a group of companies offering similar products or services. It makes up the supply side of the market, while customers make up the demand side
structure-conduct-performance (SCP) model
a framework that explains differences in industry performance. 4 different industry types:
*fragmented industries tend to be less profitable than consolidated ones.
this type of industry is characterized as fragmented and has many small firms, a commodity product, ease of entry, and little or no ability for each individual firm to raise its prices. Firms competing in this type of industry are approximately similar in size and resources. Consumers making purchasing decisions solely on price, because the commodity product offerings are more or less identical.
monopolistically competitive industry
characterized by many firms, a differentiated product, some obstacles to entry, and the basis for raising prices for a relatively unique product while retaining customers. The key to understanding this industry structure is that the firms now offer products or services that have UNIQUE FEATURES.
"few sellers" - this type of industry is becoming more consolidated with few (large) firms, differentiated products, high barriers to entry, and some degree of pricing power. Competing firms are interdependent.
only one (large) firm supplying the market. The firm may offer a unique product, but the challenges to moving into the industry tend to be high. Firm has considerable pricing power. Firm profitability tends to be high.
Porter's Five Forces
Threat of entry
Power of suppliers
Power of buyers
Threat of substitutes
Rivalry among existing competitors
obstacles that determine how easily a firm can enter an industry. They are most often one of the most significant predictors of industry profitability.
occurs when a buyer moves upstream in the industry value chain, into the seller's business. Commonly observed in the auto-component supply industry, in which car manufacturers like GM have the capability to backward-integrate in order to produce their components in-house if their demands for lower prices and higher product quality are not met by their suppliers
moving into their buyers' market
obstacles that determine how easily a firm can leave the industry
a product, service, or competency that adds value to the original product offering when the two are used in tandem EX: tires to cars, paper to printers
a company that provides a good or service that leads customers to value your firm's offering more when the two are combined EX: tires company and car manufacturer
a process whereby formerly unrelated industries begin to satisfy the same customer need
the set of companies that pursue a similar strategy within a specific industry
strategic group model
a framework that explains firm differences in performance in the same industry by clustering different firms into groups based on few key strategic dimensions
industry-specific factors that separate one strategic group from another
levels of employment
price stability (inflation and deflation)
currency exchange rates
balance of trade
the difference between a nation's exports and imports
the governments involved believe that the product or service would not be supplied by the market if there were not a monopoly
firms that have accrued significant market power; they are changing the industry structure in their favor, generally from monopolistic competition or oligopolies to near monopolies; are firms that have accomplished product differentiation to such a degree that they are in a class by themselves
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