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Ch. 2 Strategic mgmt

Environmental Awareness Managers must recognize opportunities and threats in their firm's external environment
Managers must be aware of what is going on ________ the company outside
What are three important processes used used to develop forecasts? Environmental Scanning, External Monitoring, and Competitive Intelligence
Environmental Scanning Surveillance of a firm's external environment
Environmental scanning consists of... predicting environmental changes to come, detect changes already under way, and proactive mode
Alerting the firm to critical trends before changes have been developed to a discernible pattern and before competitors recognize them relates to what environmental awareness process? Environmental Scanning
External Monitoring Track evolution of environmental trends, sequence of events or streams of activities.
What are the best ways to spot hot trends? Listen, Pay attention, follow trends online, and go old school
Listen talk to customers; ask your customers questions
Pay attention read trade publications and watch industries on the cutting edge; discover emerging trends that may affect your business
Follow trends online Add trend-hunting websites to your itinerary
Go old school Organize on-line or in person focus groups, chat rooms, etc. Ask your customers what they think
How does Virgin Mobile use crowdsourcing to keep up with new hot trends? Virgin Mobile USA relies on 2,000 carefully selected online customers, referred to as "Insiders" to keep it aware of trends and promising opportunities.
The Insider community A very hip focus group-provides input on everything from designing phones to coming up with names for service plans.
Competitive Intelligence Helps firms define and understand a firm's industry
Which one of the three processes helps identify rival's strengths and weaknesses? Competitive Intelligence
True or False. Intelligence gathering is an example of Environmental Scanning? False. it is an example of competitive intelligence
True or False. Interpretation of intelligence data is an example of competitive intelligence. True
What cautions are there for competitive intelligence? Caution to avoid unethical and illegal behavior and don't spend all time on traditional competitors that you ignore new competitors.
What is a danger of forecasting? is that mangers may view uncertainty as black and white and ignore important gray areas.
Environmental forecasting Plausible projections about direction, scope, speed and intensity of environmental change.
Scenario Analysis In-depth approach to environmental forecasting that involves experts' detailed assessments of societal trends, economics, politics, technology, or other dimensions of the external environment.
SWOT stands for what? Strengths, Weaknesses, Opportunities, and Threats
Firm's strategy must.... Build on its strengths, remedy the weaknesses or work around them, take advantage of the opportunities presented by the environment, and protect the firm from threats.
Strengths and weaknesses are internal conditions of the firm
Strengths where your firm excels
Weaknesses Where the firm is lacking relative to competitors
Opportunities and threats environmental conditions external to the firm
The General Environment Factors external to an industry, usually beyond a firm's control. Demographic, sociocultural, legal/political, technological, economic, global.
Examples of Demographic segment Aging population, rising or declining affluence, changes in ethnic composition, geographic distribution of population, greater disparities in income levels.
Examples of sociocultural segment more women in the workforce,dual-income families, increase in temporary workers, greater concern for healthy diets and physical fitness, greater interest in the environment, postponement of having children.
Examples of political/legal segment Health care reform, Americans with Disabilities Act, Increased regulation of banking, Deregulation of utility and other industries, increases in federally mandated minimum wages, taxation at local, state, federal levels, legislation on corporate governanc
Examples of Technological segment genetic engineering, emergence of internet technology, computer-aided design/computer-aided mftg, wireless communication, nanotechnology
Examples of Economic segment Interest rates, unemployment, consumer price index, trends in GNP, Changes in stock market valuations.
Examples of Global Segment Increasing global trade, currency exchange rates, emergence of the Indian and Chinese economics, trade agreements, and creation of WTO
Effects of trend can vary across ________. Industries
Porter's Five Forces Model Potential entrants, Buyers, Industry Competitors, Substitutes, and Suppliers
Why should managers need to know the 5 forces model? Helps determine whether to remain in an industry or exit, provides rationale for increasing or decreasing resource commitment, helps assess how to improve firm's competitive position relative to each of the 5 forces
The threat of new entrants Profits of established firms in the industry may be eroded by new competitors.
What are the sources of entry barriers? Economies of scale, product differentiation, and capital requirements, switching costs, access to distribution channels, and cost disadvantages independent of scale
Economies of scale Spreading costs of production over number of units-costs decline as volume increases
Product Differentiation Strong brand and customer loyalty-barrier forcing high spending by competition
Capital requirements need to invest large financial resources is barrier.
Switching costs Barrier exists if one-time switching costs exist when going from one product to another
Access to distribution channels new entrant needs to secure distribution for product
Cost disadvantage independent of scale Proprietary products, favorable access to raw materials, government subsidies, favorable government policies.
How do buyers threaten an industry? (1) Forcing down prices, (2) Bargaining for higher quality or more services, (3) Playing competitors against each other
In what ways is a buyer group powerful? (1) It is concentrated or purchases large volumes relative to seller sales, (2) The products it purchases from the industry are standard or undifferentiated, (3) The buyer faces few switching costs, (4) It earns low profits
The bargaining power of suppliers Suppliers can exert power by threatening to raise prices or reduce the quality of purchased goods and services.
When is a supplier group powerful? (1) The supplier group is dominated by a few companies and is more concentrated than the industry it sells to, (2) The supplier group is not obligated to contend with substitute products for sale to the industry, (3) The industry is not an important custo
How is a supplier group powerful? (1) The supplier's product is an important input to the buyer's business, (2) The suppler group's products are differentiated or it has built up switching costs for the buyer, (3) The supplier group poses a credible threat of forward integration.
The threat of substitute products and services Substitutes limit the potential returns of an industry.
The threat of substitute products and services create a ________ on the prices that firms in that industry can profitably charge. ceiling
The intensity of rivalry among competitors in an industry Threat customers will switch business to competitors within industry: Price competition, Advertising battles, product introductions, and increased customer service or warranties.
What are some facts about the rivalry among competitors in an industry? (1) Numerous or equally balanced competitors, slow industry growth, high fixed or storage costs, (2) Interacting factors lead to intense rivalry, (3) Lack of differentiation or switching costs, high exit barriers.
Five forces analysis is essentially a __________ analysis, meaning it gives a point in time, but doesn't show changes over time static
The Value Net Represents all the players in the game and analyzes how their interactions affect a firms ability to generate and appropriate value.
Vertical dimension suppliers and customers-direct transactions
Horizontal dimension Substitutes and compliments-firm interacts but no direct transactions
Compliments Products or services that have a potential impact on the value of a firm's own products or services. Ex. computer hardware and software
What is the point of industry analysis? It is not to declare an industry attractive or unattractive but to understand the underpinnings of competition and the root causes of profitability.
What are the two unassailable assumptions in industry analysis? (1) No two firms are totally different (2) No two firms are exactly the same
When a cluster of firms share similar strategies they share? (1) Breadth of product and geographic scope, (2) Price/quality, (3) Degree of vertical integration, (4) Type of distribution system
Using the value of strategic groups as an analytical tool industries identify ________ to mobility that protect a group from ________ by other groups. barriers, attacks
Created by: kmpech