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Evaluating a firm´s external environment (Understanding a firm´s general…
Evaluating a firm´s external environment
Understanding a firm´s general environment
Consist of broad trends in the context within which a firm operates that can have an impact on a firm´s strategic choices
Identify some of the threats and opportunities it faces
Often has an impavct on a firm´s threats and opportunities through its impact on a firm´s more local environment
Technological change
Forces firms to rethink their technological strategies
Demographic trends
Is the distribution of individuals in a society in therms of age, sex, marital status, incom, ethnicity, and other personal attributes that may determine buying patterns
Determine wheter its product or services will appeal top customers and how potencial customers for these products and services it might have
Cultural trendes
Is the values, beliefs, and norms that guide behavior in a society
Define whats is right and wrong in a society
Economic climate
Is the overall health of the economic systems within which a firm operates
Varies over time in a distinct pattern
Legal and Political conditions
The laws and legal system´s impact in business, together with the general nature of the relationship between government and business
Specific international events
These include events such as civil wars, political coups, terrorism, wars between countries, famines, and country or regional economic recessions
The structrure-conduct-performance model of firm performance
Describe conditions under which competition in a industry would not develop
Industry structure
number of competitors
heterogeneity of products
cost of entry and exit in a industry
Performance
Individual firms
Economy as a whole
Conduct
Strategies that firms in a industry implements
Industry Structure
Range of options and constraints facing a firm
The five forces model of environmental threats
Identifies
The five most common threats faced by firms in their local competitive environments and the conditions under which these threats are nmore or less likely to be present.
Threat of entry
Proprietary technology
Gives incumbent firms important cost advantages over potencial entrants
Managerial Know-how
For granted knowledge and information hat are needed to compete in an industy on a day to day basis
Favorable access to raw materials
Cost advantages, compared to new entrants, based on favorable access to raw materials
Learning curve cost advantages
The cost of production falls with the cumulative volume of production
Product differentiation
Incumbent firms possess brand identification and customer loyalty that potencial entrants do not
Government Policy as a Barrier to entry
Increase the cost of entry into an industry
Threat of rivalry
Intensity of competition among a firm´s direct competitors
Threat of substitutes
Meet approximately the same customer needs, but do so in different ways
Threat of suppliers
Make a wide variety of raw materials, labor and other critical assets available to firms
Threat of buyers
Purchase a firm´s products or services
Industry Structure and Environmental Opportunities
Complementors
First mover advantages and creating customer switching cost
Firts mover advantages
Opportunities in mature industries: product refinement service, and process innovation
Refining current products
Divestment
Opportunities in declining industries: leadership, niche, harvest and divestment
Threat and opportunity analysis in a international context
Analysis of environmental threats in international context
Tariffs as a barrir to entry
Quotas as a barrier to entry
Nontariff trade barriers
Multinational opportunities
Global opportunities