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BUS 345 > Chapter 3 > Flashcards

Chapter 3 Flashcards

1
Q

What is the environment?

A

-consists of the set of external conditions and forces that have the potential to influence the organization.

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2
Q

What are two components of environment?

A
  • general environment(macroenvironment) includes overall trends and events in society such as social trends, technological trends, demographics, and economic conditions.
  • industry(competitive environment) consists of multiple organizations that collectively compete with one another by providing similar goods, services, or both.
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3
Q

Why does the environment matter?

A
  • it provides resources that an organization needs in order to create goods and services.
  • no organization is self-sufficient and cannot survive without the support of its environment
  • it’s a source of opportunities and threats for an organization.
  • shapes various strategic decisions that executives make as they attempt to lead their organizations to success.
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4
Q

What is an opportunity?

A

-events and tends that create chances to improve an organization’s performance level.

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5
Q

What are threats?

A

-events and trends that may undermine an organization’s performance.

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6
Q

What is a PESTEL analysis?

A

-important tool executives can rely on to organize factors within the general environment and to identify how these factors influence industries and the firms within them.

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7
Q

What does PESTEL stand for?

A
  • political
  • economic
  • social
  • technological
  • environmental
  • legal.
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8
Q

Describe political as it relates to “political”.

A
  • centers on the role of governments in shaping business
  • tax policies, changes in trade restrictions and tariffs, stability of governments.
  • immigration policy.
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9
Q

Describe economic as it relates to PESTEL.

A
  • centers on the economic conditions within which organizations operate.
  • interest rates, inflation rates, GDP, unemployment rates, levels of disposable income, general growth or decline of the economy.
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10
Q

Describe social as it relates to PESTEL.

A

-social factors include trends in demographics such as population size, age, and ethnic mix as well as cultural trends such as attitudes toward obesity and consumer activism.

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11
Q

Describe technological as it relates to PESTEL.

A
  • centers on improvements in products and services that are provided by science.
  • changes in the rate of new product development, increases in automation, and advancements in service industry delivery.
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12
Q

Describe environmental as it relates to PESTEL.

A
  • involves the physical conditions within which organizations operate.
  • natural disasters, pollution levels, weather patterns.
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13
Q

Describe legal as it relates to PESTEL.

A
  • how courts influence business activity.

- employment laws, health and safety regulations, discrimination laws, and antitrust laws.

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14
Q

What is the purpose of Porter’s five forces analysis?

A
  • to identify how much profit potential exists in an industry.
  • considers teh interations among the competitors in an industry, potential new entrants to the industry, substitutes for the industry’s offerings, suppliers to the industry, and the industry’s buyers.
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15
Q

When is the profit potential strong according to Porter’s Five forces?

A

-if none of the five forces works to undermine profits in the industry.

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16
Q

When is profit potential weak according to Porter’s Five forces?

A

-if all the forces work to undermine profits in the industry, then the profit potential is very weak.

17
Q

What are competitors?

A
  • firms that produce similar products or services.
  • use a variety of moves such as advertising, new offerings, and price cuts to try to outmaneuver one another to retain existing buyers and to attract new ones.
18
Q

When is competitive rivalry fierce?

A

-growth rate of demand for industry’s offering is low, fixed costs in the industry are high, competitors are not differentiated from one another, exit barriers in the industry are high.

19
Q

Describe the threat of potential new entrants in an industry?

A
  • firms that do not currently compete in the industry but may in the future.
  • tend to reduce the profit potential of an industry by increasing its competitiveness.
20
Q

When is likely that a new entrant will join an industry?

A
  • less likely when existing competitors enjoy economies of scale
  • capital requirements are high(less likely)
  • access to distribution channels is limited.
  • governmental policies discourages new entry
  • differentiation among existing competitors is high.
  • switching costs are high
  • expected retaliation from existing competitors is high.
21
Q

Describe how the threat of substitutes.

A
  • players in other industries that can steal their customers.
  • offerings that differ from the goods and services provided by the competitors in an industry, but that fill similar needs to what the industry offers.
22
Q

Describe the power of suppliers.

A
  • suppliers provide inputs that the firms in an industry need to create the goods and services that they in turn sell to their buyers.
  • supply raw materials, financial resources, and labor.
23
Q

What is a concern about suppliers?

A

-if suppliers have greater leverage over the competitors than the competitors have over the suppliers, then suppliers can increase their prices over time.

24
Q

Describe the Power of an Industry’s Buyers.

A

-buyers purchase the goods ans services that the firms in an industry produce.

25
Q

When are buyers powerful?

A
  • when there are relatively few buyers compared with the number of firms that supply the industry
  • industry’s goods or services are standardize or undifferentiated.
  • buyers face little or no switching costs in changing vendors
  • goods or services purchased by the buyers represent a high percntage of the buyers cost’s and the good or service is of limited importance to the quality of the buyer’s offerings.
26
Q

What are strategic groups?

A
  • sets of firms that follow similar strategies to one another.
  • consists of a set of industry competitors that have similar characteristics to one another but differ in important ways form the members of other groups.
27
Q

Why are strategic groups important?

A
  • members of a firm’s group is helpful because they are usually its closest rivals.
  • strategies pursued by firms within other strategic groups highlight alternative paths to success.
  • analysis can reveal gaps in the industry that represent untapped opportunities.

BUS 345 (4 decks)

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