Question 1. What is an industry?

Provide an example of an industry and several firms in

it.
Answer:
An industry is a group of firms producing a similar product or service, such as music, fitness
drinks, or electronic games.

Example: Telecommunications Services (Viettel, FPT, VNPT), Energy (Petrolimex,

Petrolimex Bariavungtau, mipecorp)

Question 2. What is the purpose of industry analysis?

Answer:
Industry analysis is business research that focuses on an industry’s potential. The knowledge
gleaned from this analysis helps a firm decide whether to enter an industry and if it can carve
out a position in that industry that will provide it a competitive advantage.

Question 3. What are the four primary categories of environmental trends?

Answer:
Provide an example of how a trend in each category could affect the toy industry.

Economic trends, social trends, technological advances, and political and regulatory changes
are the most important environmental trends for entrepreneurs to study.

For example, companies in toy industry, today parents often choose morden toy, in the
reasonable price and not harmful for environment.

Question 4. Identify the five forces that determine industry profitability.

Answer:
Porter’s five forces model includes threat of substitutes, threat of new entrants, rivalry among
existing firms, bargaining power of suppliers, and bargaining power of buyers.

Question 5. Describe how the threat of substitute products has the potential to suppress
an industry’s profitability.
Answer:
Threat of Substitutes: In general, industries are more attractive when the threat of substitutes is
low. This means that products or services fromother industries can’t easily serve as substitutes
for the products or services being made and sold in the focal firm’s industry. For example, there
are few if any substitutes for prescription medicines, which is one of the reasons the
pharmaceutical industry is so profitable. When people are sick, they typically don’t quibble
with the pharmacist about the price of a medicine. In contrast, when close substitutes for a
product do exist, industry profitability is suppressed because consumers will opt not to buy
when the price is too high. Consider the price of airplane tickets. If the price gets too high,
businesspeople will increasingly utilize videoconferencing as a substitute for travel. This
problem is particularly acute if the substitutes are free or nearly free. For example, if the price
of express mail gets too high, people will increasingly attach documents to e-mail messages
rather than sending them via UPS or FedEx

6. How does the threat of new entrants have the potential to suppress an industry’s
profitability?
Answer:
– If the firms in an industry are highly profitable, the industry becomes a magnet to new
entrants.
– Unless something is done to stop this, the competition in the industry will increase, and
average industry profitability will decline.

7. What is meant by the term barrier to entry? Describe the six major sources of barriers
to entry that firms use to restrict entry into their markets.
Answer:
A barrier to entry is a condition that creates a disincentive for a new firm to enter an industry.
The six major sources of barriers to entry are as follows:

– Economies of scale: Industries that are characterized by large economies of scale are
difficult for new firms to enter, unless they have substantial resources or are willing to
accept a cost disadvantage.
– Product differentiation: Industries such as the soft drink industry that are characterized
by firms with strong brands are difficult to break into without spending heavily on
advertising.
– Capital requirements: The need to invest large amounts of money to gain entrance to
an industry is another barrier to entry.
– Cost advantages independent of size: Entrenched competitors may have cost
advantages not related to size that are not available to new entrants.
– Access to distribution channels: Distribution channels are often hard to crack,
particularly for new firms.
– Government and legal barriers: In knowledge-intensive industries, patents, trademarks,
and copyrights form major barriers to entry. Other industries, such as banking and
broadcasting, require the granting of a license by a public authority.

8. How does rivalry among existing firms have the potential to suppress an industry’s
profitability?
Answer:
In most industries, the major determinant of industry profitability is the level of
competition among the firms already competing in the industry. Some industries are fiercely
competitive to the point where prices are pushed below the level of costs.
9. Describe the four primary factors that play a role in determining the nature and
intensity of the bargaining power of suppliers. How does the bargaining power of
suppliers have the potential to suppress and industry’s profitability?
Answer:
The four factors that play a role in determining the nature and intensity of the bargaining
power of suppliers are:
– Supplier concentration: When there are only a few suppliers that supply a
critical product to a large number of buyers, the supplier has an advantage.

– Switching costs: If switching costs are high, a buyer will be less likely to switch
suppliers.

– Attractiveness of substitutes: Supplier power is enhanced if there are no

attractive substitutes for the product or services the supplier offers.

– Threat of forward integration: The power of a supplier is enhanced if there is a

credible possibility that the supplier might enter the buyer’s industry.

In some cases, suppliers can suppress the profitability of the industries to which they sell
by raising prices or reducing the quality of the components they provide.

10. Describe the four primary factors that play a role in determining the nature and
intensity of the bargaining power of buyers. How does the bargaining power of buyers
have the potential to suppress an industry’s profitability?
Answer:
The four factors that play a role in determining the nature and intensity of the bargaining
power of buyers are:

– Buyer group concentration: If the buyers are concentrated, meaning that there
are only a few large buyers, and they buy from a large number of suppliers, they
can pressure the suppliers to lower costs.

– Buyer’s costs: The greater the importance of an item is to a buyer, the more
sensitive the buyer will be to the price it pays.

– Degree of standardization of supplier’s products. The degree to which a

supplier’s products differ from its competitors affects the buyer’s bargaining
power.
– Threat of backward integration: The power of a buyer is enhanced if there is a
credible threat that the buyer might enter the supplier’s industry.

Buyers can suppress the profitability of the industries from which they purchase by
demanding price concessions or increase in quality.
Question 11: Identify the nontraditional barriers to entry that are particularly suitable
for entrepreneurial firms.
Answer:
– Strength of management team,
– First mover advantage,
– Passion of management team and employees,
– Unique business model tied together by a network of relationships,
– Unique or “spot on” Internet domain names and
– Inventing a new approach to an industry and executing the idea in an exemplary fashion.
These nontraditional barriers to entry are important for firms to consider and utilize when
appropriate.

Question 12: How can a start-up avoid or sidestep the pressure applied by one of the five
forces on industry profitability by establishing a unique “position” in an industry?
Answer:
– A company’s position determines how it is situated relative to
its rivals.
– An example of a company that has positioned itself in a favorable manner is Panera Bread,
the subject of Case 5.1.
– By establishing a new category in the restaurant industry,
which Panera Bread calls “fast-casual,” Panera diminishes the
“rivalry among existing firms,” by avoiding direct head-to-head
competition with the fast-food and the casual dining segments of the restaurant industry.

Question 13: Describe the characteristics of a fragmented industry. What is the primary
opportunity for new firms in fragmented markets?
Answer:
– A fragmented industry is one that is characterizedby a large number of firms of approximately
equalsize.
– The primary opportunity existing for start-ups in fragmented industries is to consolidate the
industry and establish industry leadership as a result of doing so.
Question 14: Describe the characteristics of a mature industry. What is the primary
opportunity for new firms in a mature industry?
Answer:
– A mature industry is an industry that is experiencing slow or no increase in demand, has
numerous repeat customers, and has limited product innovation.

– The primary opportunity existing for start-ups in mature industries is to introduce new
product innovations.

Question 15: What is a global industry? Describe the two most common strategies
pursued by firms in global industries.
Answer:
– A global industry is an industry that is experiencing significant international sales.

– The two most common strategies pursued by firms in global industries are the multi-domestic
strategy and the global strategy.
– Firms that pursue a multi-domestic strategy compete for market share on a country-by-
country basis and vary their product or services offerings to meet the demands of the local
market.

– In contrast, firms pursuing a global strategy use the same basic approach in all foreign
markets.

16. What is thse purpose of a competitor analysis? Make your answer as complete as
possible.
Answer

The purpose of competitor analysis is to evaluate you rival's strengths and weaknesses, assess
their current position in the market to enable you to outperform them. Once you learned about
their strengths and weaknesses, it will allow you to formulate your own strategy and get your
own share in the market. Normally, sales,marketing, business development and R&D team use
this type of analysis.

17. Describe the differences between direct competitors, indirect competitors, and future
competitors.
Answer
The differences between direct competitors, indirect competitors, and future competitors.

Direct competitors Indirect competitors Future competitors

 They offer products  They offer close  They are not yet direct or
identical or similar to substitutes to the product indirect competitors but
 those of the firm the firm completing the could move into one of
completing the analysis. analysis sells. these roles at any time.
 These competitors are the  These firms’ products are  Firms are always
most important because also important in that concerned about strong
they are going after the they target the same basic competitors moving into
same customers as the need that is being met by their markets
new firm. A new firm the new firm’s product.
faces winning over the
loyal followers of its
major competitors, which
is difficult to do, even
when the new firm has a
better product.

18.What is meant by the term competitive intelligence? Why is it important for firms to
collect intelligence about their competitors?
Answer

 Competitive intelligence refers to information collected by a company about rival

businesses and markets, which may then be analyzed to create more effective business
strategies moving forward. By definition, competitive intelligence assembles actionable
information from diverse published and unpublished sources, collected efficiently
and ethically.
 It is important for firms to collect intelligence about their competitors because of some
reasons outlined below.

- Be aware of market dynamics and know when you are being outsmarted or if you are in fact
outperforming the competition.

- Have complete knowledge of the external business environment which can influence
your marketing strategy as well as the long term view of the company.

- Risk assessment by knowing the changes happening in the market and how they will
influence your own business.

- Opportunity analysis wherein a segment ignored by your competition can be immediately

taken over by your products.

19. Identify three sources of competitive intelligence.

Answer

Source Identify
 Sources inside your organization
Sources outside your organization
Events
CEO and other executives, board of
directors, salespeople, marketing managers
and personnel, customer-service reps,
delivery personnel.
Customers, suppliers, distributors, financial
analysts, SEC filings, online databases,
social media, Dow Jones, LexisNexis,
newspapers, trade journals, white papers,
speeches and presentations, catalogs, patent
databases, analytics.
Trade shows, conventions, conferences,
standards organizations.

20. What is the purpose of completing a competitive analysis grid?

Answer

 The purpose of completing a competitive analysis grid

- As we mentioned previously, a competitive analysis grid is a tool for organizing the
information a firm collects about its competitors.
- It can help a firm see how it stacks up against its competitors, provide ideas for markets
to pursue, and, perhaps most importantly, identify its primary sources of competitive
advantage. To be a viable company, a new venture must have at least one clear
competitive advantage over its major competitors.
- Conduct a methodical analysis of each competitor’s strengths and weaknesses. Why is
this important? It is a widely accepted fact that a company achieves success through the
assets, skills, and competitive advantages that it brings into the marketspace. An analysis
of successful competitors should reveal these sources of prosperity and assist you in
structuring your business idea. Searching for weaknesses not only provides insight into
what others may be doing wrong, but reveals where opportunities for success may lie.