MGMT 449 EXAM 1 QUESTIONS WITH VERIFIED
ANSWERS
PESTEL Analysis - Answers - focuses on principal components of strategic significance
in the macro-environment
what do the letters in PESTEL mean - Answers - Political factors
Economic conditions
Socioeconomic forces
Technological factors
Environmental factors
Legal factors
What are the components in the five-forces model of competition - Answers - Buyers
Suppliers
Potential
Firms in other industries w/ sub products
Rivalry among competing firms
How to use the five-forces model - Answers - Step 1: ID parties involved in competitive
pressures
Step 2: Eval strengths of pressures
Step 3: Determine if the forces are supportive of high industry profitability
define Strategy - Answers - set of actions that its managers take to out perform the
company's competitors and achieve superior profitability
Rivalry increases and becomes stronger when: - Answers - - demand is growing slowly
- cost to switch brands is low
- products are commodities or weakly differentiated
- firms have excess production capacity
- firms have high fixed/storage costs
- competitors are numerous or equal in size and strength
- rivals have diverse objectives, strategies or countries of origin
- rivals have emotional stakes or face high exit barriers
Factors affecting the threat of entry - Answers - all types barriers to entry from capital
requirements or brand loyalty to government regulations or policies
competitive pressure from substitutes are stronger when: - Answers - good substitutes
are available and attractively priced, comparable or better features, and have a low cost
to switch
, competitive pressures from buyers increase when: - Answers - they have strong
bargaining power and are price sensitive
supplier bargaining power is stronger when - Answers - products are in short supply
products are differentiated
costs of switching suppliers
supplier industry is dominated by one/few companies
firm is not able to integrate backward for self-manufacturing
supplier is a small cost overall to the firm
no good subs
firm doesn't account for much of the suppliers sales
Strategic Management Principle - Answers - strategy concerns competition and
exceptional strategy is doing what competitors don't or cannot do
competitive advantage - Answers - superior value compared to the competition or offers
the same value at a lower cost to the firm
sustainable competitive advantage - Answers - competitive advantage continues
indefinitely despite the efforts of competitors to match or surpass its advantage
Basic Strategic Approches - Answers - Low-Cost Provider
Focused Low-Cost
Best-Cost Provider
Focused Differentiation
Broad Differentiation
Focused Low Cost - Answers - simple products that are inexpensive to produce sold for
low costs to a specific trgt mrkt
ex: dollar shave club
Low Cost - Answers - selling products for lowest possible cost to compete within the
market
ex: amazon
Best Cost - Answers - good quality and equally good price for the quality
ex: applebees
focused differentiation - Answers - a lot of R&D to create unique and focused products
for a very specific market
ex: Luxury Brands such as Redbull, Lamborghini, and designer clothing
Broad Differentiaion - Answers - still has a lot of R&D but has a wider target market
which allows for lower prices
ex: Apple
ANSWERS
PESTEL Analysis - Answers - focuses on principal components of strategic significance
in the macro-environment
what do the letters in PESTEL mean - Answers - Political factors
Economic conditions
Socioeconomic forces
Technological factors
Environmental factors
Legal factors
What are the components in the five-forces model of competition - Answers - Buyers
Suppliers
Potential
Firms in other industries w/ sub products
Rivalry among competing firms
How to use the five-forces model - Answers - Step 1: ID parties involved in competitive
pressures
Step 2: Eval strengths of pressures
Step 3: Determine if the forces are supportive of high industry profitability
define Strategy - Answers - set of actions that its managers take to out perform the
company's competitors and achieve superior profitability
Rivalry increases and becomes stronger when: - Answers - - demand is growing slowly
- cost to switch brands is low
- products are commodities or weakly differentiated
- firms have excess production capacity
- firms have high fixed/storage costs
- competitors are numerous or equal in size and strength
- rivals have diverse objectives, strategies or countries of origin
- rivals have emotional stakes or face high exit barriers
Factors affecting the threat of entry - Answers - all types barriers to entry from capital
requirements or brand loyalty to government regulations or policies
competitive pressure from substitutes are stronger when: - Answers - good substitutes
are available and attractively priced, comparable or better features, and have a low cost
to switch
, competitive pressures from buyers increase when: - Answers - they have strong
bargaining power and are price sensitive
supplier bargaining power is stronger when - Answers - products are in short supply
products are differentiated
costs of switching suppliers
supplier industry is dominated by one/few companies
firm is not able to integrate backward for self-manufacturing
supplier is a small cost overall to the firm
no good subs
firm doesn't account for much of the suppliers sales
Strategic Management Principle - Answers - strategy concerns competition and
exceptional strategy is doing what competitors don't or cannot do
competitive advantage - Answers - superior value compared to the competition or offers
the same value at a lower cost to the firm
sustainable competitive advantage - Answers - competitive advantage continues
indefinitely despite the efforts of competitors to match or surpass its advantage
Basic Strategic Approches - Answers - Low-Cost Provider
Focused Low-Cost
Best-Cost Provider
Focused Differentiation
Broad Differentiation
Focused Low Cost - Answers - simple products that are inexpensive to produce sold for
low costs to a specific trgt mrkt
ex: dollar shave club
Low Cost - Answers - selling products for lowest possible cost to compete within the
market
ex: amazon
Best Cost - Answers - good quality and equally good price for the quality
ex: applebees
focused differentiation - Answers - a lot of R&D to create unique and focused products
for a very specific market
ex: Luxury Brands such as Redbull, Lamborghini, and designer clothing
Broad Differentiaion - Answers - still has a lot of R&D but has a wider target market
which allows for lower prices
ex: Apple
