BEC5 - Business Strategy
Terms
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- Name four techniques to analyze and forecast the economic environment.
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1. scanning
2. monitoring
3. forecasting
4. assessing - Describe scanning.
- A study of all segments in the general environment.
- Describe monitoring.
- A study of environmental changes identified by scanning to identify important trends.
- Describe forecasting.
- Developing probable projections of what might happen and its timing.
- Describe assessing.
- Determining changes in the firm's strategy that are necessary as a result of the information obtained.
- Name four different types of industries.
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1. perfect (pure) competition
2. pure monopoly
3. monopolistic competition
4. oligopoly - Describe perfect (pure) competition.
- A market characterized by a large number of small producers that sell a vertually identical product.
- How do firms compete in a perfectly competitive market?
- On the basis of price.
- Describe a pure monopoly.
- A market in which there is a single seller of a product or service for which there are no close substitutes.
- Name four reasons for a monopoly.
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1. increasing returns of scale
2. control over the supply of raw materials
3. patents
4. government franchise - Describe a natural monopoly.
- When economic or technological conditions permit only one efficient supplier.
- How long will monopolists continue to produce and sell products?
- As long as average variable cost is less than marginal revenue.
- Describe monopolistic competition.
- A market that is characterized by many firms selling a differentiated product or service.
- What are the strategies of firms in monopolistic competition?
- Focus on product or service innovations, product developments, and advertising.
- Describe oligopoly.
- A market characterized by significant barriers to entry.
- What is the nature of competition in an oligopoly?
- Nonprice competition is most common, but price competition can become fierce during economic downturns.
- Name the five industry forces used in analyzing the industry.
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1. competitors
2. potential entrants into the market
3. equivalent products
4. bargaining power of customers
5. bargaining power of input suppliers - Name three techniques for industry analysis.
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1. competitor analysis
2. price elasticity analysis
3. target market analysis - Describe competitor analysis.
- Involves gathering information about competitors' capabilities and using the information to understand the competitors' behavior.
- Describe price elasticity analysis.
- Involves using historical information to determine the price elasticity of demand for the firm's product.
- Describe target market analysis.
- Obtaining a thorough understanding of the market in which the firm sells its products.
- How is a SWOT analysis used in developing business strategies?
- Identifies strengths, weaknesses, opportunities and threats.
- Name the two basic business strategies that firms generally pursue.
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1. product differentiation
2. cost leadership - Describe product differentiation.
- Involves modification of a product to make it more attractive to the target market or to differentiate it from competitors' products.
- Name three ways in which products can be differentiated.
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1. physical characteristics
2. perceived differences
3. support service differences - Describe cost leadership.
- Involves focusing on reducing the costs and time to produce, sell, and distribute a product or service.
- Name five techniques that may facilitate cost reductions.
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1. process reengineering
2. lean manufacturing
3. supply chain management
4. strategic alliances
5. outsourcing - Describe process reengineering.
- Redesigning existing processes.
- Describe lean manufacturing.
- Identification and elimination of all types of waste in the production function.
- Describe supply chain management.
- The sharing of key information from the point of sale to the final consumer back to the manufacturer, the manufacturer's suppliers, and the supplier's suppliers.
- What is the objective of supply chain management?
- To reduce time, defects, and costs all along the supply chain.
- Describe stategic alliances.
- Involve collaborative agreements between two or more firms.
- Describe outsourcing.
- Involves contracting for the performance of processes by other firms.