ACCA Applied Knowledge · Business and Technology
Competitive Factors for ACCA Business and Technology
Competitive factors are the forces and choices that decide how well a business competes. For ACCA BT you learn Porter's generic strategies, Five Forces, the value chain, the product life cycle, the Boston Matrix and market structures. Solve questions by matching the scenario's clues to the right model and its exact terms.
What this chapter covers
This chapter is about how a business wins customers against rivals, and how its industry shapes its profits. You study five linked ideas: Porter's generic strategies (cost leadership, differentiation and focus), Porter's Five Forces, the value chain, the product life cycle with the Boston Matrix, and finally market structures and globalisation.
The models work at two levels. Five Forces looks outward at the industry. The value chain looks inward at the firm's activities. Generic strategies link the two, because a firm picks a way to compete and then arranges its activities to deliver it. The life cycle and Boston Matrix look at products and the portfolio, and ask where cash will come from and where it will go.
The chapter connects to other parts of BT. Strategy and the business environment build on it. Marketing, finance and operations all draw on these ideas when a question asks how a firm can gain advantage. Section B multi-task questions can mix this chapter with neighbouring topics, so know the terms well enough to apply them to a short scenario.
BT is a two-hour computer-based exam, and Section A has 46 objective test questions that reward quick, accurate recall of definitions and model components. Competitive factors are full of named lists, such as the five forces and the four Boston Matrix categories, which suit multiple choice and multiple response questions. Once you know the models, these are among the easier marks to secure. The same models also appear in the four-mark multi-task questions, where you must apply them to a short scenario. Careful study here pays off because the wording of each model is precise and examiners test the small distinctions.
Competitive factors: topics in the order to study them
- 1Competitive Advantage and Porter's Generic StrategiesStart here because it defines competitive advantage and the three strategies that every later model supports.
- 2Porter's Five ForcesIt explains the industry pressures that make some strategies work better than others.
- 3Porter's Value ChainIt moves from the industry to the firm, showing which activities create cost advantage or differentiation.
- 4Product Life Cycle and Boston MatrixIt adds a product view, so you can judge strategy and cash flow across stages and across a portfolio.
- 5Competitive Forces, Globalisation and Market StructuresIt widens the picture to economic market types and global competition, and is easiest once the earlier models are secure.
How to prepare Competitive factors
Treat this chapter as a set of models to learn exactly, then practise spotting them in short scenarios. Use short phone-friendly sessions.
- Write out each model's components from memory: three generic strategies, five forces, primary and support activities, life cycle stages, and the four Boston Matrix categories.
- For each model, write one plain sentence on what it tells a manager to do. This helps you handle application questions.
- Practise matching clues to terms. For example, decide whether a described feature raises supplier power or the threat of substitutes.
- Learn the differences between similar ideas, such as differentiation and focus, or primary and support activities, since objective tests target these.
- Do timed objective questions on each topic. Allow about a minute per two-mark question and flag long ones to return to.
- For multiple response questions, read the number you must select first, then tick only options you can justify.
- Finish with mixed practice that combines this chapter with strategy and environment topics, as multi-task questions often do.
Common mistakes in Competitive factors
Mixing up differentiation and focus strategies.
Fix: Ask whether the firm targets a narrow segment. If yes, it is focus. If it serves a broad market with a distinctive offer, it is differentiation.
Confusing primary and support activities in the value chain.
Fix: Primary activities handle the product from inputs to after-sales. Support activities help every primary activity. Learn this link, not just the lists.
Treating Five Forces as a company analysis.
Fix: Remember it assesses an industry's attractiveness and profit potential. Use the value chain for the firm's own activities.
Placing Boston Matrix products by size rather than by market growth and relative market share.
Fix: Check two things only: market growth rate and the product's share relative to the largest rival.
Assuming every product follows the life cycle smoothly.
Fix: Treat it as a general model. Products can vary in length of stages, and management action can extend maturity.
Rushing multiple response questions and selecting the wrong number of options.
Fix: Read how many answers are required before looking at the options, then eliminate those that do not fit the model.
Last-day revision: Competitive factors
- Porter's generic strategies are cost leadership, differentiation and focus.
- Focus can be based on cost or differentiation within a narrow market segment.
- Competitive advantage means doing something better or cheaper than rivals in a way customers value.
- Five Forces: threat of new entrants, supplier power, buyer power, threat of substitutes and competitive rivalry.
- High barriers to entry reduce the threat of new entrants.
- Value chain primary activities are inbound logistics, operations, outbound logistics, marketing and sales, and service.
- Value chain support activities are procurement, technology development, human resource management and firm infrastructure.
- Margin is the difference between the value created and the cost of the activities.
- Product life cycle stages are introduction, growth, maturity and decline.
- Boston Matrix categories are stars, cash cows, question marks and dogs, based on market growth and relative market share.
- Cash cows generate cash that can fund question marks and stars.
- Market structures such as perfect competition, monopoly and oligopoly differ in number of sellers, product type and price control.
Competitive factors practice questions
- Which factor would most likely INCREASE the intensity of rivalry among existing competitors in an industry?
- Which statement best describes the purpose of the 'margin' in Porter's value chain model?
- A market has many sellers, each offering a slightly different product such as restaurants in a city centre. Each firm has some control over …
- Zenith Bags makes handcrafted leather bags with distinctive designs and sells them only to luxury buyers in a few high-end boutiques, chargi…
- A regional bank finds that customers can easily move their accounts to rival banks because the process is free and takes one day. Which of P…
- According to Porter, which of the following is a generic strategy that a business can adopt to gain competitive advantage?
- Which of the following is a barrier to entry that protects existing firms in an industry from new competitors?
- Which of the following is a recognised benefit to an organisation of analysing its activities using the value chain?
Competitive factors in other exams
The same ground in other exams, if you are preparing for more than one or want another angle on it.
Competitive factors: frequently asked questions
Which models in competitive factors do I need to know for ACCA BT?
You need Porter's generic strategies, Five Forces, the value chain, the product life cycle and the Boston Matrix. You also need market structures and the effects of globalisation. Learn each model's exact components.
Are Porter's models tested in objective questions or only in longer scenarios?
They can appear in both. Section A tests definitions and components in quick objective questions. Section B multi-task questions may ask you to apply a model to a short scenario.
What is the difference between Five Forces and the value chain?
Five Forces examines the industry and the pressures on profitability. The value chain examines the activities inside one firm and where it creates value or incurs cost. Together they help explain how to gain advantage.
How do I remember the Boston Matrix categories?
Link each to growth and share. Stars have high growth and high share. Cash cows have low growth and high share. Question marks have high growth and low share. Dogs have low growth and low share.