Module 6 Flashcards
For a person to put up a business, it is essential that an industry analysis first be made. Commonly used is a system known as the SWOT analysis, which lists the strengths, weaknesses, opportunities, and threats that the business faces.
Principles, Tools, and Techniques in Evaluating a Business
Was created in the 1960s by business gurus, Edmund P. Learned, C. Roland Christensen, Kenneth Andrews, and William D. Book in their book, Business Policy, Text and Cases (Irwin, 1969).
The SWOT analysis
Stands for Strengths, Weaknesses, Opportunities, and Threats, is an analytical framework that can help a company meet its challenges and identify new markets.
SWOT
What factors is “Financial resources such as money and sources of funds for investment.”
Internal Factors
What factors is “Physical resources, such as the company’s location, facilities, machinery, and equipment”
Internal Factors
What factors is “Human resources consisting of employees.”
Internal Factors
What factors is “access to natural resources, trademarks, patents, and copyrights.”
Internal Factors
What factors is “current processes, such as employee programs, department hierarchies and software systems, sales and distribution capabilities, marketing programs, etc.”
Internal Factors
What factors is “economic trends including local, national and international financial trends, developments in the country’s stock market, reforms in the banking system, growth of the Gross Domestic Product;”
External Factors
What factors is “market trends, such as new products or technology or evolving buyers’ profiles, including changes in tastes and lifestyle behavior;”
External Factors
What factors is “national and local laws and statutes as well as political, environmental, and economic regulations;”
External Factors
What factors is “demographic characteristics of the target market such as the age, the gender, the culture of the customers”
External Factors
What factors is “relationships with suppliers and co-owners; ”
External Factors
What factors is “Competitive threats.”
External Factors
An acronym for political, economic, social, and technological - external factors that commonly affect business activities and performance. Created by Harvard professor Francis Aguilar in 1967, PEST can work alone or be used in combination with other tools, such as Porter’s Five Forces and SWOT Analysis to determine an organization’s overall outlook.
PEST analysis
This factor looks at how government regulations and legal issues affect a company’s ability to be profitable and successful. Issues that must be considered include tax guidelines, copyright and property law enforcement, political stability, trade regulations, social and environmental policy, employment laws and safety regulations. Companies should also consider their local and federal power structure, and discuss how anticipated shifts in power could affect their business.
Political
This factor examines the outside economic issues that can play a role in a company’s success. Items to consider include economic growth, exchange, inflation and interest rates, economic stability, anticipated shifts in commodity and resource costs, unemployment policies, credit availability and unemployment policies.
Economics
This issue analyzes the demographic and cultural aspects of the company’s market. These factors help businesses examine consumer needs and determine what pushes them to make purchases. Among the items that should be examined are demographics, population growth rates, age distribution, attitudes toward work, job market trends, religious and ethical beliefs, lifestyle changes, educational and environmental issues and health consciousness
Social
This factor takes into consideration technology issues that affect how an organization delivers its product or service to the marketplace. Among the specific items that need to be considered are technological advancements, government spending on technological research, the life cycle of current technology, the role of the Internet and how any changes to it may play out, and the impact of potential information technology changes. In addition, companies should consider how generational shifts, and their related technological expectations, are likely to affect those who will use their product and how it is delivered.
Technology
Another analytical tool that can be used to assess a business is _________ It was developed in 1979 by Michael E. Porter of Harvard Business School as a framework or a guide for assessing and evaluating the competitive strength and position of a business organization.
Porter’s Five Forces of Competitive Position Analysis
It is essential to evaluate how much power the supplier is capable to drive up prices. A supplier benefits this power if there are few supplier of an essential input and they therefore control the supply of that input. The more unique the product, the easier it is for the supplier to drive up price.
Supplier Power
An evaluation of how easy it is for buyers to direct prices down. This is directed by the: number of customers in the market; worth of each buyer to the organisation; and cost to the interchange from one supplier to another. If a business has just a less of powerful buyers, they are usually able to dictate terms.
Buyer Power
The major driver is the number and competitor’s capability in the market. A lot of competitors, offering common products and services, will reduce market attractiveness.
Number of Competitors
Where common products available in a market, it improves the livelihood of customers switching to alternatives in response to price increases. This lessen both the power of suppliers and the attractiveness of the market.
Possibility of substitution
Profitable markets attract new entrants, which destroy profitability. Unless current have strong and long lasting barriers to entry, for example capital requirements or government policies and regulations, then profitability will slow down to a competitive rate.
Possibility of new entrants
