Ch 3 External Analysis: Industry Structure, Competitive Forces, and Strategy

The PESTEL framework allows the scanning, monitoring, and evaluating of ________in a firm’s macro environment.

changes and trends

In early 2022, Airbnb’s valuation reached $114 billion, nearly double that of Marriott. Airbnb’s rise illustrates the impact of two important PESTEL factors in its external environment: technological and sociocultural. How did sociocultural trends contribute to Airbnb’s growth?

Guests increasingly preferred remote work flexibility, longer stays, and accommodations outside crowded cities.

In a firm’s external environment, ________ factors to consider are growth rates, interest rates, the employment level, price stability, and currency exchange rates.

economic

Roxana manages a chain of workout facilities in a tri-county area that has recently experienced an economic boom because of the development of a new high-speed train line. What is most likely to happen when there is too much money in the tri-county economy?

an increase in prices

Which of the following best explains why the threat of new entrants can reduce the profit potential of an industry?

Incumbent firms may cut prices or increase spending to deter entry, lowering overall profitability.

According to Michael Porter’s five forces model, ________must be viewed broadly to encompass other forces in an industry.

competition

According to the five forces model, the stronger the five forces, the lower the industry’s

profit potential.

Keeping in mind the five forces in the airline industry, which of the following best explains the difficulty airlines have in generating a profit?

Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry.

BrightView Insurance recently adopted a new customer relationship management (CRM) platform from a different vendor. To make the system effective, the company spent $120,000 on migrating data, customizing workflows, and retraining staff. This expense is best classified as BrightView’s

switching cost.

Economies of scale are cost advantages that accrue for firms with

larger output.

When traditional in-person business conferences face competition from virtual platforms like Zoom, which of the following forces in Porter’s Five Forces model primarily becomes stronger?

the threat of substitutes

Lucas runs a company that manufactures satellites for commercial and government use. It has few rivals. At the moment, the power of buyers, the power of suppliers, and the threat of substitutes are all low. Based on this information, what can Lucas conclude?

The company is likely to be very profitable as long as the threat to entry is low.

Jatteland Jets Inc., a firm controlled and managed by the government of Jatteland, is the only company that has the license to manufacture private jets in the country. Which of the following industry competitive structures does this best illustrate?

monopoly

Firms that are classified as operating in an oligopoly tend to have some pricing power if they are able to differentiate their product or service offerings from those of their competitors, so the recommended mode of competition is

non-price competition.

Several budget airlines have been struggling to maintain profitability. As travelers increasingly opt for premium carriers or alternative modes of transportation, the low-cost airlines fight among themselves by constantly offering flash sales and rock-bottom ticket prices. These aggressive tactics are most indicative of

cutthroat competition.

Samsung and Google cooperate as complementors to compete against Apple’s strong position in the mobile device industry, while at the same time Samsung and Google are becoming increasingly competitive with one another. This scenario best illustrates the process of

co-opetition.

Siham is a chef who owns three moderately successful restaurants with innovative menus. Based on what you have read, which of these approaches could help her improve her profits?

Use her existing knowledge, equipment, and staff to launch a catering business.

Todd is a manager in an industry that has a few large players and that has remained relatively stable over the past few years. He finds out that legislators are proposing new laws to deregulate the industry. If the laws pass, which of these scenarios will Todd most likely face?

many new competitors

Firms that compete within the same strategic group generally experience

more competitive rivalry than firms outside their strategic group.

Breeze Car Rental follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor?

Quicker Rental Cars, which follows a low-cost strategy