Cap 3 Flashcards
Environmental Scanning
monitoring, evaluation, and dissemination of information
relevant to the organizational development of strategy
External Environmental Variables
- Natural environment
- Societal environment
- Task environment
Task environment
Industry analysis: an in-depth examination of key factors within a corporation’s task environment
- PESTEL Analysis
PESTEL Analysis
-Political:government policies, taxation changes
-Economic Factors: business cycles, interest rates
-Socio-cultural Factors: population changes, income distribution, lifestyle changes
-Technological Factors: new discoveries and technology developments
-Environmental Factors: environmental protection regulations, energy consumption
-Legal Factors: competition laws, health and safety laws
social generations
-Silent generation (1928-1945)
-Baby Boomers (1946-1964)
-Gen X (1965-1980)
-Millenials/Gen Y (1981-1996)
-Gen Z (1997-2012)
-Gen Alpha
Industry Analysis
- Industry: Group of firms producing the same principal product
- Market: Group of customers for specific products or services that are essentially the same
- Sector: Group of firms producing similar products or services
- Competitive Forces: Determine attractiveness of industry
Profit potential industry
-leverage of suppliers
-superior or lower cost substitute products
-competition among existing firms
-openness to new competitors
-buyers influence
Assessing competitive forces
-potential entrants (threat of entry)
-buyers (bargaining power)
-substitutes (threat of substitutes)
-suppliers (bargaining power)
Threat of New Entrants
New entrants to an industry bring new capacity, a desire to gain market
share and substantial resources
* Entry barrier: An obstruction that makes it difficult for a company to enter an industry
-economies of scale
-product differentiation
Bargaining Power of Suppliers
A buyer or a group of buyers is powerful if some of the following factors hold
true:
- Industry is dominated by a few companies
- Unique product or service
- Substitutes are not readily available
Bargaining Power of Buyers
Buyers affect an industry through their ability to force down prices, bargain
for higher quality or more services, and play competitors against each other.
Threat of Substitutes
identification of possible substitute products means searching for
products that can perform the same function, even though they have
a different appearance.* Substitute product: a product that appears to be different but can satisfy the same need as another product
Rivalry Among Existing Firms
A competitive move by one firm can be expected to have a noticeable
effect on its competitors and thus may cause retaliation.
* Intense rivalry is related to the presence of several factors
Assessing competitive forces
-Supplier power
-Threat of entry
-Competitive Rivalry
-Threat of substitutes
-Buyer power
Implications of five forces analysis
-Identifies the attractiveness of industries – which industries/markets to enter or leave.
-Identifies strategies to influence the impact of
the forces
