BST Flashcards
What are the two stategic approaches?
Resource Based “Inside-Out” & Positioning Approach “Outside-In”
Define Resource Based Approach?
Focus on developing internal resources and competences which are hard to imitate and find or create markets to exploit these strengths
Risk of Resource Based
Define Positioning Based Approach?
Focus on analysing the external environment to identify customer needs and adapting to meet these needs
Define Positioning
Approach?
Define industry
A group of organisations supplying a market offering similar products using similar technologies to provide customer benefits
Explain the industry life cycle
There are 5 stages - introduction, growth, shakeout, maturity and decline
Define Porters 5 Forces and explain each stage
Used to assess the attractiveness of an industry in terms of long run profitability
1. Threat of new entrants
2. Bargaining power of supplier
3. Bargaining power of customers
4. Threat of substitutes
= competitive rivalry
P5F - what should you consider when looking at the Threat of New Entrants?
How attractive is the market
- high industry growth
- high profit margins
- few existing competitors
- easy customer switching
Barriers to Entry
- economies of scale
- Brand loyalty
- capital requirements
- access to distribution
- patent’s
-government subsidies
P5F - what should you consider when looking at the Competitive Rivalry?
How intense is competition among existing players in the market
Higher if there are:
No. Of existing competitors
High level of fixed costs
Low industry growth
Low switching costs
High exit barriers
High strategic importance
P5F - what should you consider when looking at the Threat of Substitutes?
Are substitutes available and are consumers likely to switch?
Availability of substitutes
- from different industries
- From sub-industries
Increased likelihood if:
- Price of substitute is low
- Relative performance of the substitute is comparable
- Customers can switch easily
P5F - what should you consider when looking at the Power of Customers?
Do customers have enough bargaining power to push down prices?
Higher if:
- small number of customers
- large number of competitors
- low level of product differentiation
- low switching costs
- customers own profitability is low
- high degree of price transparency in the market
P5F - what should you consider when looking at the Power of Suppliers?
Do suppliers have enough bargaining power to increase their prices?
Different types of suppliers:
- Providers of raw materials
- Service prividers and outsourced services
- Employees and hire works
Bargaining power increased if:
- few large suppliers
Suppliers products are differentiated
- high switching costs for the customers
- suppliers has other buyers they can sell to instead
Define PESTEL analysis
Used to analyse the macro environment as part of strategic planning to identify potential opportunities and threats facing the industry
P- political
E - economic
S - social and demographic
T - technological
E - environmental
L - legal
Provide examples for each PESTEL
KW44
P - taxation policy / gov spending / foreign trade regulations
E - economic growth/ interest rates / inflation
S - attitude, taste and fashion / population demographic/ income distribution
T - new products / improved production methods
E - sustainability / pollution and climate change / natural capital impact/ green finance issues
L - industry regulations/ competition legislation/ employment law
