Hoofdstuk 2 External environment Flashcards
General environment
Trends in the context within which a firm operates
- Technological change (opportunity and threat)
- Demographic trends (age, sex, marital status, income)
- Cultural trends (values, beliefs and norms)
- Economic climate (health of economic systems)
- Legal and political conditions (laws and regulations)
- Specific international events (civil wars)
Structure-conduct-performance model
Industry structure –> firm conduct –> performance
Industry structure (model)
The range of options and constraints facing a firm. Number of competing firms, homogeneity of products, cost of entry and exit
Firm conduct (model)
Strategies firms pursue to gain competitive advantage
Performance (model)
Firm level: competitive disadvantage, parity, temporary or sustained competitive advantage
Society: productive and allocative efficiency, level of employment, progress
The five forces model of environmental threats
An environmental threat is any individual, group, or organization outside a firm that seeks to reduce the level of that firm’s performance
Threat of entry, rivalry, buyers, substitutes and suppliers
Threat of entry
New entrants will begin operations when the cost of entry are lower than the profit of entry
Barriers of entry
Attributes of an industry’s structure that increase the cost of entry
- Economies of scale (a firm’s costs fall as a function of its volume of production)
- Product differentiation (existing firms possess brand identification and customer loyalty)
- Proprietary technology (patented or secret technology of existing firms)
- Managerial know-how (knowledge, skills and information of existing firms)
- Favorable access to raw materials (for existing firms)
- Learning-curve cost advantages
- Government policy
Threat of rivalry
The intensity of competition among a firm’s direct competitors
Indicated by frequent price cutting, frequent introduction of new products, intense advertising and rapid competitive actions and reactions
Attributes:
* Large number of competing firms that are roughly the same size
* Slow industry growth
* Lack of product differentiation
* Capacity added in large increments
Threat of buyers
Powerful buyers act to decrease a firm’s revenues
Indicators
* Number of buyers is small
* Products sold to buyers are undifferentiated and standards
* Products sold to buyers are a significant percentage of a buyer’s final costs
* Buyers are not earning significant economic profits
* Buyers threaten backward vertical integration (also rivals)
Threat of substitutes
Substitutes meet approximately the same customer needs, but do so in different ways
Threat of suppliers
Suppliers can threaten the performance of firms by increasing the price of their suppliers or by reducing the quality of those suppliers
Indicators
* Suppliers’ industry is dominated by small numbers of firms
* Suppliers sell unique or highly differentiated products
* Suppliers are not threatened by substitutes
* Suppliers threaten forward integration (compete)
* Firms are not important customers for suppliers
Complementors
Another firm is a complementor if your customers value your product more when they have this other firm’s product than when they have your product alone. Positive
Opportunities in fragmented industries
Industries in which a large number of small or medium-sized firms operate and no small set of firms has dominant market share or creates dominant technologies
Consolidation: consolidate industry into a smaller number of firms
Opportunities in emerging industries
Newly created industries formed by technological innovations, changes in demand, the emergence of new customer needs
First-mover: make important strategic and technological decisions early in the development of an industry. Establish the rules of the game. Technological leadership, preemption of strategically valuable assets and customer-switching costs.
Uncertainty
