Strategic MGMT 449 Ch. 2

• is composed of dimensions (segments) in the broader society that influence an industry and the firms within it.
• Demographic
• Economic
• Political/Legal
• Sociocultural
• Technological
• Global
• Physical Environment

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is the set of factors that directly influences a firm and its competitive actions and competitive responses: the threat of new entrants, the power of suppliers, the power of buyers, the threat of product substitutes, and the intensity of rivalry among competitors.

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Firm's direct & indirect competitors. Competitive dynamics expected to impact a firm's efforts to generate above-average returns.

How companies gather & interpret information about their competitors

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• – What drives competitors
• Shown by organization's future objectives

• – What the competitor is doing and can do
• Revealed in organization's current strategy

• – What the competitor believes about the industry
• Shown in organization's assumptions

• – What the competitor’s capabilities are
• Shown by organization's strengths and weaknesses

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is a condition in the general environment that if exploited effectively, helps a company achieve strategic competitiveness.

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is a condition in the general environment that may hinder a company's efforts to achieve strategic competitiveness.

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• 4 parts
• Scanning
• Monitoring
• Forecasting
• Assessing

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Group of firms producing products that are close substitutes

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To identify areas for competitive attack, entry & withdrawal. Determine's attractiveness in terms of potential to earn adequate or superior returns. (Industry's profit potential)






Slide 8

• Vertical- Suppliers & Customers
• Horizontal- Substitutes & Complements

Slide 9

Set of firms emphasizing similar strategic dimensions to use a similar strategy. The more intense the greater the rivalry. Strengths of the 5 forces differs across strategic groups

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Set of data and information the firm gathers to better understand and anticipate competitors' objectives, strategies, assumptions, and capabilities

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• Pop size- Doubled in size? Aging pop need workers?
• Age Structure- Baby boomers, mortality rates
• Geographic Distribution- North, South, East, West
• Ethnic Mix- Immigrant workforce, increase mix in countries
• Income Distribution- Dif grp purchasing power. Young, dual-career couple, middle class

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Nature and direction of the economy in which a firm competes or may compete.

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Arena in which org. & interest grps compete for attention, resources, and a voice in overseeing the body of laws and regulations guiding interactions among nations as well as between firms and various local governmental agencies

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• Concerned w/ a society's attitudes & cultural values.
• Ex: Growing gender, ethnic & cultural diversity in workforce creates challenges & opportunities, changes in health care, growing of contingency workers, lifestyle changes.

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• Institutions & activities involved w/ creating new knowledge & translating that knowledge into new outputs, products, processes, and materials.
• Should identify potential substitutes for technologies that are in current use, as well as to identify newly emerging technologies from which their firm could derive competitive advantage.

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includes relevant new global markets, existing markets that are changing, important international political events, and critical cultural and institutional characteristics of global markets.

• Globalfocusing- moderate levels of international ops who increase their internationalzation on global niche market. (Build on & use their special competencies & resources)
• OR Focus their Operations & Sales in one region of the world. (Build stronger relationships in and knowledge of their markets- harder for comp to enter)

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• refers to potential and actual changes in the physical environment and business practices that are intended to positively respond to & deal w/ those changes.
• Ex: Energy, Global Warming

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• Supplier- Integrate Forward. Go straight to buyer.
• Buyer- Integrate Backwards

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• Threat of new entrants
• Bargaining Power of Suppliers
• Bargaining Power of Buyers
• Threat of Substitute Products
• Rivalry Among Competing Forces

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• •Capital requirements-facilities, inventories, marketing. ENTRY-must have cap resources avail.
• •Economies of scale- ENTR- risk strong retaliation.
• •Absolute cost advantage- Can't duplicate. product technology, access to raw materials, desirable location, government subsidies.
• •Product differentiation- Firm product unique thru service to customer, effective advertising, being first to market a good/service,loyalty. ENTRY-allocate resources, lower prices. risk- low profits/loss.
• •Access to distribution channels- Built relationships. ENTRY-persuade distributors to carry their products.
• •Legal/ regulatory barriers- Licensing & permits. Gov't can control entry into industry.
• •Retaliation-Expect in slow growth or constrained industry. Solution= (Locate niches not being served)

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Increasing prices & reducing quality of their products

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• Dom. by few & is concentrated
• Satisfactory substitutes not avail
• Industry firm not significant customer 4 supplier grp
• Goods r critical to buyer's' mktplace success
• Poses threat if they integrate forward
• High switching costs for industry firms

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• •Size and concentration of buyers relative to producers. Lots of buyers.
• •Buyers’ switching costs- low to switch
• •Buyers’ information
• Buyers’ ability to backward

• PRICE SENSITIVITY
• •Cost of product relative to total cost
• •Product differentiation
• •Competition between buyers

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• • Buyers’ propensity to substitute
• • Relative prices & performance of substitutes

Differentiating a product along dimensions that customers value (Quality, Service after sale & Location) reduces a substitute's attractiveness.

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• •Concentration- Few firms equivalent size= Strong rivalry
• •Diversity of competitors- offering different products. high stakes
• •Product differentiation
• •Excess capacity & exit barriers- Max productivity = excess cap over industry wide. Lower prices to keep out of storage. Ex: Perishable foods.
• •Cost conditions

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