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Chapter 2 notes

by: Briana Notetaker

Chapter 2 notes Management 490

Briana Notetaker
GPA 2.7

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pay close attention to Porters five forces model. These will be on the exam
Business Strategy
Yin-Chi Liao
Class Notes
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This 3 page Class Notes was uploaded by Briana Notetaker on Tuesday January 12, 2016. The Class Notes belongs to Management 490 at Western Illinois University taught by Yin-Chi Liao in Winter 2016. Since its upload, it has received 25 views. For similar materials see Business Strategy in Business, management at Western Illinois University.

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Date Created: 01/12/16
MGT 490 External Analysis Notes Chapter 2 Industry: a group of firms that produce similar goods or services Competitive environment: factors that pertain to an industry and affect a firms strategies Environmental Scanning: surveillance of a firs external environment to predict environmental changes and detect changes already underway Environmental Monitoring: firms analysis of the external environment that tracks the evolution of environmental trends, sequences of events, or streams of activities Environmental Forecasting: the development of plausible projections about direction, scope, speed, and intensity of environmental change Scenario analysis: an in depth approach to environmental forecasting Competitive intelligence: collecting and interpreting data on competitors, defining and understanding the industry, and identifying competitors strengths and weaknesses SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats): analyzing a company’s internal and external environment Demographic: observable characteristics  Age  Density  Sex  Rae  Ethnicity  Education  Geographic  Income  Region Sociocultural: values, beliefs, and lifestyles of a society  Women in the workforce  Temporary workers  Conern for fitness and healthy diets  Interest in environment Political/legal: how a society creates and exercises power  Rules  Laws  Taxation policies Technological: developments in technology  Genetic energy  emergence of internet technology  wireless communication  Pollution, global warming Economic characteristics of the economy including national income and monetary conditions  Interest rates  Unemployment  Gross domestic product Global influences from foreign countries:  Increasing global trade  Currency exchange rates  Emergence of the Indian and Chinese economies Porter’s five forces model of industry competition The threat of new entrants: if entry barriers are high and/or a newcomer can anticipate a sharp retaliation the threat of entry is low  Economies of scale  Product differentiation  Switching cost  Capital requirements  Access to distribution channels Buyers Power: forcing down prices, bargain for higher quality or more services, and play competitors against each other Powerful when:  It is concentrated (small number of buyers)  It purchase large volumes relative to seller sales  The buyer faces few switching cost  The products are standard or undifferentiated  The buyers pose a credible threat or backward integration Suppliers Power: suppliers may rise pries or reduce the quality of purchased goods and services Powerful when:  Dominated by a few companies (suppliers group)  Products are differentiated  Threat of forward integration  Lack of close substitutes  Industry is not an important customer of the group Intensity of rivalry among competitors in an industry: the competition for market share and profitability among the firms in the industry, the threat that customers will switch their business to competiots within the industry Price competition heats up when:  There are many competitors  Lak of differentiation or switching costs  Slow industry growth  High fixed or storage costs  High exit barriers Threat of substitute products and services:  Substitutes can meet some need or fulfill the same purpose or achieve the same end  When its performance increases or its price falls or demand decreases  Limit the potential returns of an industry by placing a ceiling on the pries that firms in that industry can charge Complements: help to increase the size of a firms market, whereas a firms competitors divide this market among a set of firms Strategic Groups within industries:  Cluster of firms that pursue a similar strategy  Direct competitors in the same groups  Affected differently by the external environment and competitive forces Analytical tool:  Identify barriers to mobility that protect a group from attacks by other groups  Chart the future direction of firms strategies  Thinking through the implementation of each industry trend for the strategic groups as a whole


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