CHAPTER 5 TERMS MGMT 3000 (UGA LYONS)|UPDATED&VERIFIED|100% SOLVED|GUARANTEED SUCCESS

Three Components of developing business Strategy Who: Customers What: Products and Services How: Process/approach help firm choose between low cost differentiation, focused or combination Porter's 5 Forces Model Provides a framework to assess an industry's long-run profit potential and attractiveness` -Suggests that any industry can be assessed by exploring 5 basic competitive forces 1. Threat of new entrants 2. Bargaining power of suppliers 3. Threat of substitutes 4. Bargaining power of customers 5. Rivalry among existing competitors Threat of New Entrants depends on how intense the barriers of entry Barriers to entry obstacles a firm may face while trying to enter a market or an industry -supply-side economies of scale -demand-side benefits of scale -customer switching costs -capital requirements due to scale of entry -incumbency advantages independent of size - unequal access to distribution channels - restrictive gov't policy and regulations Supply-side economies of scale When a firm manufactures products in high volumes, resulting in low production costs Demand-side benefits of scale the buyer's willingness to pay for a product increases as the number of other buyers for the product increases First-Mover advantage A competitive advantage that occurs when a firm is first to offer desirable products or services that secure customer loyalty Characteristics of a Powerful Supplier Group -The supplier industry is more concentrated than the industry it sells to -Industry participants in the buyer industry face switching costs to changing suppliers -No substitutes exist for what the supplier group provides -The supplier group can threaten to integrate forward into the buyer industry -The supplier group does not depend heavily on the industry first-mover advantage a competitive advantage that occurs when a firm is first to offer a desirable products or services customer loyalty Bargaining Power of Customers increases: when customer purchase in large volumes the seller's products are differentiated buyer faces few switching costs in changing vendors buyers could potentially integrate backward to produce the industry's product Rivalry among existing competitors is high when industry products or services lack differentiation or switching costs fixed costs are high, and marginal costs are low there is overcapacity or capacity must be expanded in large increments the industry's product is perishable or highly cyclical rival competitors are numerous or are roughly equal in size and power industry growth is slow exit barriers are high Increase in industry profitability if there are: -High barriers to entry -Limited competitors -Lack of substitutes -Low buyer and supplier power Decrease in industry profitability if there are: -Low barriers to entry -Many competitors -Several substitutes -High buyer and supplier power innovation streams pattern of innovation over time that can create a sustainable competitive advantage 1. Technological discontinuity 2. Discontinuous change 3. Dominant designs Technological Discontinuity a scientific advance or unique combination of existing technology that create a significant break through in performance or function discontinous change development through tech substitution or design competition dominant design a new technological design or process that becomes the accepted market standard Innovator's Dilemma The notion that disruptive innovations can cause established firms or industries to lose market dominance, often leading to failure. sustaining technologies meet demands of mainstream customers in major markets improve performance of established products can be discontinuous, radical or incremental in nature most technological advances in an industry are sustaining in character typically of established firms