The Five Forces Model helps businesses understand the competitive forces at play within a particular industry or market. It allows them to assess the attractiveness of the industry and identify the factors that influence their competitive position. By analyzing each of the five forces (Industry Rivalry, Threat of New Entrants, Bargaining Power of Buyers, Bargaining Power of Suppliers, and Threat of Substitutes), companies can gain insights into the overall competitive environment.
Value added refers to the difference between the cost of inputs (raw materials, labor, and other expenses) and the market value of outputs (final goods or services produced). It represents the additional value created by a company in the production process.
Barriers to entry are factors or obstacles that make it difficult for new firms to enter and compete in a specific industry or market. These barriers can act as deterrents and limit the number of new entrants, thus protecting the market position of existing companies.
Mobility obstacles in the context of strategic group analysis refer to barriers that prevent other firms from entering a particular strategic group and threatening the existing members' competitive positions. These barriers can make it difficult for new firms to enter the strategic group and compete effectively.
Dynamic capabilities, also known as dynamic skills, refer to the firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments. These capabilities allow the firm to adapt, innovate, and respond effectively to shifts in the market, technological advancements, and evolving customer demands.
Forecasts are educated assumptions about future trends and events. They are predictions or estimates made based on available data, historical patterns, and analysis of relevant factors. Forecasts are commonly used in various fields, including economics, finance, business, weather, and social sciences, to make informed decisions and plans for the future.
The International Product Life Cycle (IPLC) theory, developed by Raymond Vernon in the 1960s, implies that products go through a specific life cycle as they enter the international market. The theory describes how the production, marketing, and distribution of a product change over time as it moves from its inception to maturity and decline in different countries.
The term "strategic group analysis" refers to the process of identifying firms or companies within an industry that have similar strategies or compete on similar bases. In strategic group analysis, companies are grouped together based on similarities in their business models, target markets, competitive approaches, and overall strategic positioning.
Buyer switching costs, on the other hand, are related to the costs and efforts that customers need to incur when switching from one supplier or brand to another. While buyer switching costs can influence customer loyalty and retention, they are not directly related to entry barriers for new firms trying to enter the market. Instead, they affect customer behavior and brand preferences within the existing market landscape.
According to the resource-based perspective (also known as the resource-based view or RBV), designing successful strategies should indeed begin with identifying the distinctive corporate resources. Unique firm resources, capabilities, and core competencies are considered the starting point for developing successful strategies.
Global value chains (GVCs) are networks of production and distribution activities that involve multiple firms located in different countries. In a global value chain, each firm specializes in a specific stage of the production process, and goods or services are passed along the chain from one firm to another until the final product reaches the consumer.
Non-standard industrial products, such as luxury products, are not typically covered by the International Product Life Cycle (IPLC) theory. The International Product Life Cycle theory primarily applies to standardized industrial products that go through a specific life cycle as they enter the international market. These products are often mass-produced and have relatively uniform features and characteristics. Examples of standardized industrial products include machinery, electronics, chemicals, and other manufactured goods.
The VRIO framework is a tool used to assess a firm's core competencies and competitive advantages. It helps identify whether a firm's resources and capabilities provide a sustained competitive advantage.
Scenario planning allowed Shell to consider a range of possible outcomes and responses to different market conditions, rather than relying on a single forecast or prediction. It helped the company to be better prepared for different eventualities and make more informed decisions in an ever-changing business environment.
According to Michael Porter, the primary factor affecting a company's profitability is "Industry attractiveness." He introduced the concept of five competitive forces that influence a firm's profitability, and one of these forces is the attractiveness of the industry in which the firm operates.
The statement "International investments have less political risk than domestic investments" is incorrect. In reality, international investments often come with higher political risk compared to domestic investments. Political risk refers to the risk of value loss in an investment due to political actions or events in a foreign country. These actions can include changes in government policies, regulations, political instability, nationalization of assets, expropriation, or civil unrest. Political risk can have a significant impact on the profitability and stability of international investments.
