Chapter 3: Ext. Analysis Flashcards
The PESTEL model groups….;
aimed to be a straightforward way….
environmental factors into segments;
to monitor and evaluate external factors
PESTEL stands for..
Political
Economic
Sociocultural
Technological
Ecological
Legal
political factors
processes/actions of the govt that influence the firm
ex. lobbying, litigation
Political and legal forces are _____ ______, and _____ ______ often results in changes to legislation
closely related
political pressure
economic factors
largely macroeconomic and affect economy-wide phenomena
ex. growth rates, employment levels
sociocultural factors
society’s cultures, norms, values are constantly in flux and differ across groups
trends should be monitored.
technological factors include (4)
- application of knowledge (new processes, products)
- innovations in process technology (lean manufacturing)
- innovations in product technology (smartphones)
- AI, machine learning
ecological factors
broad environmental issues; ex. global warming
Relationships between organizations and the environment can be ______ and can provide _____ ______
adversarial
business opportunities
legal factors
official outcomes of political processes (laws, mandates)
many industries have become ______.
such as airlines, energy, ….
deregulated
trucking
what affects Firm Performance? __% firm effects; __% industry effects; __% other factors/unexplained variance
55, 20, 25
some industry effects may include… (2)
- economic structure
- entry/exit barriers
some firm effects include… (1)
manager actions
industry analysis seeks to understand…
how structural factors of an industry determines profit
industry
group of firms producing similar products/services
industry attractiveness
some industries are more profitable than others – but why? different factors!
Five Forces Model helps… (2)
- strategic leaders understand the profit potential of different industries
- how they can position their firms to gain and sustain competitive advantage
2 key insights of the Five Forces Model
- competition is viewed more broadly in the 5 competitive forces
- profit potential is a function of the 5 forces
Porter’s 5 Forces
Threat of New Entrants
Power of Suppliers
Power of Buyers
Threat of Substitutes
Internal Rivalry
Porter’s 5 Forces are industry-level analysis, we’re looking at a _____, not just one company
group
Threat of New Entrants depresses profits by… (2)
- capping prices to prevent entry
- driving up costs; incumbents are spending more to satisfy customers
You can analyze threat of entry by examining an industry’s _____ _____ – an advantage that incumbent firms have over entrants
entry barriers
Power of Suppliers are pressures an industry supplier can exert on profit potential.
Lowers profit potential if…(2)
- suppliers demand higher prices for their inputs
- suppliers capture part of the economic value created
Power of Buyers depends on…
relative bargaining power of buyers;
pressure firms to cut prices and add value
Threat of Substitutes
meeting the same need in a different way; can originate from a different industry
ex. videoconferencing vs business travel
Rivalry Amongst Existing Competitors
intensity with which companies in the same industry jockey for market share and profitability
greater intensity of rivalry –>
lower industry profitability
complements
a product/service adding value when used with original product
strategic groups
set of companies pursuing similar strategy in a specific industry
strategic group model/framework
clusters different firms into groups based on key strategic dimensions
dimensions of strategic group modeling may include…
pricing, breadth of offering, R&D, etc.
3 insights from strategic group mappings
- competitive rivalry is strongest b/w firms in same strat group
- external environ and 5 forces will affect groups differently
- some groups are more profitable than others
