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25 Cards in this Set
- Front
- Back
- 3rd side (hint)
macro - environment
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Political factors
Economic conditions Sociocultural Technological factors Environment (natural) Legal /regulatory |
PESTEL
the broad environmental context in which a company's industry is situated |
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Strategic questions about a company's competitive environment
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1) how strong are the industry's competitive forces?
2) what are the driving forces in the industry? 3) market position of competitors - who's strongest and weakest? 4) rival's next move? 5) what are the industry's key success factors? 6) is the industry's outlook conductive to good profitability? |
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5 forces model of competition
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Competition from rival sellers
Competition from potential new entrants Competition from producers of substitute products Supplier bargaining power Customer bargaining power |
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using the 5 forces model
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step 1) For each of the 5 forces, identify different parties involved and specific factors that bring competitive pressures
step 2) evaluate how strong the pressures stemming from each of the 5 forces are step 3) determine whether the strength of the 5 forces is conductive to earning attractive profits in the industry |
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rivalry increases when...
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1) when demand is growing slowly or declining
2) as it becomes less costly for buyers to switch brands 3) as the products of rival sellers becomes less differentiated 4) when there is excess supply or unused production capacity, especially if the product has high fixed & storage costs 5) as the number of competitors increases and they become more equal in size/capacity 6) as companies become more diverse in long term direction, objective, strategies, and countries 7) when high exit barriers exist and keep unprofitable companies from leaving. |
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weapons for competing with rivals
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price discounting
couponing & advertising sales advertising innovating products introducing new or improved features or selection increasing customization of product or service building better dealer networks improving warranties & offering low interest financing |
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factors that affect threat of new entrants
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reaction of incumbent firms to the new entry
barriers to entry |
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biggest barriers to new entrants
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industry incmbent's cost advantages
strong brand preferences and high degrees of customer loyalty network effects in customer demand (video games) high capital requirements building a network of distributors or dealers restrictive government policies |
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are barriers to entry high or low
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depends on the resources and capabilities possessed by the pool of potential entrants
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high or low barriers to entry today, can switch tomorrow
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where strongest barriers to entry come from
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the strongest competitive pressures associated with potential entry frequently come not from the outsider, but from current industry participants looking for growth opportunities
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strength of competitive pressure from substitute products
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1) whether substitutes are really available and attractively priced
2) whether buyers view the substitute as comparable or better in quality, performance, ect. 3) whether the cost of switching is high of low |
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factors that determine the strength of supplier's bargaining power
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1) whether demand for suppliers' product is high and they are in short supply
2) whether suppliers provide a differentiated input that enhances the performance of the indsutry' product 3) whether it s costly or difficult to switch suppliers 4) whether the supplier industry is dominated by a few large companies and whether it is more concentrated than the industry it sells to 5) whether suppliers provide an item that accounts for a sizable fraction of the cots of the industry's product 6) whether it makes good economic sense for industry members to integrate backward and self-manufacture instead of buy from suppliers 7) whether there are good substitutes available for the supplier's products 8) whether industry members are major customers of supplier's |
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competitive pressure from buyers increases when...
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1) buyer demand is weak in relation to industry supply
2) when industry goods are standardized or differentiation is weak 3) when when their costs of switching to other brands or substitutes is low 4) when buyers are large, but small relative to the number of sellers 5) when they are well informed about sellers products, prices, and costs 6) when they pose a credible threat of integrating backward into the business of sellers 7) if buyers have discretion to delay their purchases or not purchase at all |
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buyers are more sensitive to price when
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1) earnings or income is low
2) the product represents a large portion of their total purchases |
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what determines the extent of competitive pressure
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the strongest competitive forces determine the extent of the competitive pressure on industry profitability
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effectively matching strategy to competitive conditions
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1) pursuing avenues that protects the firm from from as many of the different competitive pressures as possible
2) initiate actions to shift the competitive forces in the company's favor by altering the underlying factors driving the 5 forces |
a company's strategy is increasingly effective the more it provides insulation from competitive pressure, shifts the battle in the company's favor, and positions the firm to take advantage of attractive growth opportunities.
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driving forces
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are the major underlying causes of change in an industry and competitive condidtions
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driving forces analysis
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step 1) identifying what the driving forces are
step 2) assessing whether the drivers of change or acting to make the industry more or less attractive step 3) determining what strategy changes are needed to prepare for the impact of driving forces |
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categories of driving forces
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changes in an industry's long-term growth rate
increasing globalization emerging new Internet capabilities and applications changes is who buys the product and how they use it technological change and manufacturing process innovation product and marketing innovation entry or exit of major firms diffusion of technical know-how across companies and countries changes in cost and efficiency reductions in uncertainty and business risk regulatory influences and government policy changes changing societal concerns, attitudes and lifestyles |
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the most important part of driving forces analysis
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determining whether the impact of driving forces will increase or decrease market demand, competition, and profitability
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assessing the impact of the factors driving industry change
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1) are the driving forces as a whole causing demand to increase of decrease?
2) is the impact of the driving forces making competition more or less intense? 3) I will the driving forces lead to higher or lower profitability? |
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main benefit of driving forces analysis
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is helping managers understand what strategy changes are needed to prepare for the impact of the driving forces
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strategic group mapping
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a technique for displaying the different market or competitive positions that rival firms occupy in the industry
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a strategic group
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a cluster of individual rivals that have similar competitive approaches and market positions
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a strategic group map
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