UARK MGMT 3013 Final Review
Questions and Answers 100% Pass
PESTEL Model - ✔✔framework that categorizes and analyzes an important set of
external factors that can affect a firms potential to gain and sustain a competitive
advantage
-*P*olitical - government, laws and regulation
-*E*conomic - interest rates, currency exchange, price stability
-*S*ociocultural - societies, culture, norms, values
-*T*echnological - innovations in product/service
-*E*cological - environment issues, pollution, global warming
-*L*egal - regulation changes, anti-trust laws, class action lawsuits
5 Forces Model - ✔✔framework that identifies 5 forces that "determine the profit
potential" of an industry and shape a firms competitive strategy; stronger forces = lower
profit
1. Threat of Entry
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,2. Power of Suppliers
3. Power of Buyers
4. Threat of Substitutes
5. Rivalry Among Competitors
Threat of Entry - ✔✔risk of potential competitors entering the industry which lowers
the industry's profit potential (Amazon)
Threat of Entry: Barriers - ✔✔obstacles that determine how easily firms can enter the
industry (economies of scale, network effects, customer switching costs, capital
requirement, government policy, credible threat of retail)
Power of Suppliers - ✔✔pressures that industry suppliers can exert on an industry's
profit potential
-reduces a firm's ability to obtain superior performance of that by powerful suppliers
can raise the cost of production by demanding higher prices for their inputs OR
reducing the quality of the input factor or service level delivered
Factors that influence the power of suppliers? (is high when....) - ✔✔-suppliers' industry
is more concentrated then the industry it sells to
-suppliers do not depend heavily on the industry for a large portion of their revenues
-incumbent firms face significant switching costs when changing suppliers
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,-suppliers offer products that are differentiated
-no readily available substitutes that the supplier offers
-suppliers can credibly threaten to forward-integrate into the industry
Power of Buyers - ✔✔concerns the pressure an industry's customers can put on the
producers margins in the industry by demanding a lower price or higher product
quality
-when buyers obtain price discount, it reduces the firm's top line (revenue)
-when the buyers demand higher quality and more service, it raises production costs
Factors that influence the power of buyers? (is high when....) - ✔✔-there are few buyers
and each buyer purchases large quantities relative to the size of a single seller
-products are standardized and undifferentiated commodities
-buyers are facing low or no switching costs
-buyers can credibly threaten to backwardly integrate into the industry
Threat of Substitutes - ✔✔product or services available from outside the industry can
come close to meeting the needs of current customers
-threat is high when... substitute offers an attractive price performance trade off, buyers
cost pf switching to the substitute is low
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, Rivalry Among Competitors - ✔✔describes the intensity with which companies within
the same industry jockey for market share and profitability
exit barriers
Factors that determine the intensity of rivalry among competitors? - ✔✔-*competitive
industry structure*
-*industry growth rate (when high - consumer demand rises and price competition
decreases and when low or negative industry growth - competition becomes fierce)
-*strategic commitments* (if firms make commitments, rivalry among competitors are
more intense)
-*exit barriers* (when high- reduces profit potential because excess capacity still
remains but when low- its more attractive because it allows underperforming firms to
exit more easily)
6th Force - Strategic Role of Complements - ✔✔Porter enhanced his 5 forces model by
highlighting positive sum competition via firm cooperation that yields complements
Example: 5 Forces Model - If you have two auto parts suppliers, one in Taiwan and one
in Japan, and a typhoon destroys the supplier factory in Taiwan. What happens to the
bargaining power of the supplier in Japan? How does this impact the profit potential of
the automakers who rely on this part? - ✔✔
Brittie Donald, All Rights Reserved © 2025 4
Questions and Answers 100% Pass
PESTEL Model - ✔✔framework that categorizes and analyzes an important set of
external factors that can affect a firms potential to gain and sustain a competitive
advantage
-*P*olitical - government, laws and regulation
-*E*conomic - interest rates, currency exchange, price stability
-*S*ociocultural - societies, culture, norms, values
-*T*echnological - innovations in product/service
-*E*cological - environment issues, pollution, global warming
-*L*egal - regulation changes, anti-trust laws, class action lawsuits
5 Forces Model - ✔✔framework that identifies 5 forces that "determine the profit
potential" of an industry and shape a firms competitive strategy; stronger forces = lower
profit
1. Threat of Entry
Brittie Donald, All Rights Reserved © 2025 1
,2. Power of Suppliers
3. Power of Buyers
4. Threat of Substitutes
5. Rivalry Among Competitors
Threat of Entry - ✔✔risk of potential competitors entering the industry which lowers
the industry's profit potential (Amazon)
Threat of Entry: Barriers - ✔✔obstacles that determine how easily firms can enter the
industry (economies of scale, network effects, customer switching costs, capital
requirement, government policy, credible threat of retail)
Power of Suppliers - ✔✔pressures that industry suppliers can exert on an industry's
profit potential
-reduces a firm's ability to obtain superior performance of that by powerful suppliers
can raise the cost of production by demanding higher prices for their inputs OR
reducing the quality of the input factor or service level delivered
Factors that influence the power of suppliers? (is high when....) - ✔✔-suppliers' industry
is more concentrated then the industry it sells to
-suppliers do not depend heavily on the industry for a large portion of their revenues
-incumbent firms face significant switching costs when changing suppliers
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,-suppliers offer products that are differentiated
-no readily available substitutes that the supplier offers
-suppliers can credibly threaten to forward-integrate into the industry
Power of Buyers - ✔✔concerns the pressure an industry's customers can put on the
producers margins in the industry by demanding a lower price or higher product
quality
-when buyers obtain price discount, it reduces the firm's top line (revenue)
-when the buyers demand higher quality and more service, it raises production costs
Factors that influence the power of buyers? (is high when....) - ✔✔-there are few buyers
and each buyer purchases large quantities relative to the size of a single seller
-products are standardized and undifferentiated commodities
-buyers are facing low or no switching costs
-buyers can credibly threaten to backwardly integrate into the industry
Threat of Substitutes - ✔✔product or services available from outside the industry can
come close to meeting the needs of current customers
-threat is high when... substitute offers an attractive price performance trade off, buyers
cost pf switching to the substitute is low
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, Rivalry Among Competitors - ✔✔describes the intensity with which companies within
the same industry jockey for market share and profitability
exit barriers
Factors that determine the intensity of rivalry among competitors? - ✔✔-*competitive
industry structure*
-*industry growth rate (when high - consumer demand rises and price competition
decreases and when low or negative industry growth - competition becomes fierce)
-*strategic commitments* (if firms make commitments, rivalry among competitors are
more intense)
-*exit barriers* (when high- reduces profit potential because excess capacity still
remains but when low- its more attractive because it allows underperforming firms to
exit more easily)
6th Force - Strategic Role of Complements - ✔✔Porter enhanced his 5 forces model by
highlighting positive sum competition via firm cooperation that yields complements
Example: 5 Forces Model - If you have two auto parts suppliers, one in Taiwan and one
in Japan, and a typhoon destroys the supplier factory in Taiwan. What happens to the
bargaining power of the supplier in Japan? How does this impact the profit potential of
the automakers who rely on this part? - ✔✔
Brittie Donald, All Rights Reserved © 2025 4
