Question

Chapter 3: Exercises for Simulation Participants

If you are participating in a strategy simulation exercise during the academic term, you may be instructed to complete the following exercise.

1. Which of the five competitive forces is creating the strongest competitive pressures for your company?

Multiple Choice

• There is not one competitive force that is strong enough to require a strategy change.

• Companies should not be concerned with entry barriers; these are always strong enough to prevent new entrants.

• Any one of the competitive forces can impact a company. The stronger the collective forces, the lower the combined profitability of industry participants.

• Rivalry almost always becomes stronger when buyer costs to switch brands are high.

2. What are the “weapons of competition” that rival companies in your industry can use to gain sales and market share? See Figure 3.7 to help you identify the various competitive factors.

Multiple Choice

• Some weapons chosen by competitors include market penetration.

• Technology implementation has been chosen as a weapon of choice by many new entrants.

• Some “weapons of competition” include lower prices, different features, better performance, higher quality, and stronger brand image.

• First to market and benchmarking are effective weapons used by rival companies.

• Competitors chose to compete based on market segments and focusing on customization.

Porter's Five Competitive Forces

How can you apply Porter’s five competitive forces to explain the profit potential of the average firm for different industries?

This video reviews industry analysis using Porter’s five forces framework as applied to the air travel industry and the soft drink industry.

1. Is the threat of substitutes greater in the airline industry or the soft drink industry?

• the soft drink industry because all carbonated beverages are the same

• the soft drink industry because customers would incur high costs in switching

• the soft drink industry because people can choose other beverages, such as water, tea, or coffee

• the airline industry because people value their time

• the airline industry because we have so many alternate means of transportation

Answer 1

1)Anyone of the competitive forces can impact a company. The stronger the collective forces, the lower the combined profitability of industry participants.

Any competitive force impact a company, if there are more entrants this will increase competition if the supplier is at a beneficial position he will pose threat to the company if customers have more options there bargaining power will increase. Hence in a market, there is not a single factor that poses a threat to an organization. Competition, bargaining power of Supplier, Bargaining power of Buyer, Threat of Substitution, Threat of New Entry. Anyone of these can impact a company.

2)Some “weapons of competition” include lower prices, different features, better performance, higher quality, and stronger brand image.

The above-mentioned factors are the basis on which a company makes differentiation form others. These are the ways by which an organization increase the competitiveness in the market. Weapons are competition is said to be all the factors that a rival company can use to increase their sales and market share. Rebate, free shipping, home delivery, different features, quality, brand all are used to increase the customer base.

3)the soft drink industry because people can choose other beverages, such as water, tea, or coffee

In the soft drink industry, there are so many alternatives available.Entry to this industry is also not require much investment and people do switch to alternatives hence threat of substitute is more for softdrink industry.