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different levels of analysis and the relevant framework
- society - PESTEL
- proximate industries - Porter's five forces
- firm's industry - SCP
- firm's strategic group - strategic group analysis
- firm - core competencies, RBV, VRIO
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components of PESTEL framework?
- political
- economic
- sociocultural and demographic
- technological
- ecological
- legal
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PESTEL framework - political and legal
- laws and regulations
- taxation policies
- government priorities
- int'l agreements
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PESTEL framework - economic
- growth rates
- interest rates
- employment levels
- inflation levels
- currency exchange rate
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PESTEL framework - sociocultural and demographic
- social attitudes
- demographic trends
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PESTEL framework - technological
- process advances
- product advances
- services advances
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PESTEL framework - ecological
- climate change
- air pollution
- large scale accidents
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Nonmarket strategies
- government - lobbyists and corp leaders, challenging laws in courts, bribing
- public (changing perceptions) - advertisement and sponsoring friendly think tanks
- others- lawsuits, industry standard setting boards, JV/alliances
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components of 5F framework?
- threats of new entry
- threats of substitutes
- bargaining power of suppliers
- bargaining power of buyers
- rivalry within the industry
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realized VS implied threat of new entrants: implications
- no matter whether there are new entrants or not, profits suffer
- threat cannot be measured by number of new entrants
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cost of threats of new entry
- lower prices to drive out new entrants
- invest in customer value/differentiation
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barriers to entry
- Economies of scale(spreading FC)
- Network externality
- Customer switching costs
- Capital requirements
- Advantages independent of size (tied to RBV)
- Threat of retaliation
- Government policy
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barriers to entry - Threat of retaliation - depends on
- incentive to retaliate
- ability to retaliate
- demonstrated willingness to retaliate
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threats of substitutes - esp. high when? + examples
- substitutes offer attractive price-performance trade off (netflix, youtube VS cinemas)
- cost of switching is low (high speed trains for short haul flights)
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bargaining power of suppliers - esp high when?
- suppliers are more concentrated than buyers
- supplying differentiated products
- buyers face high switching cost
- low threat of new entrant
- little substitutes
- suppliers can forward integrate
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cost for focal industry if bargaining power of suppliers is high
- demanding higher prices
- reducing quality
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ability to extract value is poor when the buyer is esp. price sensitive; esp high when?
- buyer's purchase represent big part of their cost structure>high incentive to bargain
- buyers earn low profits/cash constrained - low ability to pay
- quality of buyer's product not really affected by suppliers inputs(eg. commodity)
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rivalry within the industry - industry structure - components (SCP model)
- industry concentration
- pricing power(demand higher price without losing much sales)
- mode of competition (price or differentiation)
- entry barriers
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Structure, conduct and performance model (SCP) - types of competition from low to high profit potential
- perfect competition
- monopolistic competition
- oligopolistic competition
- monopoly
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additional determinants of competition beyond structure
- industry growth
- sales volume pressure (for high FC and excess capacity)
- exit barriers
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