LSUS MBA 705 - Minsun Kim Exam 1
questions and answers
Purpose of Five Forces Analysis ✔✔- evaluates industry by understanding
dynamics that shape how much profit potential exists in an industry and is key to
knowing how likely it is that a firm will succeed
-determines profitability, together factors show attractiveness of an industry
If none of the five forces work together to undermine profits, then ✔✔profit
potential is very strong
If all of the five forces work to undermine profits, then ✔✔profit potential is weak
High levels of rivalry ✔✔reduce industry's profit potential
Exit Barriers ✔✔could include emotional barriers such as mass layoffs or desire to
recoup losses
Vehicles in US vs South America example ✔✔- large vehicles in US due to wide
roads and low fuel taxes (political and legal factor) and high standard of living
(economic facftor)
-Small vehicles in South America due to narrow roads and high fuel taxes (political
and legal factors) and lower disposable income (economic factor)
, Backward Integration ✔✔occurs when a buyer moves upstream in the industry
value chain, into the seller's business
-example: Ford and GM threaten to self-manufacture products if their suppliers
don't lower the cost of goods and servicesPESTEL Analysis ✔✔6 segments of
general environment, use to identify how these factors influence industries and
the firms within them
P - Political
E- Economic
S- Socio- Cultural
T - Technological
E- Environmental
L - Legal
Political Factors ✔✔-include tax policies, changes in trade restrictions and tariffs,
and stability of governments
- example : immigration policy, clean energy policies
Economic Factors ✔✔- include elements such as interest rates, inflation rates,
gross domestic product, unemployment rates, levels of disposable income and
general growth or decline of economy
- example: Covid crisis of 2020
questions and answers
Purpose of Five Forces Analysis ✔✔- evaluates industry by understanding
dynamics that shape how much profit potential exists in an industry and is key to
knowing how likely it is that a firm will succeed
-determines profitability, together factors show attractiveness of an industry
If none of the five forces work together to undermine profits, then ✔✔profit
potential is very strong
If all of the five forces work to undermine profits, then ✔✔profit potential is weak
High levels of rivalry ✔✔reduce industry's profit potential
Exit Barriers ✔✔could include emotional barriers such as mass layoffs or desire to
recoup losses
Vehicles in US vs South America example ✔✔- large vehicles in US due to wide
roads and low fuel taxes (political and legal factor) and high standard of living
(economic facftor)
-Small vehicles in South America due to narrow roads and high fuel taxes (political
and legal factors) and lower disposable income (economic factor)
, Backward Integration ✔✔occurs when a buyer moves upstream in the industry
value chain, into the seller's business
-example: Ford and GM threaten to self-manufacture products if their suppliers
don't lower the cost of goods and servicesPESTEL Analysis ✔✔6 segments of
general environment, use to identify how these factors influence industries and
the firms within them
P - Political
E- Economic
S- Socio- Cultural
T - Technological
E- Environmental
L - Legal
Political Factors ✔✔-include tax policies, changes in trade restrictions and tariffs,
and stability of governments
- example : immigration policy, clean energy policies
Economic Factors ✔✔- include elements such as interest rates, inflation rates,
gross domestic product, unemployment rates, levels of disposable income and
general growth or decline of economy
- example: Covid crisis of 2020
