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the strategically relevant factors outside a company's industry boundaries—economic conditions, political factors, socio-cultural forces, technological factors, environmental factors, and legal/regulatory conditions.

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A company's "macro-environment" refers to

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A. Political factors including the extent to which government intervenes in the economy B. Economic conditions that include the general economic climate and specific factors such as interest rates, inflation rate, and unemployment rate, as well as conditions in the stock and bond markets that can affect consumer confidence C. Socio-cultural forces including societal values, attitudes, cultural factors, and lifestyles that impact business D. Technological factors includes the pace of change and technical developments that have the potential for impacting society

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principal components of strategic significance in the PESTEL analysis

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-What strategic moves are rivals likely to make next? -What are the industry's key factors for future competitive success? -Is the outlook for the industry conducive to providing attractive profitability? -What are the driving forces in the industry, and what impact will these changes have on competitive intensity and industry profitability?

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major questions to ask in thinking strategically about industry and competitive conditions in a given industry

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the market positions of industry rivals and their relative strength, and the competitive forces rivals are facing and what impact they will have on competitive intensity and industry profitability.

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Thinking strategically about the industry and competitive environment involves in-depth analysis and evaluation of such consideration as

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Five Forces Model

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The most powerful and widely used tool for diagnosing the principle competitive pressures in a market is the

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-associated with the market maneuvering and jockeying for buyer patronage that goes on among rival firms in the industry. -companies in other industries attempting to win buyers over to their substitute products. -associated with the threat of new entrants into the marketplace. -associated with the bargaining power of suppliers and customers.

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The competitive pressures on companies within an industry comes from those:

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-competition from rival sellers. -competition from potential new entrants. -competition from producers of substitute products. -competitive pressures stemming from the bargaining power of both suppliers and buyers.

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The nature and strength of the competitive forces that prevail in an industry is generally a joint product of

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the competitive pressures associated with the market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry.

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The most powerful of the five competitive forces is USUALLY

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the constant rivalry of firms to strengthen their standing with buyers and win a competitive edge over rivals.

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What makes the marketplace a competitive battlefield is

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is ongoing and dynamic, with moves and countermoves of rivals producing a continually evolving competitive landscape that delivers winners and losers.

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Market maneuvering among industry rivals

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when buyer demand is growing fast or increasing.

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Rivalry increases

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rapid growth in buyer demand and high buyer switching costs.

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Factors that cause the rivalry among competing sellers to be weaker include

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the diversity of competitors in terms of long-term direction objectives, strategies, and countries of origin.

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In analyzing the strength of competition among rival firms, an important consideration is

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incumbent firms are willing and able to be aggressive in defending their market positions against entry.

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Potential entrants are more likely to be deterred from actually entering an industry when

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financially strong incumbents send strong signals that they will launch strategic initiatives to combat the entry of newcomers.

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The competitive threat that outsiders will enter a market is weaker when

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the industry outlook is risky or uncertain

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Competitive pressures stemming from the threat of entry are weaker when

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-A salad as a substitute for French fries -Wireless phones as a substitute for wired telephones -Snowboards as a substitute for snow skis -Video-on-demand services from a cable TV company as a substitute for going to the movies

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good examples of substitutes product that triggers stronger competitive pressures?

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whether attractively priced substitutes are readily available and the ease with which buyers can switch to substitutes.

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Just how strong the competitive pressures are from substitute products depends on

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whether demand for supplier products is high and they are in short supply.

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Whether supplier-seller relationships in an industry represent a strong or weak source of competitive pressure is a function of

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54. Which one of the following is NOT a factor in causing supplier bargaining power to be stronger? -The products/services needed from suppliers are in short supply. -Industry members can't integrate backward and self-supply themselves. -The item being supplied significantly enhances the quality or performance of the products of industry members. -Suppliers are not dependent on the industry for a large portion of their revenues.

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factors causing supplier bargaining power to be stronger

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there is a strong likelihood such partnerships will put increased competitive pressure on those industry members who lack productive collaborative relationships with their suppliers.

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When an industry member is a major customer of the supplier, and the relationship (partnership) is unusually effective and mutually advantageous

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limit supplier bargaining power.

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The higher the switching costs for industry members, the more it can

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the industry's products are standardized or undifferentiated.

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Buyer bargaining power is stronger when

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sales are made to buyer groups with either strong bargaining power or high sensitivity.

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Collaborative relationships between particular sellers and buyers in an industry can represent a source of strong competitive pressure when

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the costs incurred by buyers in switching to competing brands or to substitute products are relatively high.

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Competitive pressures stemming from buyer bargaining power tend to be weaker when:

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When buyers are unlikely to integrate backward into the business of sellers

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Which of the following conditions acts to weaken buyer bargaining power?

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Buyers are price-sensitive due to the product representing a significant fraction of their purchases.

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Buyers are in position to exert strong bargaining power in dealing with sellers when:

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-Whether certain customers offer sellers important market exposure or prestige -Whether customers are relatively well-informed about sellers' products, prices, and costs -Whether sellers' products are highly differentiated, making it troublesome or costly for buyers to switch to competing brands or to substitute products -Whether sellers pose little threat of forward integration into the product market of their customers and whether buyers pose a major threat to integrate backward into the product market of sellers

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The following factors are relevant considerations in judging whether buyer bargaining power is relatively strong or relatively weak

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some sellers may be less sensitive than others to price, quality, or service differences.

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Not all buyers of an industry's product have equal degrees of bargaining power with sellers, because:

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is conducive to industry members earning attractive profits.

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A competitive environment where there is weak to moderate rivalry among sellers, high entry barriers, weak competition from substitute products, and little bargaining leverage on the part of both suppliers and customers:

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is competitively unattractive from the standpoint of earning good profits.

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A competitive environment where there is strong rivalry among sellers, low entry barriers, strong competition from substitute products, and considerable bargaining leverage on the part of both suppliers and customers:

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determines the extent of the competitive pressure on industry profitability.

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As a rule, the collective impact of competitive pressures associated with the five competitive forces:

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shift the competitive battle in favor of the firm by altering the underlying factors driving the five forces.

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A company's strategy is increasingly effective the more it can match the company strategy to competitive conditions, so the firm can:

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are major underlying causes of changing industry and competitive conditions and have the biggest influences in reshaping the industry landscape and altering competitive conditions.

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The "driving forces" in an industry:

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because important forces are enticing or pressuring certain industry participants (competitors, customers, suppliers) to alter their actions in important ways.

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Industry conditions change:

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identify the driving forces, assess whether their impact will make the industry more or less attractive, and determine what strategy changes are needed to prepare for the impacts of the driving forces.

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The task of driving forces analysis is to:

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Movement in the economy and in interest rates

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Which of the following is NOT generally a "driving force" capable of producing fundamental changes in industry and competitive conditions?

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Increasing efforts to collaborate with suppliers via strategic alliances and partnerships, escalating risk levels and normalization of cost and efficiency in the industry

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Which of the following are most UNLIKELY to qualify as driving forces?

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Changes in the economic power and bargaining leverage of customers and suppliers, growing supplier-seller collaboration, and growing buyer-seller collaboration

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Which of the following do NOT qualify as potential driving forces capable of inducing fundamental changes in industry and competitive conditions?

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Successful introduction of innovative new products or new ways to market products

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Which of the following is MOST likely to qualify as a driving force?

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Increasing efforts to collaborate closely with suppliers

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Which one of the following is NOT a common type of driving force?

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companies need to spread their operating reach into more and more country markets to meet consumer demand and take advantage of available operating activities.

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Increasing globalization of the industry can be a driving force because:

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the collective impact of the driving forces will act to increase/decrease market demand, increase/decrease competition, and raise/lower industry profitability in the years ahead.

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Driving forces analysis helps managers identify whether:

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generally are defined in ways that will strengthen or weaken market demand, competition, and industry profitability in future years.

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Evaluating the industry's driving forces, as a whole, requires understanding their influence on the attractiveness of industry environment and:

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identify the driving forces and evaluate their impact on (1) demand for the industry's product, (2) the intensity of competition, and (3) industry profitability.

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In analyzing driving forces, the strategist's role is to

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Determining whether forces are acting to cause industry rivals to shift to a different strategic group

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Which one of the following is NOT an integral part of driving forces analysis?

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what strategy changes are needed to prepare for the impacts of the driving forces.

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The real payoff of driving forces is to help managers understand:

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has practical value and is basic to the task of thinking strategically about where the industry is headed and how to prepare for the changes ahead.

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Driving forces analysis:

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Strategic group mapping

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What is the best technique for revealing the different market or competitive position that rival firms occupy in the industry?

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is a cluster of industry members with similar competitive approaches and market positions in the market.

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A strategic group:

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pursue essentially identical strategies and have similar market positions.

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An industry contains one strategic group when all sellers:

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the different market or competitive positions that rival firms occupy in an industry and for identifying each rival's closest competitors.

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Strategic group mapping is a visual technique for displaying:

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Level of profitability and size of market share

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Which one of the following pairs of variables is LEAST likely to be useful in drawing a strategic group map?

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-Geographic market scope and degree of vertical integration -Brand name reputation and distribution channel emphasis -Product quality and product-line breadth -Price/perceived quality and image range and the extent of buyer appeal

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The following pairs of variables are likely to be useful in drawing a strategic group map

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strategic group maps help identify how each competing firm is positioned and the relationship to their closest competitors.

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The concept of strategic groups is relevant to industry and competitive analysis because:

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the best variables to use as axes for the map are those that identify the competitive characteristics that delineate strategic approaches used in the industry.

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In mapping strategic groups:

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The variables chosen as axes for the map should be highly correlated.

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Which of the following is NOT an appropriate guideline for developing a strategic group map for a given industry?

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reveal which companies are close competitors and which are distant rivals, and that not all positions on the map are equally attractive.

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With the aid of a strategic group map, one can:

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that some strategic groups are more favorably positioned than others because they confront weaker competitive forces and/or because they are more favorably impacted by industry driving forces.

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One of the things that can be gleaned from a strategic group map of industry rivals is:

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where on the map is the easiest position to shift from to a more favorably situated position.

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Strategic Group mapping analysis does not entail drawing conclusions about:

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anticipate what moves rivals are likely to make next, thereby providing a valuable assist in outmaneuvering them in the marketplace.

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The payoff of good scouting reports on rivals is an improved ability to:

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it allows a company to anticipate what moves rivals are likely to make next and to craft its own strategic moves with some confidence about what market maneuvers to expect from its rivals.

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Having good competitive intelligence about rivals' strategies and moves to improve their situation is important because:

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A. which competitor has the best strategy and which competitors have flawed or weak strategies. B. which rivals are poised to gain market share and which seem destined to lose market share. C. which rivals are likely to rank among the industry leaders on the road ahead. D. which rivals are likely to initiate fresh strategic moves and why. E. ALL OF THESE (CORRECT)

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Good competitive intelligence about the strategic direction and likely moves of key competitors allows a company to determine:

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a rival's current strategy, objectives, capabilities, and assumptions about itself and the industry.

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To succeed in predicting the next strategic moves and countermoves of close or key rivals, it is useful to consider such indicators as:

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enabled and constrained by the set of capabilities they have at hand and thus serve as a strong signal of future strategic actions.

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A rival's strategic moves and countermoves are both:

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gathered from rivals internal proprietary strategic information.

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Information regarding the four components of the framework for Competitor Analysis can NOT:

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are those competitive factors that most affect industry members' abilities to prosper in the marketplace—the particular strategy elements, product attributes, operational approaches, resources, and competitive capabilities that spell the difference between being a strong competitor and a weak one, and between profit and loss.

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The key success factors in an industry:

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such as product attributes and service characteristics are crucial, and what resources and competitive capabilities are needed, and what shortcomings are evident to put a company at a competitive disadvantage.

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An industry's key success factors can always be deduced by asking what factors:

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consider on what basis customers choose between competing brands, what resources and competitive capabilities firms need to be competitively successful, and what shortcomings are almost certain to put a company at a significant competitive disadvantage.

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In identifying an industry's key success factors, strategists should:

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What are the industry product R&D capabilities and expertise in product design?

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Which of the following is NOT a question asked to deduce a marketing-related key success factor?

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Crucial product attributes and service characteristics

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Which of the following can aid industries in identifying key success factors?

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raises a company's chances of crafting a sound strategy.

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Correctly diagnosing an industry's key success factors:

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The industry's growth potential, whether competition appears destined to become stronger or weaker, and whether the industry's overall profit prospects are above average, average, or below average

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Which of the following is particularly pertinent in evaluating whether an industry presents a sufficiently attractive business opportunity?

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Whether the industry's product is strongly or weakly differentiated

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In evaluating whether the industry and competitive environment presents sufficiently attractive prospects for both competitive success and attractive profits usually does NOT involve a consideration of which of the following factors?

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determining the industry outlook for future profitability.

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When evaluating whether an industry's environment presents a company with an above-average profitability and an attractive business opportunity, it primarily involves:

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