Business Strategy & Market Analysis Flashcards
What is the order of the strategic planning process? There are seven in total.
- Formulate mission statement
- Establish objectives
- Environmental analysis
- Establish goals
- Formulate strategies
- Implement strategies
- Evaluate and control strategic activities
Define establishing objectives, environmental analysis, formulating strategy, and evaluation and control.
Establishing objectives - measurable results an entity seeks to achieve.
Environmental analysis - assessment of the environment in which an entity operates or may operate and is used in formulating an entity’s strategy.
Formulating strategy - establishment of the guidelines an entity will use to achieve competitive advantage in its market.
Evaluation and control - measurement of post-performance characteristics to determine whether an entity is achieving its strategic objectives and to implement changes as needed to achieve objectives.
Define Porter’s Five Forces.
The five forces framework developed by Michael Porter is used for determining the nature, operating attractiveness, and probable long-run profitability of a competitive industry. Framework for gauging the attractiveness of the competitive environment of an industry.
Define SWOT.
SWOT is a means of analyzing the internal strengths and weaknesses of an entity, the external opportunities and threats in its operating environment, and the relationship between the internal factors and the external factors.
Define PEST.
PEST is a means of analyzing the external macro-environment (political, economic, social, and technological) in which an entity operates or may operate.
What are the three generic strategies identified by Michael Porter?
- Cost Leadership
- Differentiation
- Focus
Macro-environmental analysis is concerned with analysis of?
Characteristics of a country or region. Macro-environmental analysis considers the broad political, economic, social, and technological characteristics of a country or a region.
PEST is an acronym for?
P-Political
E-Economic
S-Social
T-Technological
What do the E and the L stand for in PESTEL analysis?
E-Environment
L-Legal factors
What are some political factors included in PEST analysis? P-Political Factors.
- Political instability
- Labor Laws
- Environmental laws
- Tax Policy
- Trade restrictions and import quotas
What are some economic factors included in PEST analysis? E-Economic Factors.
- Economic growth rate
- Interest rates
- Inflation rate
- Currency exchange rates
What are some social factors included in PEST analysis? S-Social Factors.
- Population growth rate
- Age distribution
- Educational attainment/career attitude
- Emphasis on health/safety
What are some technological factors included in PEST analysis? T-Technological Factors.
- Level of research/development activity
- State automation capability
- Level of technological savvy
- Rate of technological change
What are some environmental factors included in PESTEL analysis? E-Environmental Factors.
- Weather
- Climate Change
- Water and air quality
What are some legal factors included in PESTEL analysis? L-Legal Factors.
- Discrimination law
- Consumer law
- Employment law
- Antitrust law
- Health and Safety law
What form of analysis is useful in evaluating the characteristics of a macro-environment?
PEST Analysis
PEST analysis can be used when considering domestic locations? foreign locations? or both?
Both.
What is the purpose of Five Forces Analysis?
Five Forces Model identifies factors that determine the operating attractiveness and likely long-run profitability of an industry.
What are Porter’s Five Forces? List all five.
- Threat of Entry into Market by New Competition
- Threat of Substitute goods of Services
- Bargaining Power of Buyers (Customers)
- Bargaining Power of Suppliers
- Intensity of Rivalry
Regarding threat of entry by new competition, what are some barriers to entry?
- Capital Investment Required
- . Access to raw materials, technology, and suppliers
- Customer loyalty and cost of switching suppliers
- Access to distribution channels
- Regulatory of other governmental impediments to entry
- Potential retaliation by existing firms in industry
Regarding threat of substitutes, what are some factors that determine level of threat for substitutes?
- Availability of substitutes
- Relative price and performance of substitutes
- Ease of substitution
- Buyer’s brand loyalty
- Cost to buyers of switching to substitutes
Regarding bargaining power of customers (buyers), bargaining power of buyers is greatest considering what factors?
- Products are standardized (not specialized)
- Large number of suppliers
- Few dominant buyers
- Information about goods or services is widely available
- Cost of buyers switching is low
Regarding bargaining power of suppliers, bargaining power of suppliers is greatest considering what factors?
- Few substitute inputs
- Many users and few sellers
- Suppliers are in position to move downstream
- Employees are unionized
- Supplier’s products are differentiated
- No threat of substitute products
Intensity of Rivalry depends on several factors which include what?
- Structure of competition
- Degree of product differentiation
- Industry Cost Structure
- Entities’ strategic objectives
- Customer switching costs
- Exit Barriers
What are some factors that would lead to greater/more intense rivalry?
- Many small of equal-size entities (structure of competition)
- Undifferentiated products (degree product differentiation)
- Industries with high fixed costs (Industry Cost Structure)
- Aggressive growth strategy (Entities’ strategic objectives)
- Customers make little or no cost to switching suppliers (Customer switching costs)
- More exit barriers; leaving industry is difficult (Exit Barriers)
What are some factors that would lead to less intense rivalry?
- Presence of market leader (structure of competition)
- Differentiated products (degree product differentiation)
- Industries with lower fixed costs (Industry cost structures)
- Entities in mature industry (entities’ strategic objectives)
- Customers incur HIGH cost of switching to alternate supplier (customer switching costs)
- Easy exit barriers; easy to leave (Exit Barriers)
Ultimate purpose of competitor analysis is to?
Understand and predict the behavior of a major competitor.
What statement best describes the steps involved in competitor analysis?
Gathering information about the competitor and using it to predict the competitor’ behavior.
Which of the following types of analysis is directly concerned with the relationship between an entity and its environment?
SWOT Analysis
What are the four components of SWOT Analysis? list if they are external or internal.
- Strengths (Internal)
- Weaknesses (Internal)
- Opportunities (External)
- Threats (External)
Describe cost leadership, differentiation, and focus strategies.
Cost leadership - entity will seek to be the lowest cost provider in an industry for a given level of output
Differentiation - entity will develop a product/service that offers unique features that are valued by customers
Focus - entity will focus on narrow segment of an industry “niche”. Will seek cost advantage of differentiation within that segment.
For cost leadership strategy, will an entity value processing efficiencies or outsourcing? or both?
Both. These will be used means to acquire or maintain cost advantage under a cost leadership strategy.
Targeting a niche marketing always involves what strategy?
Focus.
Would marketing function be more critical to differentiation or cost leadership?
Differentiation. An entity must be able to convey to its customers and potential customers the qualities that make the good or service distinctive and generally worth a higher price than other goods/services.
Is significant capital invested and efficient distribution important in cost leadership?
Yes both are key characteristics that are important to this strategy. These and other characteristics are necessary to maintain low cost and a cost competitive advantage.
Repeat question. What are the six components of the strategic planning process? List them in order.
- Mission, values, and objectives
- Environmental scanning
- External environment: PEST & Five Forces
- Internal environment: SWOT Analysis - Setting goals
- SMART goals - Strategy formulation
- choose generic strategy (cost leadership, differentiation, etc.) - Strategy Implementation
- Evaluation and Control
What are SMART goals? This is step #3 in strategic planning process. Explain what each letter means.
S - Specific M - Measurable A - Attainable R - Relevant T - Time-bound
When an entity is deciding to operate in a specific country, what are three useful factors that an entity will consider?
- Economic system of country - example: free enterprise, government control, etc.
- Industry Analysis - provides information about the competitive environment for the industry and is useful in deciding where an entity should operate.
- Economic market structure of country - example: perfect competition, etc.
After an entity has decided to operate in a particular country it can now formulate a?
Strategy
For step #2 of strategic planning process which is environmental scanning, what analysis is used in internal and external environment?
Internal Analysis - SWOT
External Analysis - PEST and Five Forces
Define monitoring, assessing, forecasting, and scanning.
Monitoring - study of environmental changes identified by scanning to spot trends.
Assessing - involves determining changes in the firm’s strategy that are necessary.
Forecasting - involves developing probable projections of what might happen and its timing.
Scanning - scan of all segments of the general environment. collecting data about all segments of the firm’s general environment to understand the effects of economic changes on the firm’s industry
