Chapter 2 Flashcards
What is the external environment of a firm?
All relevant forces outside a firm’s boundaries, such as competitors, customers, the government, and the economy.
Define macroenvironment.
The general environment; includes governments, economic conditions, and other fundamental factors that generally affect all organizations.
What does the competitive environment include?
The immediate environment surrounding a firm; includes suppliers, customers, rivals, and the like.
What economic changes should a business owner consider?
Changes indicated by GDP, household income, spending changes, etc.
What are some technological advances that impact businesses?
New products, advanced production techniques, and better ways of managing and communicating.
What must businesses do regarding new healthcare laws?
Offer minimum essential coverage that is ‘affordable’ or make an employer payment to the IRS if employing at least a certain number of employees.
What are demographics in a business context?
Measures of various characteristics of the people who make up groups or other social units.
List some trends in demographics affecting the workforce.
- Growth of the labor force
- Increasing education and skill levels
- Immigration
- Increased numbers of women in the workforce
- Increasingly diverse workforce
What are Porter’s Five Forces?
- Rivals
- Suppliers
- Buyers
- Substitutes
- New entrants
What factors indicate the competitive strength of substitutes?
- Ready availability of substitutes
- Pricing, quality, performance, and other relevant attributes
- Switching costs that buyers incur
What considerations affect the threat of new entrants?
- Strength of barriers to entry
- Expected reaction of incumbent firms
- Attractiveness of market’s growth in demand and profit potential
- Capabilities and resources of potential entrants
What factors contribute to buyer bargaining power?
- Buyer costs for switching to competing sellers
- Degree to which industry products are commoditized
- Number and size of buyers relative to sellers
- Strength of buyer demand for sellers’ products
- Buyer knowledge of products, costs, and pricing
True or False: Rivalry is stronger when buyer demand is declining.
True
What is environmental analysis?
The process of assessing external and internal factors that can impact an organization.
What is scenario development in environmental analysis?
A narrative that describes a set of future conditions, including best-case and worst-case scenarios.
What is benchmarking?
The process of comparing an organization’s practices and technologies with those of other companies.
Define strategic maneuvering.
An organization’s conscious efforts to change the boundaries of its task environment.
What does diversification mean in a business context?
Occurs when a firm invests in a different product, business, or geographic area.
Fill in the blank: The process of creating supplies of excess resources in case of unpredictable needs is called _______.
Buffering
What does the Competing Values Model of Culture illustrate?
It illustrates the different cultural values within an organization.
