Entrepreneurship

• What is the focus of industry analysis?

  Potential of an industry
• What defines an industry?

  A group of firms producing similar products
• Why is industry analysis important?

  To learn the ins and outs of the industry
• What does industry analysis help a firm determine?

  If the target market is favorable
• What are the three key questions an entrepreneur must answer when studying an industry?

  1. Is the industry accessible for new ventures?
  2. Are there markets ripe for innovation?
  3. Are there positions that avoid negative attributes?
• What does it mean for an industry to be accessible?

  It is realistic for a new venture to enter
• What indicates markets are ripe for innovation?

  They are underserved or lacking options
• What does it mean to avoid negative attributes in an industry?

  Finding positions that mitigate industry risks
• What are firm-level factors?

  Company's products, culture, and resources
• What percentage of variation in firm profitability is attributed to industry factors?

  8% to 30%
• What techniques can be used to assess industry attractiveness?

  1. Studying industry trends
  2. The Five Competitive Forces Model
• What do environmental trends include?

  Economic, social, technological, and political changes
• How can industries benefit from environmental trends?

  By adapting to demographic changes
• What are business trends?

  Trends impacting industries not classified as environmental
• Why should start-ups monitor trends?

  To stay competitive in their industries
• What is the Five Competitive Forces Model used for?

  Understanding the structure of an industry
• What does the Five Competitive Forces Model determine?

  Industry profitability and average return rates
• How do the five forces impact industry profitability?

  By applying pressure on profitability
• How do well-managed firms position themselves in an industry?

  To avoid or diminish competitive forces
• When is an industry more attractive regarding substitutes?

  When the threat of substitutes is low
• Why are prescription medicines profitable?

  Few substitutes exist for them
• What happens when close substitutes exist in an industry?

  Industry profitability is suppressed
• What influences the extent to which substitutes suppress profitability?

  Buyers' propensity to substitute alternatives
• Why do firms offer amenities to customers?

  To reduce likelihood of switching to substitutes
• When is an industry more attractive regarding new entrants?

  When the threat of entry is low
• How do firms keep the number of new entrants low?

  By erecting barriers to entry
• What is a barrier to entry?

  A condition discouraging new firms from entering
• What is the major determinant of industry profitability?

  The level of competition among existing firms
• What happens in fiercely competitive industries?

  Profitability is significantly impacted
• What do firms in an industry try to do regarding new entrants?

  Keep the number of new entrants low
• What is a barrier to entry?

  A condition that discourages new firms
• What happens in fiercely competitive industries?

  Prices are pushed below cost levels
• How does competition vary among industries?

  Some have intense competition, others less so
• When are industries more attractive regarding supplier power?

  When the bargaining power of suppliers is low
• How can suppliers affect industry profitability?

  By raising prices or reducing quality
• What happens if a supplier reduces the quality of components?

  The finished product's quality will suffer
• What can happen if suppliers are powerful relative to firms?

  Industry profitability can suffer
• When are industries more attractive regarding buyer power?

  When the bargaining power of buyers is low
• How can buyers suppress industry profitability?

  By demanding price concessions or quality increases
• How does the automobile industry illustrate buyer power?

  Large companies demand price reductions from suppliers