Frank T. Rothaermel — Strategic Management 3e — Chapter 3

PESTEL model
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.
A group of incumbent companies that face more or less the same set of suppliers and buyers.
industry analysis
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
A firm’s strategic profile based on the difference between value creation and cost(V – C).
five forces model
A framework that identifies five forces that determine the profit potential of an industry and shape a firm’s competitive strategy.

1. Threat of entry.
2. Power of suppliers.
3. Power of buyers.
4. Threat of substitutes.
5. Rivalry among existing competitors.

threat of entry
The risk that potential competitors will enter an industry.
entry barriers
Obstacles that determine how easily
a firm can enter an industry and often significantly predict industry profit potential
network effects
The value of a product or service
for an individual user increases with the number of total users.
competitive industry structure
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.
perfect competition
* many small firms
* firms are price takers
* commodity product
* low entry barriers
monopolistic competition
* many firms
* some pricing power
* differentiated product
* medium entry barriers
* few (large) firms
* some pricing power
* differentiated product
* high entry barriers
* one firm
* considerable pricing power
* unique product
* very high entry barriers
exit barriers
Obstacles that determine how easily a firm can leave an industry.
A product, service, or competency that adds value to the original product offering when the two are used in tandem.
A company that provides a good or service that leads customers to value your firm’s offering more when the two are combined.
Cooperation by competitors to achieve a strategic objective.
industry convergence
A process whereby formerly unrelated industries begin to satisfy the same customer need.
strategic group
The set of companies that pursue a similar strategy within a specific industry.
strategic group model
A framework that explains differences in firm performance within the same industry.
mobility barriers
Industry-specific factors that separate one strategic group from another.

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