ACTG 3000 Lecture Notes - Lecture 2: Ope, Perfect Competition, Histology
Document Summary
A fi(cid:396)(cid:373)(cid:859)s (cid:448)alue is dete(cid:396)(cid:373)i(cid:374)ed (cid:271)(cid:455) its a(cid:271)ilit(cid:455) to ea(cid:396)(cid:374) a (cid:396)etu(cid:396)(cid:374) o(cid:374) its (cid:272)apital i(cid:374) e(cid:454)(cid:272)ess of the (cid:272)ost of (cid:272)apital. Strategy analysis involves industry analysis, competitive strategy analysis, and corporate strategy analysis. Whether or not the potential profits are kept by the industry is determined by the relative bargaining power of the firms in the industry and their customers and suppliers. Three potential sources of competition in a industry: rivalry between existing firms, threat of entry of new firms, threat of substitute products or services. Several factors determine the intensity of competition between existing players in an industry: Potential for earning abnormal profits will attract new entrants to an industry. The very threat of new firms entering an industry potentially forces incumbent firms to make additional investments or to keep prices low. ease with which new firms can enter an industry is a key determinant of its profitability.
