Test_1_sample_essays2[1] - Sample Short Answer/Essay...

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Sample Short Answer/Essay Questions for Midterm #1 1. Explain the important barriers to entry in an industry. Provide examples . P. 60 - Economies of Scale: refers to spreading the costs of production over the number of units produced - Product differentiation: causes entrants to spend heavily to overcome existing customer loyalties - Capital requirements: need to invest large financial resources to compete, especially if capital is required for risky or unrecoverable up-front advertising or R&D - Switching costs: 1-time costs that the buyer faces when switching from one supplier’s product to another - Access to distribution channels: new entrant’s need to secure distribution - Cost disadvantages independent of scale: advantages of some existing competitors that are independent of size or economies of scale like, proprietary product, favorable access to raw materials, govt subsidies, favorable govt policies 2. Discuss and provide examples of factors that would lead to greater buyer power. P. 61-62 - It is concentrated or purchases large volumes relative to seller sales. - The products it purchases from the industry are standard or undifferentiated. - The buyer faces few switching costs. - It earns low profits - The buyers pose a credible threat of backward integration. - The industry’s product is unimportant to the quality of the buyer’s products or services. 3. What value is the strategic groups concept as a tool in analyzing an industry? P. 68 - Strategic grouping helps a firm identify barriers to mobility that protect a group from attacks by other groups - It helps a firm identify groups whose competitive position may be marginal or tenuous. - Helps chart the future directions of firms’ strategies. - Helpful in thinking through the implications of each industry trend for the strategic group as a whole. 4. Many indicators of the macroeconomic environment such as GNP, interest rates, savings rates, trade and budget deficits/surplus, etc. are interrelated. Explain. P. 56 - When interest-rates increase it has a negative impact on the residential home construction industry but a neutral effect on industries that produce consumer necessities like prescription drugs or common grocery items. - When stock market indexes increase, consumers’ discretionary income rises and there is often a demand for luxury items. -
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Test_1_sample_essays2[1] - Sample Short Answer/Essay...

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