Week 2- The external environment Flashcards
What is compliance (industry dynamics perspective)?
Industries evolve. The role of the firm is to anticipate these changes and position themselves in the changed market.
Success comes from adapting to the changed environment.
Firm profitability is largely industry dependent
What is choice (industry leadership perspective)?
Innovative firms can envisage a new industry and have the operational and marketing capability to realise it.
Success comes from innovating and changing the environment.
Firm profitability is largely firm dependent.
What does PEST stand for?
Political
Economic
Socio- cultural
Technological
What are the drawbacks of macro analysis?
1- Expensive
2- How relevant is the information?
3- Deterministic- organisations have some control
What are the sources of information for PEST?
1- Agencies
2- Internally generated information
What makes the world economy integrated?
1- International trade in final goods (export and import)
2- International movement of capital- foreign direct investments where companies produce and sell abroad
3- International mobility of people (migration/tourism)
Why does geographical proximity matter?
1- Trade and communication costs
2- Cultural and institutional understanding
What is an industry?
An industry is a group of firms producing products and services that are essentially the same.
What are market characteristics ?
The potential demand for a commodity or service provided by such an area.
What are the factors to consider in a market?
1- What is being brought or sold- How do we define the product, What do we consider are its competitors.
2- Where- The geography of where you sell the product, the home of your customer
3- To whom- who are the customers? What is the demographic? Age, sex, etc
Give some details about a business to consumer (B2C)?
A form of one-to-many marketing
Involves state enforcement which includes consumer legislation and sale of goods act.
Low costs to the buyer
Give some details about a business to business (B2B)?
A more complex process
Limited statutory (permitted) rules.
Negotiated contracts
Significant buyer costs
Give some details of a monopoly?
One firm
Offers a unique product or service
Very high entry barriers
Give some details of an oligopoly?
Has a few competitors
Some product and service differences
High entry barriers
Give some details of perfect competition
Many competitors
Very similar products or services
Low entry barriers
