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35 Cards in this Set
- Front
- Back
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How do we know if a factor belongs in an organization's general environment? |
-- factors outside the firm’s control but could have a large impact on the firm’s strategy and fortunes.
e.g. demographics - aging population, old people eat less fast food e.g. economic forces |
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How do we describe an industry? |
-- A group of firms selling a similar product or service (close substitutes)
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What is the challenge for managers in defining an industry? |
--Define the industry wide enough to capture the main issues but not so wide that their focus has become meaningless |
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The six segments of the general environment |
1. Demographic/Psychographic 2. Sociocultural 3. Political/Legal 4. Technological 5. Economic 6. Global |
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What are demographics? |
-- measurable characteristics of the population - age, income |
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How can an aging population impact an industry? |
* - fast food
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What do psychographics capture? |
The values, interests and lifestyles of individuals hunter type / clubbing type |
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What types of issues would fall under the sociocultural segment? |
Looks at society’s, beliefs and lifestyles and how they change.
e.g Now gambling is legal, marijuana laws changing |
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What are types of issues are covered in the Political/Legal segment? |
Employment equity act -> affect hiring
competition Act -> eg. predatory pricing
Stability of the political environment |
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Why do businesses adopt new technologies? |
Save on costs -- especially labour costs
e.g. automated software means less specialized employees = less pay |
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What types of issues are included as part of the Global Segment? |
-- trade agreements make trade easier |
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How can the impact of a trend or an event vary across industries? |
+ price of oil -- good for oil producers -- bad for manufacturers |
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Why do we also focus on a firm's competitive environment? |
· The nature of competition as well as the profitability of a particular firm are more directly impacted by factors in the competitive environment |
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The Five Forces are: |
1. Threat of New Entrants 2. Bargaining Power of Suppliers 3. Bargaining Power of Buyers 4. Threat of Substitute Products or Services 5. Rivalry Among Existing Competitors |
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How easy is it for another firm or a new firm to enter into your industry and start selling similar products to your customers? |
if it’s easy to enter then you’re have many rivals - difficult to maintain profits |
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What candidates pose the biggest threat to entering into your market? |
Firms that are already in the industry but do not have a presence in your geographic area or market segment (niche market) |
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What are barriers to entry? Why is it important to have barriers to entry? |
Barriers to entry are any factor that increase the difficulty to compete in your industry -- good to keep out new entrance
common barrier to entry is cost -- eg car industry |
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What are economies of scale and why do they provide a barrier to entry? |
cost savings from large scale production.
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Beyond large scale production, how else can incumbent firms enjoy cost advantages? |
learning curve - have already learned all the mistakes of production |
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How do strong brand preferences and a high degree of customer loyalty act as barriers to entry? |
need to exert time, energy and $ to market your product |
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What are some examples of the difficulties of building a network of distributors-retailers and securing adequate space on retailers' shelves? |
-- the best spots on the shelf are taken up by strong rivals who’ve paid for those spots |
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How are switching costs a barrier to entry? |
buyers may need to modify what they have. |
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Who makes the majority of the profits in the personal computer (PC) industry? |
Microsoft, Intel |
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Why would your firm wish to have many suppliers to choose from? |
-- many suppliers to choose from -- shop around for best deal -- backup supplier in case anything happens to main supplier |
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How does the uniqueness of the input affect supplier bargaining power? |
+ more unique the input the more bargaining power from the supplier |
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How does switching ability impact on supplier bargaining power? |
-- easier it is to switch to another supplier the weaker the bargaining power for the supplier
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What is meant by backwards vertical integration? |
-- when you become your own supplier |
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How does potential backwards vertical integration affect supplier bargaining power? |
Supplier can’t gouge you because you can become your own supplier
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What's the first rule of business? |
1. Don't get high on your own supply. |
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How has Apple reduced buyer bargaining power? |
-- opened their own retail store, have online store |
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How can bargaining power shift to buyers when there is low demand? |
products are piling up on shelves, need to move them. |
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How easy is it to switch from your product to another product? |
if the customer feels that it fulfills same need as another product |
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What is a general rule with your ability to sustain healthy profits and the number of substitutes? |
+in the # of substitutes the harder it will be to sustain profits |
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What are some signs of high levels of rivalry? |
· Frequent price cutting · Frequent introduction of new products in an industry · Intense advertising campaigns · Rapid competitive reactions
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What are some attributes of an industry that are likely to generate high levels of rivalry? |
1. Large numbers of competing firms (most are roughly the same size).
2. Slow industry growth
3. Lack of product differentiation
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