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Chapter 2 Notes

by: Mackenzie Bauer

Chapter 2 Notes Mgmt 491 - Arvin Sahaym

Mackenzie Bauer
GPA 3.5
Mgmt 491
Arvin Sahaym

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Mgmt 491
Arvin Sahaym
Class Notes
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This 3 page Class Notes was uploaded by Mackenzie Bauer on Sunday February 22, 2015. The Class Notes belongs to Mgmt 491 - Arvin Sahaym at Washington State University taught by Arvin Sahaym in Spring2014. Since its upload, it has received 81 views. For similar materials see Mgmt 491 in Business at Washington State University.


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Date Created: 02/22/15
CHAPTER 2 THE EXTERNAL ENVIRONMENT OPPORTUNITIES THREATS INDUSTRY COMPETITION AND COMPETITOR ANALYSIS IO Model 0 Opportunity A condition in the general environment that if exploited helps a company achieve strategic competitiveness 0 Firms who have successfully exploited opportunities 0 Threat A condition in the general environment that may hinder a company s efforts to achieve strategic competitiveness 0 Firms who faced threats and could not survive External Environmental Analysis Process Scanning Identify early signals Of environmental changes and trends Monitoring Detect meaning through ongoing Observations Of environmental changes and trends Forecasting Anticipate outcomes basked on monitored changes and trends Assessing Determining the timing and importance Of environmental changes and trends for firms strategies and their management 3 Parts of External Environment 0 General Environment Focused on Competitor General environment environment the fuml e focus on competitors focus on future Industry Environment Focused on factors in uencing a firm s profitability Within an industry Competitor environment Focused on predicating the dynamics Of Industry competitors actions responses and environment intentions focus on industry pro tability General Environment Demographic Economic PoliticalLe gal Sociocultural Technological Global Industry Environment 0 The set of factors directly in uencing a rm and its competitive actions and competitive responses Threat of new entrants Bargaining power of suppliers Bargaining power of buyers Threat of substitute products Intensity of rivalry among competitors Porters Five Forces of Competition Threat of New Entrants Economies of scale 0 Product differentiation Dif cult for new entrants 0 Capital requirements 0 Switching costs 0 Access to distribution channels 0 Cost disadvantages independent of scale 0 Government policy 0 Expected retaliation Bargaining Power of Suppliers 0 Supplier power increases when Suppliers are large and few in number Suitable substitute products are not available Individual buyers are not large customers of suppliers and there are many of them Suppliers goods are critical to the buyers marketplace success Suppliers products create high switching costs Suppliers pose a threat to integrate forward into buyers industry Bargaining Power of Buyers Buyer power increases when l 2 3 Buyers are large and few in number Buyers purchase a large portion of an industry s output Buyers purchases are a signi cant portion of a supplier s annual revenues Eg Retailer Power WalMart Costco Buyers switching costs are low Threat of Substitute Products 0 The threat of substitute products increases when Buyers face few switching costs 0 Diet Coke vs Diet Pepsi The substitute product s price is lower 0 Tylenol vs store brand Acetaminophen Substitute product s quality and performance are equal to or greater than the existing product 0 E g paper or plastic bags sugar vs splenda Reduce this threat by developing Di erentiated Products that are truly valued by customers Rivalry Among Competitors 0 Industry rivalry increases when There are numerous or equally balanced competitors Industry growth slows or declines There are high xed costs or high storage costs There is a lack of differentiation opportunities or low switching costs When the strategic stakes are high When high exit barriers prevent competitors from leaving the industry 0 Eg Airlines for travel Delta or US or Southwest Boeing vs Airbus GM vs Ford vs Toyota High entry barriers bu my rm is capable of entering Suppliers and buyers have weak positions Few threats from substitute products Attractiv Industry E Moderate rivalry among competitors High pro t potential Low entry barriers Suppliers and buyers have strong positions U nattractive Strong threats from Ind ustry substitute products Intense rivalry among competitors Low pro t potential


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