MIDTERM:PPT.1- Industial Env.. Flashcards
It refers to the specific industry or sector in which a business operates, and it consists of the competitive and market forces that directly influence the organization’s ability to thrive
Industrial Environment
It refers to the factors and conditions that directly affect an industry’s operation and competitiveness
Industrial Environment
It is a framework for analyzing the competitive forces that affect an industry
Porters Five forces
The degree to which new competitors can enter an industry and threaten the market share of existing companies
Threat of New Entrants
What are the factors of threat of New Entrants?
- Barriers to entry
- Cost advantages
- Regulatory Barrier
High barriers (eg., capital requirements, economies of scale, brand loyalty, patents) discourage new firms from entering the industry.
Barriers to entry
Established companies with cost advantages or access to cheaper resources can discourage new competitors
Cost advantages
Government regulations, permits, and licenses may restrict new entrants.
Regulatory Barriers
It’s the influence that suppliers have over the prices and quality of inputs (e.g., raw materials, components) for the industry
Bargaining Power of supplier
What are the factors influencing supplier power?
- Number of suppliers
- Uniqueness of the input
- Switching cost
- Supplier concentration
If there are few suppliers for a particular input, they hold more bargaining power.
Number of suppliers
Suppliers of critical, unique, or scarce resources have higher bargaining power.
Uniqueness of the input
The ease with which companies can switch suppliers. High switching costs increase supplier power
Switching costs
A few dominant suppliers can command higher prices and terms.
Supplier concentration
The power that customers have to influence the price, quality, and terms of products or services.
Bargaining Power of buyers
Factors influencing buyers’ power?
- Buyers concentration
- Switching costs
- Availability of substitutes
- Importance of the buyer
If a few large buyers account for a significant portion of total sales, they have more bargaining power
Buyer concentration
Low switching costs allow customers to easily move to competitors, increasing their bargaining power
Switching costs
if buyers have many alternatives to choose from, their power increases
Availability of substitutes
If a company depends heavily on a specific buyer for revenue, the buyer has more leverage.
Importance of the buyer
The likelihood that customers will switch to alternative products or services that fulfill the same need
Threat of Substitute product or services
What are the factors influencing the substitutes?
- Availability of alternatives
- Price-performance trade-offs
- Customer loyalty
The intensity of competition among elcsting firms within the industry
Industry rival
The more alternatives available to customers, the higher the threat of substitution
Availability of alternatives
if substitutes offer a better price-to-performance ratio, they can easily attract customers
Price performance trade offs
Strong brand loyalty reduces the likelihood of customers switching to substitutes.
Customer loyalty
What are Factors Influencing Industry Rivalry?
- Number of competitors
- Industry growth rate
- Product differentiation
- Exit barrier
More competitors in the market lead to higher rivalry and competitive pressure.
Number of competitors
In a slow-growing industry, firms often fight harder for market share, intensifying rivalry
Industry growth rate
If products or services are perceived as similar, companies compete more on price and features
Product differentiation
High ext barriers (eg, specialized assets) increase rivalry because firms are reluctant to leave a struggling market
Exit barriers
