WPC 480 EXAM 1 STUDY GUIDE
AFI strategy framework - Answers - A model that links three interdependent strategic
management tasks—analyze, formulate, and implement—that, together, help managers
plan and implement a strategy that can improve performance and result in competitive
advantage.
PESTEL model - Answers - A framework that categorizes and analyzes an important
set of external factors (political, economic, sociocultural, technological, ecological, and
legal) that might impinge upon a firm. These factors can create both opportunities and
threats for the firm.
Industry Effects - Answers - firm performance attributed to the structure of the industry
in which the firm competes
Firm Effects - Answers - firm performance attributed to the actions managers take
industry - Answers - a group of incumbent companies that face more or less the same
set of suppliers and buyers
Industry Analysis - Answers - A method to (1) identify an industry's profit potential and
(2) derive implications for a firm's strategic position within an industry.
strategic position - Answers - a firm's strategic profile based on the difference between
value creation and cost (V-C)
Five Forces Model - Answers - A framework that identifies five forces that determine the
profit potential of an industry and shape a firm's competitive strategy.
Threat of Entry - Answers - the risk that potential competitors will enter an industry
entry barriers - Answers - obstacles that determine how easily a firm can enter an
industry and often significantly predict industry profit potential
network effects - Answers - the value of a product or service for an individual user
increases with the number of total users
economies of scale - Answers - cost advantages to manufacturers that accrue from
high-volume production, since the average cost of production falls with increasing
output
power of buyers - Answers - pressure an industry's customers can put on producer's
margins in the industry by demanding a lower price or higher product quality
, Power of buyers is high when: - Answers - Each buyer purchases large quantities
relative to the size of a single industry member.
Power of Suppliers - Answers - Pressures that industry suppliers can exert on an
industry's profit potential
The power of suppliers is high when - Answers - -Incumbent firms face significant
switching costs when changing suppliers
-Suppliers offer products that are differentiated
-There are no readily available substitutes for the products/services offered by the
supplier
-Suppliers can credibly threaten to forward-integrate
Threat of Substitutes - Answers - Products or services outside an industry meeting the
needs of current customers
Rivalry among existing competitors - Answers - the intensity with which companies
within the same industry jockey for market share and profitability
competitive industry structure - Answers - Elements and features common to all
industries, including the number and size of competitors, the firms' degree of pricing
power, the type of product or service offered, and the height of entry barriers.
strategic commitments - Answers - actions that are costly, long-term oriented, and
difficult to reverse
exit barriers - Answers - obstacles that determine how easily a firm can leave an
industry
complement - Answers - a product, service, or competency that adds value to the
original product offering when the two are used in tandem
Complementor - Answers - are companies or networks of companies that sell
complementary goods or services that are compatible with the focal firm's good or
service.
co-opetition - Answers - cooperation by competitors to achieve a strategic objective
industry convergence - Answers - a process whereby formerly unrelated industries
begin to satisfy the same customer need
strategic group - Answers - the set of companies that pursue a similar strategy within a
specific industry
strategic group model - Answers - a framework that explains differences in firm
performance within the same industry
AFI strategy framework - Answers - A model that links three interdependent strategic
management tasks—analyze, formulate, and implement—that, together, help managers
plan and implement a strategy that can improve performance and result in competitive
advantage.
PESTEL model - Answers - A framework that categorizes and analyzes an important
set of external factors (political, economic, sociocultural, technological, ecological, and
legal) that might impinge upon a firm. These factors can create both opportunities and
threats for the firm.
Industry Effects - Answers - firm performance attributed to the structure of the industry
in which the firm competes
Firm Effects - Answers - firm performance attributed to the actions managers take
industry - Answers - a group of incumbent companies that face more or less the same
set of suppliers and buyers
Industry Analysis - Answers - A method to (1) identify an industry's profit potential and
(2) derive implications for a firm's strategic position within an industry.
strategic position - Answers - a firm's strategic profile based on the difference between
value creation and cost (V-C)
Five Forces Model - Answers - A framework that identifies five forces that determine the
profit potential of an industry and shape a firm's competitive strategy.
Threat of Entry - Answers - the risk that potential competitors will enter an industry
entry barriers - Answers - obstacles that determine how easily a firm can enter an
industry and often significantly predict industry profit potential
network effects - Answers - the value of a product or service for an individual user
increases with the number of total users
economies of scale - Answers - cost advantages to manufacturers that accrue from
high-volume production, since the average cost of production falls with increasing
output
power of buyers - Answers - pressure an industry's customers can put on producer's
margins in the industry by demanding a lower price or higher product quality
, Power of buyers is high when: - Answers - Each buyer purchases large quantities
relative to the size of a single industry member.
Power of Suppliers - Answers - Pressures that industry suppliers can exert on an
industry's profit potential
The power of suppliers is high when - Answers - -Incumbent firms face significant
switching costs when changing suppliers
-Suppliers offer products that are differentiated
-There are no readily available substitutes for the products/services offered by the
supplier
-Suppliers can credibly threaten to forward-integrate
Threat of Substitutes - Answers - Products or services outside an industry meeting the
needs of current customers
Rivalry among existing competitors - Answers - the intensity with which companies
within the same industry jockey for market share and profitability
competitive industry structure - Answers - Elements and features common to all
industries, including the number and size of competitors, the firms' degree of pricing
power, the type of product or service offered, and the height of entry barriers.
strategic commitments - Answers - actions that are costly, long-term oriented, and
difficult to reverse
exit barriers - Answers - obstacles that determine how easily a firm can leave an
industry
complement - Answers - a product, service, or competency that adds value to the
original product offering when the two are used in tandem
Complementor - Answers - are companies or networks of companies that sell
complementary goods or services that are compatible with the focal firm's good or
service.
co-opetition - Answers - cooperation by competitors to achieve a strategic objective
industry convergence - Answers - a process whereby formerly unrelated industries
begin to satisfy the same customer need
strategic group - Answers - the set of companies that pursue a similar strategy within a
specific industry
strategic group model - Answers - a framework that explains differences in firm
performance within the same industry
