Chapter 3: Evaluating a Company's External Environment Flashcards
What are 8 common tactics for competing with rivals?
1) Price discounting, clearance sales, “blowout” sales
2) Couponing, advertising items on sales
3) Advertising product or service characteristics, using ads to enhance a company’s image or reputation
4) Innovating to improve product performance and quality
5) Introducing new or improved features, increasing the number of styles or models to provide greater product selection
6) Increasing customisation of product or service
7) Building a bigger, better dealer network
8) Improving warranties, offering low-interest financing
Primary effects of (1) Price discounting, clearance sales, “blowout” sales:
Lowers price (P), acts to boost total sales volume and market share, lowers profit margins per unit sold when price cuts are big and/or increases in sales volume are relatively small
Primary effects of (2) Couponing, advertising items on sale:
Acts to increase unit sales volume and total revenues, lowers price (P), increases unit costs (C), may lower profit margins per unit sold (P-C)
Primary effects of (3) Advertising product or service characteristics, using ads to enhance a company’s image or reputation:
Boosts buyer demand, increases product differentiation and perceived value (V), acts to increase total sales volume and market share, may increase unit costs (C) and/or lower profit margins per unit sold
Primary effects of (4) Innovating to improve product performance and quality
Acts to increase product differentiation and value (V), boosts buyer demand, acts to boost total sales volume, likely to increase unit costs (C)
Primary effects of (5) Introducing new or improved features, increasing the number of styles or models to provide greater product selection:
Acts to increase product differentiation and value (V), strengthens buyer demands, acts to boost total sales volume and market share, likely to increase unit costs (C)
Primary effects of (6) Increasing customisation of product or service:
Acts to increase product differentiation and value (V), increases switching costs, acts to boost total sales volume, often increases unit costs (C)
Primary effects of (7) Building a bigger, better dealer network:
Broadens access to buyers, acts to boost total sales volume and market share, may increase unit costs (C)
Primary effects of (8) Improving warranties, offering low-interest financing
Acts to increase product differentiation and value (V), increases unit costs (C), increases buyer costs to switch brands, acts to boost total sales volume and market share
What are the 8 most common drivers of industry change?
1) Increased globalisation
2) Social/demographic change (Changes in who buys the product and how they use it)
3) Technological change
4) Emerging new Internet capabilities and applications
5) Product and marketing innovation
6) Reductions in uncertainty and business risks
7) Regulatory influences and government policy changes
8) General economic conditions
Driving forces analysis has three steps:
1) Identifying what the driving forces are
2) Assessing whether the driving forces are, on the whole, acting to make the industry more or less attractive
3) Determining what strategy changes are needed to prepare for the impact of the driving forces
What are the key success factors for future competitive success?
An industry’s key success factors are the particular strategy elements, product attributes, operational approaches, resources and capabilities that all industry members must have in order to survive and prosper in the industry.
Regardless of the circumstances, an industry’s KSF can always be deduced by asking the same three questions:
1) On what basis do buyers of the industry’s product choose between the competing brands of sellers?
2) What resources and competitive capabilities must a company have to be competitively successful?
3) What shortcomings are almost certain to put a company at a significant competitive disadvantage?
