Chapter 2 Flashcards
What does SWOT stand for?
Strengths- Favorable
Weakness- unfavorable
Opportunities- favorable
Threats- unfavorable
External environment
Elements that Companies cannot control and are constantly changing
Name 6 forces in the external environment
SET "CRS" Social Forces economic Forces Technological Forces Competitive forces Regulatory forces Substitute forces
Social forces
Social forces affect people’s attitudes, beliefs, and lifestyle. These forces shape consumers’ behavior. Social forces influence what we buy, where we buy, how we buy, how much we buy, and when we buy.
Gross Income
What is on your paycheck
total amount received in a year
disposable income
Amount of money a person has after paying taxes
Discretionary Income
Amount of money a person has after paying taxes and paying for needs/necessities
Technological forces
Application of science and research to accomplish a function more efficiently or to solve a problem.
(competitive force) Michael Porter’s five forces model
1- Competitive rivalry 2- Power of suppliers 3- Power of Buyers 4- Threat of entrants 5- Threat of substitutes
Competitive rivalry
. Rivalry among existing companies in a particular industry varies in intensity based on the type and number of competitors and on the basis of competition—price discounting, advertising, new product offerings, and service quality. High competitive rivalry drives down industry profits.
E.g. Delta vs. United
Greatest generation
1901-1927
Silent generation
1928-1945
Baby boomers
1946-1964
Generation X
1965-1980
Generation Y/ Millennials
1981-1996
Generation Z
1997 and later
Power of suppliers
Powerful suppliers can drive down industry profits by charging higher prices and/or reducing product and service quality.
E.g. Oil Industry or Boeing
Power of buyer
Powerful buyers (customers) can use their clout to demand and receive lower prices, increased product quality, and more services.
Threat of entrants
New entrants can shake up an industry and cause increased competition as they seek to take market share from existing companies in the industry.
Threat of Substitutes
Substitute products have the potential of replacing existing products because they perform a similar function. As a result, industry profits suffer.
E.g. Walk, Drive, Bike, Boat
Competitive factors
used to determine the attractiveness of an industry.
Economic factors
Changes in the economy affect consumer spending
Regulatory Factors
The objective of regulation is to protect consumers and businesses. For the consumer, regulation seeks to ensure safety and fair trade practices.
