Ch.3 Evaluating the External Environment Flashcards
Consists of the set of external conditions and forces that have the potential to influence the organization.
Environment
Include overall trends and events in society such as social trends, technological trends, demographics, and economic conditions.
also known as macroenvironment
General Environment
Consists of organizations that collectively compete with one another by providing goods, services, or both.
Industry environment
Events and trends that create chances to improve an organization’s performance level.
Opportunities
Events and trends that may undermine an organization’s performance.
Threats
Tool that executives can rely upon to organize factors within the general environment and identify how these factors influence industries and the companies within them.
political, economic, social, technological, environmental, legal
PESTEL Analysis
portion involving government, tax policies, changing in trade restrictions and tariffs, and the stability of governments.
Political segment
portion of economic and financial conditions including interest rates, inflation orates, gross domestic product, unemployment rates, levels of disposable income, and the general growth or decline of the economy.
Economic segment
Portion that involves factors including trends in demographics such as population size, age, and ethnic mix, as well as cultural trends such as attitudes toward obesity and activism.
Social segment
portion that centers on improvements in products and services that are provided by science, for example, change in the rate of a new product development, increases in automation, and advancements in service industry delivery.
Technological segment
portion that involves the physical conditions within which organizations operate, for example. natural disasters and weather patterns.
Environmental segment
portion that centers on how the courts influence businesses activity and legal factors including laws involving issues such as employment, health and safety, discrimination, and antitrust.
Legal segment
- Most popular analytical tool in the business world.
- used to identify how much profit potential exists in an industry.
- considers the interactions among the competitors in an industry, potential new entrants to the industry, substitutes for the industry’s offerings, suppliers to the industry, and the industry’s buyers.
Five forces analysis
- Competitive Rivalry
- Buyers
- Substitute Products
- New Entrants
- Suppliers
- Buyers
Porter’s Five Forces
Companies that produce very similar products or services.
Competitors
factors that make it difficult for a company to stop competing in an industry
Exit barriers
Companies that do not currently compete in the idustry but may in the future.
Potential new entrants
Offerings that differ from the goods and services provided by the competitors in an industry, but that fill similar needs to what the industry offers.
Threat of substitutes
Providers of inputs that the competitors in an industry need to create goods or services.
Power of Suppliers
Suppliers possess power to the extent that they have ability to become a new entrant to the industry if they wish.
Forward vertical integration
Purchasers of the goods or services that the companies in an industry.
Power of a buyer
Buyers possess power to the extent that they have the ability to become a new entrant to the industry if they wish.
Backward vertical integration
Consist of a set of industry competitors that have similar characteristics to each other but different in important ways from the members of other groups.
Strategic groups
