5 pages assignment
ABK
StrategicManagementCh2.pptxExternal Environment
Chapter 2
1
Three components of External environments
| Type of Analysis | Focus |
| General Environment | Focused on the future |
| Industry Environment | Focused on factors and conditions influencing a firm’s profitability within an industry |
| Competitor Environment | Focused on predicting the dynamics of competitors’ actions, responses and intentions |
2
General environment Segments (or Pestel)
Demographic
Economic
Political/Legal
Sociocultural
Technological
Global
Physical Environment
3
Population size
Age structure
Geographic distribution
Ethic mix
Income distribution
Etc.
General environment Segments (or Pestel)
Demographic
Economic
Political/Legal
Sociocultural
Technological
Global
Physical Environment
4
Inflation rates
Interest rates
Personal savings rate
Business savings rates
GDP
Budget deficit or surplus
Etc.
General environment Segments (or Pestel)
Demographic
Economic
Political/Legal
Sociocultural
Technological
Global
Physical Environment
5
Taxation laws
Antitrust laws
Deregulations
Labor laws
Educational policies
Etc.
General environment Segments (or Pestel)
Demographic
Economic
Political/Legal
Sociocultural
Technological
Global
Physical Environment
6
Workforce diversity
Shift in work or career preference
Shift in preference in products or service
Attitudes about quality of life
Etc.
General environment Segments (or Pestel)
Demographic
Economic
Political/Legal
Sociocultural
Technological
Global
Physical Environment
7
New communication technologies
Product innovation
Internet speed
Speed of technology diffusion
Etc.
General environment Segments (or Pestel)
Demographic
Economic
Political/Legal
Sociocultural
Technological
Global
Physical Environment
8
Important political events
Global market trends
Newly industrialized countries
Differences in culture and institutionalization
Etc.
General environment Segments (or Pestel)
Demographic
Economic
Political/Legal
Sociocultural
Technological
Global
Physical Environment
9
Minimizing environmental footprints
Renewable energy efforts
Energy consumption
Pollution (water, soil, air)
Climate change
Etc.
Industry environment & porter’s five forces
10
Competitive Rivalry within an industry
Bargaining power of suppliers
Threats of substitute products
Threats of new entrants
Bargaining power of customers
Industry environment & porter’s five forces
Supplier power increases when:
Suppliers are large and few
No suitable substitute products
Many small buyers
Importance of suppliers’ goods
High switching costs.
Threats of forward integration
11
Industry environment & porter’s five forces
Barriers to entry is high when:
Economies of scale
Product differentiation
Capital requirements
Switching costs
Access to distribution channels
Government policy
Expected retaliation
12
Industry environment & porter’s five forces
The threat of substitute products increases when:
Low switching costs
Lower price of the substitute product
Substitute product’s quality and performance are equal to or greater than the existing product.
13
Industry environment & porter’s five forces
Buyer power increases when:
Large and few buyers
Large purchase
Low switching cost
Backward integration
14
Industry environment & porter’s five forces
Industry rivalry increases when:
Numerous or equally balanced competitors
Slow growth or decline of an industry
High fixed costs
Low switching costs
High strategic stakes
High exit barriers
15
Competitor Analysis
Strategic group
Market/Resource commonality
