MGMT 352 Purdue Exam 1 || with Errorless Solutions
100%.
Strategy correct answers set of goal-directed actions a firm takes to gain and sustain competitive
advantage
3 elements: Analysis (diagnosis of competitive advantage), Formulation (guiding policy to
address competitive challenge), Implementation (set of coherent actions to implement firm's
guiding policy)
Competitive Advantage correct answers superior performance relative to other competitors in the
same industry or the industry average
Sustainable competitive advantage correct answers outperforming competitors or the industry
average over a prolonged period of time
competitive disadvantage correct answers underperformance relative to other competitors in the
same industry or the industry average
competitive parity correct answers performance of two or more firms at the same level
Industry (external) effects correct answers firm performance attributed to industry structure in
which a firm competes.. about 20%, firm effects (internal) take up to 55%
PESTEL correct answers -External (macro) analysis
-Political (P): processes and actions of government bodies
- Lobbying, public relations, contributions
- Economic (E): 5 macroeconomic factors affecting firm performance
- Growth rates
- Interest rates
- Levels of employment
- Price stability (inflation/deflation)
- Currency exchange rates
- Sociocultural (S): Cultures, norms, values; dynamic; differ across groups
- Demographic trends: age gender, family size, ethnicity, sexual orientation, religion,
socioeconomic class
- Technological (T): application of knowledge to create new processes and products
-Ecologicial (E): Broad environmental issues
- Natural environment, global warming, sustainable economic growth
- Business and natural worlds are interdependent and inextricably linked
, - Legal (L): Official outcomes of political processes
- laws, mandates, regulations, court decisions
Industry correct answers a group of incumbent companies that face more or less the same set of
suppliers and buyers with similar products and services
Industry analysis correct answers identifies an industry's profit potential; derives implications for
firm's strategic position
Porter's Five Forces correct answers A framework considering the interplay between (1) the
intensity of rivalry among existing competitors, (2) the threat of new entrants, (3) the threat of
substitute goods or services, (4) the bargaining power of buyers, and (5) the bargaining power of
suppliers.
- An attractive industry has:
- weaker five forces, higher profit potential... makes competitive adv easier
- An unattractive industry has:
- stronger five forces, lower profit potential... makes comp adv. harder
- Looks at industry at a certain point; static
Force 1: Threat of Entry correct answers - New Entrants lower industry profit potential (Lower
prices, spend more to satisfy existing customers)
Entry Barriers:
- Economies of scale: mass producing ultimately lowering per unit cost... leads to larger output
- Network Effects: system or product's value increases the more you use it
- Customer Switching costs: harder to get customers if switching costs are high
- Capital requirements: high cap. rqmts. make industry unattractive
- Advantages independent of size: patents, location, brand loyalty
- Government policy: can make it easier or harder to enter... Easier: think Anti-trust law,,,
Harder: ie. restricting uber so taxis can still profit
- Credible threat of retaliation: basically a promise to fight against new entrants
Force 2: Power of Suppliers correct answers - Powerful suppliers deduce industry profit potential
- They demand higher prices for their inputs (increasing incumbents' product costs) or they
reduce quality
- All dependent on if they have bargaining power
Signs of powerful suppliers:
- Supplier's industry is smaller/more concentrated
- Supplier is not dependent on incumbent's industry alone
- Incumbents face high supplier switching costs
- Supplier's products are differentiated
100%.
Strategy correct answers set of goal-directed actions a firm takes to gain and sustain competitive
advantage
3 elements: Analysis (diagnosis of competitive advantage), Formulation (guiding policy to
address competitive challenge), Implementation (set of coherent actions to implement firm's
guiding policy)
Competitive Advantage correct answers superior performance relative to other competitors in the
same industry or the industry average
Sustainable competitive advantage correct answers outperforming competitors or the industry
average over a prolonged period of time
competitive disadvantage correct answers underperformance relative to other competitors in the
same industry or the industry average
competitive parity correct answers performance of two or more firms at the same level
Industry (external) effects correct answers firm performance attributed to industry structure in
which a firm competes.. about 20%, firm effects (internal) take up to 55%
PESTEL correct answers -External (macro) analysis
-Political (P): processes and actions of government bodies
- Lobbying, public relations, contributions
- Economic (E): 5 macroeconomic factors affecting firm performance
- Growth rates
- Interest rates
- Levels of employment
- Price stability (inflation/deflation)
- Currency exchange rates
- Sociocultural (S): Cultures, norms, values; dynamic; differ across groups
- Demographic trends: age gender, family size, ethnicity, sexual orientation, religion,
socioeconomic class
- Technological (T): application of knowledge to create new processes and products
-Ecologicial (E): Broad environmental issues
- Natural environment, global warming, sustainable economic growth
- Business and natural worlds are interdependent and inextricably linked
, - Legal (L): Official outcomes of political processes
- laws, mandates, regulations, court decisions
Industry correct answers a group of incumbent companies that face more or less the same set of
suppliers and buyers with similar products and services
Industry analysis correct answers identifies an industry's profit potential; derives implications for
firm's strategic position
Porter's Five Forces correct answers A framework considering the interplay between (1) the
intensity of rivalry among existing competitors, (2) the threat of new entrants, (3) the threat of
substitute goods or services, (4) the bargaining power of buyers, and (5) the bargaining power of
suppliers.
- An attractive industry has:
- weaker five forces, higher profit potential... makes competitive adv easier
- An unattractive industry has:
- stronger five forces, lower profit potential... makes comp adv. harder
- Looks at industry at a certain point; static
Force 1: Threat of Entry correct answers - New Entrants lower industry profit potential (Lower
prices, spend more to satisfy existing customers)
Entry Barriers:
- Economies of scale: mass producing ultimately lowering per unit cost... leads to larger output
- Network Effects: system or product's value increases the more you use it
- Customer Switching costs: harder to get customers if switching costs are high
- Capital requirements: high cap. rqmts. make industry unattractive
- Advantages independent of size: patents, location, brand loyalty
- Government policy: can make it easier or harder to enter... Easier: think Anti-trust law,,,
Harder: ie. restricting uber so taxis can still profit
- Credible threat of retaliation: basically a promise to fight against new entrants
Force 2: Power of Suppliers correct answers - Powerful suppliers deduce industry profit potential
- They demand higher prices for their inputs (increasing incumbents' product costs) or they
reduce quality
- All dependent on if they have bargaining power
Signs of powerful suppliers:
- Supplier's industry is smaller/more concentrated
- Supplier is not dependent on incumbent's industry alone
- Incumbents face high supplier switching costs
- Supplier's products are differentiated
