Unit 4 Flashcards
What are the three major areas of the external environment?
Global, macro, and industry or market environments.
What does external environmental analysis focus on?
Identifying and evaluating trends/events beyond the control of a single organisation.
What is the purpose of a thorough external environmental analysis?
To enable managers to formulate strategies that take advantage of opportunities and avoid or reduce the impact of threats.
What are the five segments of the macro environment in a PESTE analysis?
- Political
- Economic
- Sociocultural
- Technological
- Ecological
What does the political environment represent?
The way organisations try to influence government and how government influences them.
How does the economic environment affect organisations?
It influences the demand for goods and services and the potential attractiveness of various strategies.
What is the sociocultural environment concerned with?
A society’s attitudes and cultural values.
What is the technological environment?
Includes new products, processes, and materials, as well as the institutions involved in creating new knowledge.
What does the ecological environment focus on?
The relationship between human beings and the physical environment, including air, soil, and water.
What are the four variables important in industry analysis?
- Concentration
- Economies of scale
- Product differentiation
- Barriers to entry
What is an industry?
A group of organisations that produces products which are close substitutes for one another.
What are the two factors that influence the threat of new entrants?
- Barriers to entry
- Expected retaliation
What are some barriers to entry in an industry?
- Economies of scale
- Product differentiation
- Capital requirements
- Switching costs
- Access to distribution channels
- Cost disadvantages independent of scale
What is the bargaining power of suppliers?
Suppliers can exercise power over competing organisations by increasing prices and/or reducing product quality.
What defines the bargaining power of buyers?
The ability of customers to negotiate for higher quality and better deals, impacting the organisation’s goals.
What is a substitute product or service?
A product or service from another industry that can perform similar functions to a product or service in the industry.
What factors influence the intensity of rivalry among competitors?
- Numerous or equally balanced competitors
- Slow industry growth
- High fixed costs or storage costs
- Lack of differentiation or low switching costs
- High exit barriers
What is strategic group mapping?
A method to identify competitors within an industry.
Fill in the blank: The analysis of the macro environment is sometimes called a _______ analysis.
PESTE
True or False: Organisations can directly control segments and elements of the external environment.
False
What influences the direction and stability of political factors in a country?
Major considerations for managers when formulating strategy.
What does the ecological environment include regarding natural resources?
Limited natural resources from which an organisation obtains its raw materials.
What is a key consideration for organisations regarding technological changes?
Studying the technological environment and the threats and opportunities it presents.
What should organisations do to avoid detrimental effects on the ecological environment?
Ask important questions regarding their impact.
Which element of Porter’s Five Forces Model is influenced by consumer spending and economic trends?
Economic Factors
What can strong brand loyalty help an organisation to do?
Challenge new entrants in the market.
What are key success factors for an organisation?
Elements that contribute to an organisation’s success in its industry.
What is an external factor evaluation matrix?
A tool to evaluate external factors affecting an organisation.
What is the threat of new entrants in the clothing retail industry?
The threat of new entrants is moderate.
What gives suppliers significant leverage in negotiations within the clothing retail industry?
The concentration of power among a few key providers.
What is the bargaining power of suppliers in the clothing retail industry?
The bargaining power of suppliers is moderate to high.
What impacts buyers’ ability to switch brands in the clothing retail industry?
Factors such as price, quality, and fashion trends.
What is the bargaining power of buyers in the clothing retail industry?
The bargaining power of buyers is high.
What is a strategic group?
A clustering of organizations that are similar in offering goods to similar customers.
What is the value of strategic grouping as an analytical tool?
Helps in identifying competitors.
What are common mistakes in identifying competitors?
Overemphasizing current competitors, focusing only on large competitors, and assuming past behavior will continue.
What is one limitation of Porter’s Five Forces model?
It implies that the five forces apply equally to all competitors in an industry.
What are key success factors (KSFs)?
Factors that contribute to the organization’s and its competitors’ success.
What two questions must an organization answer regarding KSFs?
- What do our customers want?
- What must we do to survive tough competition?
What must organizations have to meet KSFs?
- Ability to recognize KSFs
- Distinctive competencies and capabilities
- Willingness to use these competencies
How can KSFs be measured?
By key performance indicators (KPIs).
What is the purpose of the External Factor Evaluation (EFE) Matrix?
To respond to key external opportunities and threats.
What steps are involved in developing the EFE Matrix?
- List 10 to 15 important external factors
- Assign a weight to each factor
- Rate the effectiveness of current strategies
- Multiply weight by rating for a weighted score
- Include comments for clarity
What does a total weighted score of 2.72 in the EFE Matrix suggest?
Moderate response to external opportunities and threats.
What score indicates poor performance in the EFE Matrix?
A score below 2.5.
What score suggests a strong ability to capitalize on opportunities in the EFE Matrix?
A score above 3.0.
What analysis is important for auditing external environmental factors?
PESTE analysis.
What case studies are mentioned in the conclusion?
- OK FOODS
- Shoprite Checkers
