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General Environment
- 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
pg. 37
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Industry Environment
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.
pg. 38
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Competitor Environment
Firm's direct & indirect competitors. Competitive dynamics expected to impact a firm's efforts to generate above-average returns.
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Competitor Analysis Definition
How companies gather & interpret information about their competitors
pg. 38
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Competitor Analysis & Organization Response: The firm seeks to understand the following:
- – 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
slide 14 pg. 60
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Opportunity
is a condition in the general environment that if exploited effectively, helps a company achieve strategic competitiveness.
pg. 39
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Threat
is a condition in the general environment that may hinder a company's efforts to achieve strategic competitiveness.
pg. 39
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To increase understanding of general environment, firms engage in external environmental analysis which has...
- 4 parts
- Scanning
- Monitoring
- Forecasting
- Assessing
pg. 39
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Industry
Group of firms producing products that are close substitutes
pg. 50
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What can the 5 Forces Framework be used for?
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
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Economic Value Net- Horizontal, Vertical
- Vertical- Suppliers & Customers
- Horizontal- Substitutes & Complements
Slide 9
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Strategic Groups
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
pg. 11
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Competitor Intelligence
Set of data and information the firm gathers to better understand and anticipate competitors' objectives, strategies, assumptions, and capabilities
slide 16
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Demographic Segment
- 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
pg. 43-45
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Economic Segment
Nature and direction of the economy in which a firm competes or may compete.
pg. 45
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Political/ Legal Segment
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
pg. 46
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Sociocultural Segment
- 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.
pg. 47
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Technological Segment
- 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.
pg. 48
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Global Segment
includes relevant new global markets, existing markets that are changing, important international political events, and critical cultural and institutional characteristics of global markets.
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How can a firm limit their risk in international 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)
pg. 49
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Physical Environment Segment
- 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
Pg. 49
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How can a firm's customer or supplier become its competitor?
- Supplier- Integrate Forward. Go straight to buyer.
- Buyer- Integrate Backwards
pg. 50
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5 Forces of Competition
- Threat of new entrants
- Bargaining Power of Suppliers
- Bargaining Power of Buyers
- Threat of Substitute Products
- Rivalry Among Competing Forces
pg. 52
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Threat of Entry
- •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)
pg. 54
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Bargaining Power of Suppliers: How can they exert power over firms?
Increasing prices & reducing quality of their products
pg. 55
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Bargaining Power of Suppliers: Supplier Grp is powerful when
- 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
pg. 55
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Bargaining Power of Buyers
- •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
slide 7 pg.56
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SUBSTITUTE COMPETITION
- • 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.
pg. 56
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INDUSTRY RIVALRY
- •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
pg. 57
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