Chapter 2 (Analyzing the External Environment of the Firm) Flashcards
environmental scanning
surveillance of a firm’s external environment to predict environmental changes and detect changes already under way
environmental monitoring
a firm’s analysis of the external environment that tracks the evolution of environmental trends, sequences or events, or streams of activities
competitive intelligence (CI)
a firm’s activities of collecting and interpreting data on competitors, defining and understanding the industry, and identifying competitors’ strengths and weaknesses
environmental forecasting
the development of plausible projections about the direction, scope, speed, and intensity of environmental change
scenario analysis
an in-depth approach to environmental forecasting that involves experts’ detailed assessments of societal trends, economics, politics, technology, or other dimensions of the external environment
SWOT analysis
a framework for analyzing a company’s internal and external environment (the Strengths, Weaknesses, Opportunities, and Threats)
general environment
factors external to an industry, and usually beyond a firm’s control, that affect a firm’s strategy
demographic segment of the general environment
genetic and observable characteristics of a population, including the levels and growth of age, density, sex, race, ethnicity, education, geographic region, and income
sociocultural segment of the general environment
the values, beliefs, and lifestyles of a society
political/legal segment of the general environment
how a society creates and exercises power, including rules, laws, and taxation policies
technological segment of the general environment
innovation and state of knowledge in industrial arts, engineering, applied sciences, and pure science; and their interaction with society
economic segment of the general environment
characteristics of the economy, including national income and monetary conditions
global segment of the general environment
influences from foreign countries, including foreign market opportunities, foreign-based competition, and expanded capital markets
competitive environment
factors that pertain to an industry and affect a firm’s strategies
industry
a group of firms that produce similar goods or services
Porter’s five-forces model of industry competition
a tool for examining the industry-level competitive environment, especially the ability of firms in that industry to set prices and minimize costs
threat of new entrants
the possibility that the profits of established firms in the industry may be eroded by new competitors
economics of scale
decreases in cost per unit as absolute output per period increases
product differentiation
the degree that a product has strong brand loyalty or customer loyalty
switching cost
one-time costs that a buyer/supplier faces when switching from one supplier/buyer to another
bargaining power of buyers
the threat the buyers may force down prices, bargain for higher quality or more services, and play competitors against each other
bargaining power of suppliers
the threat that suppliers may raise prices or reduce the quality of purchased goods or services
threat of substitute products and services
the threat of limiting the potential returns of an industry by placing a ceiling on the prices that firms in the industry can profitably charge without losing too many customers to substitute products
substitute products and services
products and services outside the industry that serve the same customer needs as the industry’s products and services
