3.7.7 Analysing the external environment to assess opportunities and threats: the competitive environment

• Why is it crucial for businesses to analyze the competitive environment?

  Understand market position
• What is the goal of analyzing the competitive environment for a business?

  Gain a competitive advantage
• Steps to analyzing the competitive environment:

  1️⃣ Competitor analysis

  2️⃣ Industry life cycle analysis

  3️⃣ Barriers to entry assessment

  4️⃣ Competitive intensity determination
• What ability do buyers with high bargaining power have?

  Influence prices and terms
• Understanding competitive forces is crucial for businesses to develop effective strategies
• High barriers to entry make it easier for new competitors to enter the market.

  False
• Rivalry between existing competitors refers to competition between businesses already operating in the same market.


  True
• A competitive advantage is difficult for competitors to replicate.

  False
• Competitor analysis involves understanding their strengths, weaknesses, strategies, and likely responses
• What are the main competitive forces in a market?

  Rivalry, new entrants, suppliers, buyers, substitutes
• In the coffee shop market, the bargaining power of buyers is high because customers can easily switch
• What is a key difference between competitive advantage and sustainable competitive advantage?

  Replicability
• Sustainable competitive advantages are easy to imitate by competitors.

  False
• Industry trends help businesses adapt their strategies to changing consumer behavior.


  True
• What is an example of a sustainable competitive advantage related to technology?

  Proprietary technology
• What is an example of a sustainable competitive advantage related to company culture?

  Unique company culture
• The competitive environment refers to the rivalry between businesses in the same industry or market
• Competitor analysis involves understanding their strengths, weaknesses, strategies, and likely responses
• What is the primary focus of the rivalry between existing competitors?

  Market share and profits
• Match the competitive force with its description:

  Rivalry between existing competitors ↔️ Competition among current market players

  Bargaining power of buyers ↔️ Ability of customers to influence prices

  Threat of new entrants ↔️ Ease of new competitors entering the market

  Threat of substitute products ↔️ Availability of alternative solutions
• The competitive environment refers to the rivalry between businesses in the same industry or market.


  True
• By analyzing the competitive environment, businesses can make more informed strategic decisions
• The threat of substitute products refers to the availability of alternative products that meet the same customer needs
• Sustained profitability and revenue growth are benefits of having a sustainable competitive advantage
• Identifying the current stage of the industry helps anticipate changes.

  True
• Porter's Five Forces is a framework used to analyze the competitive environment
• What does using Porter's Five Forces help businesses achieve?

  Strategic decision-making
• What is the definition of a competitive advantage?

  Edge over competitors
• What is a benefit of having a sustainable competitive advantage?

  Sustained profitability and growth
• What does competitive intensity influence within a market?

  Pricing power and market share
• Superior product quality is a sustainable competitive advantage.

  False
• Sustainable competitive advantages enhance market resilience during industry disruptions.

  True
• High barriers to entry make it easier for new competitors to enter the market.

  False
• Identifying the industry life cycle stage helps businesses anticipate market changes.


  True
• Suppliers with high bargaining power can influence prices and terms.

  True
• The industry life cycle helps businesses identify the current stage of the industry to anticipate changes
• Stages of the industry life cycle

  1️⃣ Growth

  2️⃣ Maturity

  3️⃣ Decline
• What are the main competitive forces in a market?

  Five
• What is an example of a sustainable competitive advantage?

  Strong brand reputation
• What does the competitive environment refer to?

  Rivalry between businesses