Threat of Entry (Competitive Forces, Differentiation) - Protection due to intangible
resources, innovation, and customer service
- Risk include Erosion of Margins and Replacement
Threat of Entry (Cost Leadership) - Protects against entry due to Economies of Scale
- Risk include Erosion of Margins and Replacement
Power of Suppliers (Differentiation) - protection against input prices which can be passed
to customers
Risks include Erosion of Margins
, WPC 480 Exam 2 Questions With Complete
Solutions
Power of Suppliers (Cost Leadership) - Protection against increase in input prices which
can be absorbed
- Risks include Erosion of Margins
Power of Buyers (Differentiation) - Protection against decreased sales prices
- Are well differentiated products
- Risks, Erosion of Margins
Power of Buyers (Cost Leadership) - Protected against decrease in sales prices
- Can be absorbed
- Risks, Erosion of Margins
Threat of Substitutes (Differentiation) - Protection against substitute, differential appeal
, WPC 480 Exam 2 Questions With Complete
Solutions
- Risks, Replacement when face with Innovation*
Threat of Substitutes (Cost Leadership) - Protection against substitutes through further
lower prices
- Risks, Replacement when faced with innovation
Rivalry Among Competitors (Differentiation) - Protection ONLY if product has enough
differential appeal
- Competition focus = Price Shifts
- Risks, Increasing product features and no recovery profit
Rivalry Among Competitors (Cost Leadership) - Protection against price wars because
lowest cost firm WINS
- Risks, lowering costs to drive value below acceptable threshold
, WPC 480 Exam 2 Questions With Complete
Solutions
- Focus of competition to switch to non-price attributes (enhancing a product without cost inputs)
Economies of Scope - Savings that come from producing 2 or more outputs (cheaper than
it would be to produce them individually)
How do Managers Increase Perceived Value or Decrease Costs? 1. Product Features
2. Customer Service
3. Complements
Different value drivers contribute to Competitive Advantage if V > C
Red Ocean - market space that already exists with existing industries
- rivalry among competitors is CUT-throat
- market place is crowded, zero-sum game*
- products become commodities
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