Define the term industry structure and discuss the ways the Internet and e-commerce have changed the five forces that characterize industry structure.
What will be an ideal response?
The term industry structure refers to the general business environment in an industry and is defined by the nature of the players in the industry and their relative bargaining power. It is characterized by five forces: the rivalry among existing competitors, the threat of substitute products, the barriers to entry into the industry, the bargaining power of the suppliers, and the bargaining power of the buyers.
The competitive consequences of technological developments often change the market share positions among the players. New forms of distribution created by new market entrants can completely change the competitive forces in an industry. The Internet, the Web, and e-commerce have affected the structure of different industries in varying, yet often profound ways. In fact, the explosive emergence of the Internet as a major worldwide distribution channel for goods, services, and even for employment is powerfully changing economies, markets, and industry structures. The universal standards of the Internet have lowered the barrier to entry for many industries, bringing a flood of new entrants. Inter-firm rivalry is one area where e-commerce technology has had an impact on most industries.
The major consequence is that every business must become globally competitive, even if it manufactures or sells only within a local or regional market. The Internet has changed the scope of competition from local and regional to national and global, pitting firms that had previously been in separate geographic markets against one another. Consumers of all types of goods have access to global price information, putting pressure on many producers and suppliers in some industries to decrease their prices. On the other hand, it has also presented new opportunities for firms to differentiate their products or services from their competitors, driving prices and profits for those firms up.
The overall positive or negative effect of e-commerce technologies on firm profitability depends on the industry involved. In some industries, particularly those involved with information distribution such as newspapers, magazines, software distributors, music and publishing companies, e-commerce has completely changed the ways of doing business. New online challengers have intensified competition and increased the availability of substitute products.
In general, the bargaining power of consumers has grown relative to the providers, driving prices down and challenging the overall profitability of these industries. In other industries, particularly manufacturing, e-commerce has not greatly changed relationships with consumers but relationships with suppliers have been impacted by the aggregation of markets such as those created by B2B exchanges. Increasingly, manufacturing firms in entire industries have banded together to aggregate purchases, create industrial digital exchanges or marketplaces, and outsource industrial processes in order to obtain better prices from suppliers.
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The ability of an organization to outperform others by producing goods or services more effectively than its competitors is called its
A. competitive advantage. B. quality. C. efficiency. D. innovation. E. effectiveness.
Which of the following statements is CORRECT?
A. When calculating the cost of preferred stock, companies must adjust for taxes, because dividends paid on preferred stock are deductible by the paying corporation. B. Because of tax effects, an increase in the risk-free rate will have a greater effect on the after-tax cost of debt than on the cost of common stock as measured by the CAPM. C. If a company's beta increases, this will increase the cost of equity used to calculate the WACC, but only if the company does not have enough reinvested earnings to take care of its equity financing and hence must issue new stock. D. Higher flotation costs reduce investors' expected returns, and that leads to a reduction in a company's WACC. E. When calculating the cost of debt, a company needs to adjust for taxes, because interest payments are deductible by the paying corporation.
Which of the following is NOT a step in determining processing requirements or workloads of each department?
a. which employee or department will do the work b. the type of work that needs to be done c. how much to charge for the service d. how that work will be completed
Effective motivation of a sales force is best achieved through
A. annual retreats at resort locations open to families. B. emphasizing sales force objectives and their connection to compensation. C. an organized set of activities performed continuously. D. motivation meetings when sales have declined. E. daily pep talks before the sales force makes sales calls.