Chapitre 4: The External Environment Flashcards
Explain the external analysis - general environment
-The general environment is composed of dimensions in the broader society that influence an industry and the firms within it. General environment analysis seeks to capture opportunities and threats
Explain the external analysis - industry environment
The industry environment is a set of factors that directly influences a firm and its competitive actions and responses. Industry environment analysis reveals the overall profitability of the industry
Explain the external analysis - competitor analysis
The competitor analysis is about understanding the firm’s competitor environment (the competitors’s strategic characteristics, strategic moves), which complements the insights provided by studying the general and industry environments
What are the 7 environmental segments of the general environment
1-demographic
2-economic
3-political/legal
4-sociocultural
5-technological
6-global
7-sustainable physical environment
For each segment, firms have to determine the strategic relevance of environmental changes and trends
The general environment analysis includes 4 parts name and explain them
1-scanning: identifying early signals of environmental changes and trends
2-monitoring: detecting meaning through ongoing observations of environmental changes and trends
3-forecasting: developing projections of anticipated outcomes based on monitored changes and trends
4- assessing: determines the timing and importance of environmental changes and trends for firms’ strategies and their management
Explain the demographic, economic and political segment of the general environment
1- the demographic segment is concerned with a population’s size, age structure, geographic distribution, ethnic mix, and income distribution
2- the economic environment refers to the nature and direction of the economy in which a firm competes or may compete. In general, firms seek to compete in relatively stable economies with strong growth potential ( the challenge of economic uncertainty)
3- the political/ legal segment is the arena in which organizations and interest groups 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
Explain the sociocultural, technological, the global and sustainable physical environment segments
1- the sociocultural segment is concerned with a society’s attitudes and cultural values (relatively stable but can and often do change over time)
2- the technological segment includes the institutions and activities involved in creating new knowledge and translating that knowledge into new outputs, products, processes, and materials
3- the global segment includes relevant new global market and their critical cultural and institutional characteristics, existing markets that are changing, and important international political events
4- the sustainable physical environment segment refers to potential and actual changes in the physical environment and business practices that are intended to positively responds to those changes in order to create a sustainable environment
What is an industry
An industry is a group of firms producing products that are close substitutes
What are the 5 segments of the industry environment
1- Threat of new entrants
2- threat of substitute products
3- bargaining power of suppliers
4- bargaining power of buyers
5- rivalry among competing firms
What is the new entrants
-how likely firms will enter an industry is a function of two factors:
1- barriers to entry:
-economies of scale
-product differentiation
-capital requirements
-switching costs
-access to distribution channels
-cost disadvantages independent of scale
-government policy
2-the retaliation expected from current industry participants
Define the bargaining power of suppliers
1-suppliers can exert power over firms competing within an industry by:
-increasing prices -reducing the quality of their products
2- supplier group is powerful when:
-it is dominated by a few large companies and is more concentrated than the industry to which it sells -industry firms are not significant customers for the supplier group -criticality of suppliers’ goods to buyers’ marketplace success -high switching costs for industry firms -credible threat to integrate forward into the buyers’ industry
Define the bargaining power of buyers
1-to reduce their costs, buyers bargains for:
-higher quality -greater levels of service -lower prices
2-customer (buyer groups) are powerful when:
-they purchase a large portion of an industry’s total output -they could switch to another product at little, if any, cost -the industry’s products are undifferentiated or standardized, and the buyers pose a credible threat if they were to backward integrate into the seller’s industry
Define the substitute products
-substitute products are goods or services from outside a given industry that perform similar or the same functions as a product that the industry produces
-in general, product substitute present a strong threat to a firm when:
-customers face few, if any, switching costs -the substitute product’s price is lower -the substitue product’s quality and performance capabilities are equal to or greater than those of the competing product
-to reduce a substitute’s attractiveness, a firm can differentiate a product along dimensions that are valuable to customers, such as:
-quality -service after the sale -location
Define rivalry intensity
1-Competitive rivalry intensifies when:
-a firm is challenged by a competitor’s actions -a company recognizes an opportunity to improve its market position
2-common dimensions on which rivalry is based include:
-price -quality -innovation
Define the strategic groups
-a set of firms emphasizing similar strategic dimensions and using a similar strategy is called a strategic group
