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Strategic Management Ch 3: External Analysis
Terms in this set (37)
a framework that categorizes and analyzes an important set of external forces (political, economic, sociocultural, technological, ecological, and legal) that might impinge upon a firm. These forces are embedded in the global environment and can create both opportunities and threats for the firm
this part of the PESTEL framework describes the processes and actions of government bodies that can influence the decisions and behavior of firms
this part of the PESTEL framework captures the official outcomes of political processes as manifested in laws, mandates, regulations, and court decisions -- all of which can have a direct bearing on a firm's profit potential
this part of the PESTEL framework considers how key indicators of economy-wide performance can affect firm strategy. The key indicators are growth rates, interest rates, levels of employment, price stability, and currency exchange rates
this part of the PESTEL framework captures cultures, norms and values.
this part of the PESTEL framework captures the application of knowledge to create new processes and products. Some examples include lean manufacturing, Six Sigma quality, and biotechnology
this part of the PESTEL framework considers broad environmental issues such as the natural environment, global warming, and sustainable economic growth. It represents the fact that organizations and the natural environment coexist in an interdependent relationship
a group of (incumbent) companies that face more or less the same set of suppliers and buyers; these firms tend to offer similar products or services to meet specific customer needs
a method to (1) identify an industry's profit potential and (2) derive implications for a firm's strategic position within an industry
a firm's strategic profile based on value creation and cost. The goal is to generate as large a gap as possible between the value the firm's product or service creates and the cost required to product it (V - C); creating value while controlling cost.
five forces model
a framework developed by Michael Porter that identifies five forces that determine the profit potential of an industry and shape firm's competitive strategy
threat of entry
the risk that potential competitors will enter an industry. It is impacted by entry barriers that discourage new entrants into the industry.
obstacles that determine how easily a firm can enter an industry. These are often one of the most significant predictors of industry profit potential. Includes economies of scale, network effects, customer switching costs, capital requirements, advantages independent of size, government policy, and the credible threat of relatiation
economies of scale
this barrier to entry is cost advantages that accrue for firms with larger output because they can spread fixed costs over more units, can employ technology more efficiently, can benefit from a more specialized division of labor, and can demand better terms from their suppliers.
this barrier to entry reduces the threat of entry through the positive effect that one user of a product or services has on the value of that product or service for other users. For example, eBay has this when more users use the service to buy, so more people sell items through the service.
customer switching costs
this barrier to entry reduces the threat of entry through customers having costs that are incurred by moving from one supplier to another. It may required the buyer to alter product specifications, retrain employees, or modify existing processes
this barrier to entry reduces the threat of entry by having a high amount of initial investment to enter the industry by requiring expensive equipment or competencies
advantages independent of size
this barrier to entry reduces the threat of entry describes the existing competencies and relationships that a firm has by being an incumbent firm in an industry. New firms have to establish these as they enter the industry and over time. Includes brand loyalty, proprietary technology, preferential access to raw materials and distribution channels, geographic locations, and learning/experience effects
this barrier to entry refers to the political and legal restrictions on new entrants into a specific industry. An example is India not allowing foreign companies, such as Walmart to own stores and compete with domestic companies.
credible threat of retaliation
this barrier to entry refers to the need of new entrants to predict how incumbent firms will react to their entrance. A common reaction is a price war that the new entrant cannot survive.
Power of suppliers
this industry force captures the pressures that industry suppliers can exert on a profit potential. The suppliers of inputs to the industry gain power through the following:
- supplier industry concentration: higher means more power
- industry contribution to supplier industry profits: lower means more power
- switching costs of industry: higher means more power
- supplier products are differentiated: more differentiation means more power
- readily available substitutes for inputs: low amount of substitutes means more power
- suppliers can credibly threaten to forward integrate: if yes, then more power
power of buyers
this industry force captures the pressure an industry's customers can put on the producer's margins in the industry by demanding a lower price or higher product quality. Impacted by the following:
- Buyer concentration
- Standardized products in industry
- Switching costs
- Buyers can backward integrate
- Buyers are price sensitive
threat of substitutes
this industry force captures the idea that products or services available from outside the given industry will come close to meeting the needs of current customers; it provides a strategically equivalent alternative
rivalry among existing competitors
this industry force captures the intensity with which companies within the same industry compete for market share and profitability. The other forces all exert pressure on this force. It is determined by the industry structure, industry growth, strategic commitments, and exit barriers
competitive industry structure
elements and features common to all industries including the number and size of competitors in an industry, whether the firms possess some degree of pricing power, and the type of product or service the industry offers. The spectrum of descriptors for types of structure in an industry include perfect competition, monopolistic competition, oligopoly, and monopoly
this industry structure describes a highly fragmented industry with many small firms, a commodity product, ease of entry, and little ability to influence prices
this industry structure describes an industry with many firms, a differentiated product, some obstacles to entry, and the ability to raise prices for a relatively unique product
this industry structure describes an industry with few sellers, differentiated products, high barriers to entry, and some degree of pricing power based on product differentiation
this industry structure describes an industry with only a single firm supplying the market.
obstacles that determine how easily a firm can leave an industry
a product, service, or competency that adds value to the original product offering when the two are used in tandem
a company that provides a good or service that leads customers to value your firm's offering more when the two are combined
cooperation by competitors to achieve a strategic objective
a process whereby formerly unrelated industries begin to satisfy the same customer need. An example is the media industry where technology is combining print, video, and other forms of entertainment content
the set of companies that pursue a similar strategy within a specific industry
strategic group model
a framework that explains differences in firm performance within the same industry by clustering different firms into groups based on a few key strategic dimensions
industry-specific factors that separate one strategic group from another; the things that prevent a company from changing its strategy to one of a different strategic group
THIS SET IS OFTEN IN FOLDERS WITH...
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