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Flashcards in Porters 5 forces Deck (21)
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1
Q

Outline Porter’s 5 Forces

A
  1. Bargaining power of suppliers
  2. Bargaining power of customers
  3. Threat of new entrants
  4. Threat of substitutes
  5. Rivalry amongst competitors (all contribute to this)
2
Q

What paper can you refer to when discussing Porters 5 forces?

A

Porter, 2008

3
Q

What is are the uses of Porters 5 forces (3 points)?

A

Provides “a framework for anticipating and influencing competition (and profitability) over time”

Important for “positioning” in STP

Crucial for defining the relevant industry(ies) in which a company competes

4
Q

When is the threat of new entry high?

A

When the industry is profitable

5
Q

When is the bargaining power of suppliers high (2 circumstances)?

A

When “it is more concentrated than the industry it sells to”

When switching costs are high

6
Q

When is the bargaining power of customers high (3 things)?

A

When there are few customers buying a large volume

When there are many similar products in the market that they could easily switch to

When switching costs are low

7
Q

When is the threat of substitutes high?

A

When the value of the substitute is better

8
Q

What does the degree of rivalry depend on?

When is it high (3 things)?

A

Depends on the intensity and basis on which companies compete

High when…

  • Competing firms are a similar size/power
  • Exit barriers are high
  • Rivals are committed to the business
9
Q

What difficulties are faced by industry analysis?

A

Industry structure always changing

If an industry is defined too broadly/narrowly then the company risks choosing the wrong strategy and failing

10
Q

What is a strategic group?

A

A group of firms that have similar strategies in a target market

11
Q

Outline Porters generic competitive strategies

A

Cost Leadership

Cost Focus

Differentiation Leadership

Differentiation Focus

12
Q

In what case would “cost leadership” and “differentiation leadership” be appropriate strategies for a company to adopt?

A

In a broad range of market or industry segments

13
Q

In what case would “cost focus” and “differentiation focus” be appropriate strategies?

A

In a very narrow market

14
Q

What is the aim of the “cost leadership” strategy

A

To be the lowest-cost producer. Typically involves mass production for economies of scale

15
Q

Describe the “cost focus” strategy

A

Seeks low cost in jusr a few market segments

16
Q

What is the “differentiation focus” strategy?

A

Niche market strategy. Differentiation (uniqueness) in a very small number of segments.

17
Q

Describe the “differentiation leadership” strategy

A

Aims to achieve competitive advantage through selecting a unique position in the market in order to gain competitive advantage.

Difficult strategy

18
Q

What 3 steps should a company take in competitor analysis?

A
  1. Identify competitors
  2. Determine competitor objectives
  3. Select which to attack / avoid
19
Q

What are the 4 competitive positions in the market?

A

Market Leader

Market Challenger

Market Follower

Market Nicher

20
Q

Define competitive advantage?

A

Gained by satisfying customer needs better than competitors

21
Q

What is competitor analysis?

A

A systematic approach to competition by understanding competitors strategies to find a way to gain competitive advantage