SMA Topic 3

Elements and conditions in a company’s environment that allow it to formulate and implement strategies that enable it to become more profitable.

• Opportunities

• Threats

• Industry

• Sector

• Market segments

_____ arise when conditions in the external environment endanger the integrity and profitability of the company’s business.

• Opportunities

• Threats

• Industry

• Sector

• Market segments

A group of companies offering products or services that are close substitutes for each other—that is, products or services that satisfy the same basic customer needs.

• Opportunities

• Threats

• Industry

• Sector

• Market segments

A group of closely related industries.

• Opportunities

• Threats

• Industry

• Sector

• Market segments

Distinct groups of customers within a market that can be differentiated from each other on the basis of their individual attributes and specific demands.

• Opportunities

• Threats

• Industry

• Sector

• Market segments

Important barriers to entry include: I. Economies of scale II. Brand loyalty III. Absolute cost advantages IV. Customer switching costs V. Government regulation

• I, II, III only

• I and II

• I, II, III, IV, and V

• I, II, III, and V

Sources of scale economies include: (1) cost reductions gained through mass-producing a standardized output; (2) discounts on bulk purchases of raw material inputs and component parts; (3) the advantages gained by spreading fixed production costs over a large production volume; and (4) the cost savings associated with distributing marketing and advertising costs over a large volume of output.

• I, II, III, and IV are TRUE

• Only I, II, and III are TRUE

• Only I and III are TRUE

• None of the above

Companies that are not currently competing in an industry, but have the capability to do so if they choose.

• Potential competitors

• Economies of scale

• Brand loyalty

• Absolute cost advantage

• Switching costs

Preference of consumers for the products of established companies.

• Potential competitors

• Economies of scale

• Brand loyalty

• Absolute cost advantage

• Switching costs

Arise when unit costs fall as a firm expands its output.

• Potential competitors

• Economies of scale

• Brand loyalty

• Absolute cost advantage

• Switching costs