ExploringtheExternalEnvironment.pptVIP

Objectives - Analysis of Environment General environment Focused on the future Industry environment Focused on industry-specific factors influencing firm profitability Competitor environment Focused on competitive dynamics competitors’ capabilities, intentions, actions, responses Analysis of Environment Is a continuous process Your firm is interdependent with BROAD institutional dynamics: Demographic Economic Political/legal Sociocultural Technological Global Political/Legal Segment (examples) Sociocultural segment (examples) Global Segment dynamics Demographic Economic Political/legal Sociocultural Technological Global Generate economic effects on industries/firms (S/D, factor costs) Industry Environment Interdependence among firms competing for similar customers Competitive actions and responses. Interactions among factors determine industry profit potential. Industry Environment Define the industry - current and potential customers and the firms that serve them. Analyze industry and competitors. Note: Suppliers and buyers can become competitors through integration. Producers of potential substitutes may become competitors. 5 Forces Industry Analysis Threat of New Entrants Barriers to entry Learning effects World War 2 - same plants, same rate of output - lower costs over time Important for complex products and processes where humans can learn A possible source of ‘first-mover’ advantage Boston Consulting Group focused on the experience curve and learning effects Bargaining Power of Suppliers A supplier group is powerful when: Bargaining Power of Buyers Buyers (customers) are powerful when: Threat of Substitute Products Product substitutes are strong threat when: Intensity of Rivalry Intensity of rivalry is stronger when competitors: High Exit Barriers Common exit barriers include: Industry Scope What is an industry? Useful to consider chain of related products (complements) when assessing industry attractiveness Strategic Groups Strategic group: a group