Chapter 2 Flashcards
General External Environment
Technological Change Demographic Change Cultural Trends Economic Climate Legal/Political Conditions Specific International Events
General External Environment
Technological Change
Can create both opportunities and threats
General External Environment
Demographic Change
Understanding who your consumers are is vital to success
General External Environment
Cultural Trends
A firm must keep in mind what is acceptable with certain cultures to be successful in them
General External Environment
Economic Climate
The firm must be aware of where they are in the business cycle prosperity/recession/depression
General External Environment
Legal/Political Conditions
The firm needs to understand how the law and politics can affect how they do business
General External Environment
Specific International Events
The firm needs to be aware of events worldwide that may affect their ability to generate competitive advantage. Terrorism, wars and famines can all effect this
Porter 5 forces
Threat of entry Threat of rivalry Threat of buyers Threat of substitutes Threat of suppliers
Porter 5 forces
Threat of entry
This can be a firm entering an industry tough to break into some industry
Porter 5 forces
Threat of rivalry
This is the threat from a firms direct competition
Porter 5 forces
Threat of buyers
This is the customer. The less there are the more of a threat, the more there are the less of a threat
Porter 5 forces
Threat of substitutes
This is the threat of a competitor that fulfill the same customer needs in a different way
Porter 5 forces
Threat of suppliers
This threat is from those who supply raw materials, labor or anything else critical. Suppliers can increase price or decrease quality of their supplies
SCP model versus resource-based view
Structure Conduct Performance SCP suggests that industry structure determines a firms conduct, which in turn determines its performance, whereas RBV Focuses on the resources and capabilities controlled by a firm as a source of competitive advantage
Relationship between Porter 5 forces and profits
If threats are high then profits will be low. If threats are low then profits will be high
