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MGT 460 Midterm

Chapter 2

General Environment Composed of dimensions in the broader society that can indirectly influence an industry and the firms within it. Firms cannot directly control the general environment's segments and elements Focused on the future.
7 environmental segments 1. demographic 2. economic 3. politica/legal 4. sociocultural 4. technological 6. global 7. physical
Demographic Segment Concerned with a population's size, age structure, geographic distribution. ethnic mix, and income distribution.
Economic Segment The economic environment refers to the nature and direction of the economy in which a firm compete or may compete
Political/Legal Segment antitrust laws, taxation laws, deregulation philosophies, labor training laws, educational philosophies and policies
Sociocultural Segment Concerned with a society's attitudes and cultural values. Such as; women in workforce, workforce diversity, attitudes about quality of work life, shifts in work and career preferences
Technological Segment Includes the institutions and activies involved in creating new knowledge and translating that knowledge into new outputs, products, processes, and materials. Ex: Product innovation, application of knowledge, private/government supported R&D
Global Segment Includes relevant new global markets, changes in existing markets, important international political events, critical cultural and institutional characteristics of global markets.
Physical Environment Segment energy consumption, practices used to develop energy sources, renewable energy efforts, minimizing a firms environmental footprint, availability of water as a resource, producing environmentally friendly products, reacting to natural or man-made disasters
Industry Environment set of factors that directly influence a firm and its competitive actions and responses EXs: threat of new entrants power of suppliers power of buyers threat of product substitutes intensity of rivalry among competing firms
Competitor Analysis Represents the firms understanding of its current competitors. This understanding will complement information and insights derived from investigating the general and industry envrionments
Opportunity a condition in the general environment that, if exploited effectively, helps a company reach strategic competitiveness
Threat a condition in the general environment that may hinder a company's efforts to achieve strategic competitiveness
Scanning Identifying early signals of environmental changes and trends. Entails the study of all segments in the general environment
Monitoring detecting meaning through ongoing observations of environmental changes and trends
Forecasting developing projections of anticipated outcomes based on monitored changes and trends
Assessing determining the timing and importance of environmental changes and trends for firms' strategies and their management
Industry A group of firms producing products that are close substitutes
Industry Environment the set of factors (threat of new entrants, suppliers, buyers, product substitutes, and intensity of rivalry among competitors) that directly influence a firm and its competitive decisions and responses
Competitor Intelligence the set of data and information the firm gathers to better understand and anticipate competitors' objectives, strategies, assumptions, and capabilities
Complementors companies or networks of companies that sell complementary goods or services that are compatible with the focal firm's good or service
Profit Pool entails the total profits earned in an industry at all points along the value chain
Economies of Scale Incremental efficiency improvements through experience as a firm grows larger. The cost of producing each unit declines as the quantity of a product produced during a given period increases. (contrary is mass customization in lieu of scale economies)
Product Differentiation Greater levels of perceived product uniqueness create customers who consistently purchase a firm's products
Capital Requirements Facilities, money, equipment, machines, and so on needed to run a company.
Switching Costs The one time costs customers incur when they buy from a different supplier. Ex. new equipment, retraining employees, psychic costs of ending a relationship). Usually the more established the relationships between parties, the greater the costs
Access to Distributers New entrants have to persuade distributers to carry their products, either in addition to or in place of those currently distributed. Ex. Shelf-space, price breaks, cooperative advertising allowances
Cost Disadvantage Independent of Scale Cost Advantages that new entrants cannot duplicate such as proprietary product technology, favorable access to raw materials, desirable locations, and government subsidies.
Government Policy Government can also control entry into an industry. Licensing and permit requirements, deregulations of industries.
Expected Retaliation Expected responses by existing competitors may depend on a firm's present stake in the industry
External Environment Analysis Process: Scanning, Monitoring, Forecasting, and Assessing
Bargaining Power of Suppliers High Power: No substitutes, supplier's goods are critical to buyers' marketplace success, high switching costs. Ex. Boeing and Airbus compete for orders, creating more power for buyers.
Bargaining Power of Buyers High Power When: customers purchase large portion of total output, they could switch to another product to little or no cost
Threat of Substitute Products Can be reducing using differentiation strategies.
Intensity of Rivalry among Competitors Increases when an opportunity in an industry arrises
Unattractive Industry low entry barriers supplier & buyers have strong positions strong threats of substitutes intense rivalry among competitors
Attractive Industry high entry barriers supplier & buyer power is low few treats from substitutes moderate rivalry among competitors
Strategic Group a set of firms emphasizing similar strategic dimensions and using a similar strategy
External Environment (3 parts) general, industry, and competitor
Created by: jennshaw92