Competition:
- Exogenous: Factors existing in the industry itself (e.g., high costs, government regulations)
- Endogenous: Factors within firms created to deter competition (e.g., predatory pricing, aggressive marketing)
Session 19: Industry Life Cycle
- Industry Life Cycle: Sequential stages of growth and decline (introduction, growth, maturity, decline)
- Adapting to changing market demands and competition
- Key features of different stages
- Understanding the changes that will happen to the market
Session 20: Porsche
- Maintaining brand image in a growing market
- Challenges to expansion and maintaining the image
Session 21: Vertical Integration
- Vertical Integration: A company controls two or more stages of its supply chain rather than outsourcing them
- Motives: Efficiency (reduced costs) and benefits (enhanced product quality).
- Transaction Cost Economics: Trade-offs between "make" (doing it internally) and "buy" (outsourcing) decisions.
Session 22 & 23: Diversification
- Diversification: Operating in related and unrelated industries.
- Motives: Growth, risk reduction, value creation.
- Evaluation of different strategies and their impacts on the firm, assessing cost and efficiency.
- Identification of key factors in diversification models, assessing the company’s strengths and whether they align with the stated strategy
Session 25: Asynchronous
Session 26: Ecoalf (Social responsibility)
- Sustainable fashion brand
- Key attributes, and growth strategies
- Socially and environmentally responsible operations, improving the quality of life for employees, generating economical growth, and building trust with consumers
Session 27: Recommendations
- Practical Recommendations: Steps businesses can take to improve their value to stakeholders.
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Description
This quiz covers key concepts from the IE Universidad course on competition strategies, focusing on value creation and capturing in markets. Explore strategic fit, methods of value creation, and the dynamics of competitive advantage. Test your understanding of how firms can lead in their industries through effective resource utilization and stakeholder value distribution.
