Chapter 2 Flashcards
Societal Environment
General economic conditions, population demographics, cultural values, governmental regulations, and technology
Market Structure
Organizational characteristics of a market that exert a strategic influence on the intensity and form of competition
Industry:
A group of sellers whose products are close substitutes
Pharmaceutical, computer, aviation
Market:
A group of both sellers and buyers who exchange goods and services for a price – generally defined by geographical boundaries
A place where there are sellers and buyers exchanging goods and money
Patient Origin Study
Percent of total admissions divided by the zip code and sorted from the highest to the lowest percentages
Perfect Competition
Many small firms
Undifferentiated, homogeneous product
Few barriers to entry
Consumers are well informed of choices
Organizations compete on the basis of price
Examples: Agricultural commodities (e.g., wheat, rice, corn), generic drugs, gasoline
Monopolistic Competition
Many firms
Products are differentiated
Firms have some control on prices
Relatively easy entry and exit
Examples: Restaurants, private physician services, manufacturers of breakfast cereals
Oligopolies
Dominated by a few large firms
Offer similar or identical products
Consumers have limited choices; producers are limited in number
Buyers often choose services/products on the basis of location or personal preference
Focus their strategies on capturing market share
High barriers to entry and exit
Examples: Tertiary hospitals, healthcare insurance companies, airline, steel, automobile, oil, tire, and beer companies
Monopolies
One firm
Limited product options
Competition is almost nonexistent, so strategic efforts made to maintain entry barriers and keep out competition
Can influence higher prices
Examples: Rural hospitals, new drugs under patent, utility companies, the National Football League
Herfindahl-Hirscham Index (HHI)
Calculated by squaring the market share percentage of each organization in a market and then summing the numbers
Four-firm concentration ration
Caluculated by adding the market shares of the four largest organizations in a market to fingd their cumulative total output
Medical technology
The procedures, equipment, and processes used to deliver medical care.
Product Life Cycle
Most products and services go through phases or a life cycle that relate to the rate of sales, number of firms in the market, and consumer demand.
Growth Stage
Best stage for an organization to enter a new market
Competition is relatively low, customers are more forgiving, greater profits can be obtained
Standards set
Economies of scale
Greater customer acceptance
Maturity Stage
Consolidation begins Price competition Flat sales Lower profits Managing costs is key
Decline Stage
Demand for product decreases Changing consumer preferences Technological obsolescence More effective substitutes Consolidation As demand drops, overcapacity leads organizations to exit the market or merge, leaving a smaller number of competitors Cost and price competition dominate
Emerging Markets
Difficult environment for organizational growth
Sales are limited – customers lack adequate product knowledge
Inducements to try product are common
Few standards
Product quality is uneven
Generally poor profits
Companies face a substantial risk of product failure
Operating Environment
General economic conditions Population demographics Cultural values Political/Legal Technological
Industry
New competitors Substitute products Power of suppliers Power of buyers Competitive rivalry
Market
Growing, shrinking Size of markets New markets Market structure Product life cycle
Competitors
Who they are
Strengths, Weaknesses
Strategies
Objectives
Broad differentiation strategy
A type of strategy aimed at offering products that consumers perceive to be distinct from competitors’ products and that appeal to a wide segment of a market
Broad low-cost strategy
A type of strategy aimed at providing low-cost products to a broad customer segment
Business model
The underlying structure of an organization; the means through which an organization creates and delivers value to its customers and earns revenue
