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The External Environment: Opportunities and Threats. Hierarchy of External Influences. Social Economic Technical Global Political/Legal. Remote Environment. Competitive Environment. Firm. Five Forces Competitor Intelligence Industry Structure Strategic Groups

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Presentation Transcript
the external environment opportunities and threats
The External Environment:

Opportunities and Threats

hierarchy of external influences
Hierarchy of External Influences
  • Social
  • Economic
  • Technical
  • Global
  • Political/Legal

Remote Environment

Competitive Environment

Firm

  • Five Forces
  • Competitor Intelligence
  • Industry Structure
  • Strategic Groups
  • Political/Legal
stakeholders
Stakeholders
  • Shareholders
  • Government
  • Financial Community
  • Host Community
  • Ecological Environment
  • Society in General

Remote Environment

Competitive Environment

Firm

  • Rivals
  • Customers
  • Suppliers
  • Employees
  • Managers
  • Board Members
industry vital statistics
How is the industry defined?

Size

Growth

Key Players: Rivals, customers, suppliers, government agencies

Structure

Performance

Industry Vital Statistics
life cycle stage
Life Cycle Stage

Growth Rate

Time

slide8

Porter’s Five Forces Model of Competition

Threat of New Entrants

Threat of New Entrants

Prices

(+) or (-) influence...

Bargaining Power of Suppliers

Rivalry Among Competing Firms in Industry

Bargaining Power of Buyers

Threat of Substitute Products

Costs

slide9

Threat of New Entrants

Economies of Scale -- Memory

*

Product Differentiation

*

Barriers to Entry

Capital Requirements

*

Switching Costs -- Frequent flyer

*

Access to Distribution Channels

*

Cost Disadvantages Independent of Scale

*

Government Policy

*

Expected Retaliation

*

slide10

Suppliers are likely to be powerful if:

Supplier industry is dominated by a few firms -- Microprocessors

*

Suppliers’ products have few substitutes -- Intel, PowerPC

*

Buyer is not an important customer to supplier

*

Suppliers’ product is an important input to buyers’ product

*

*

Suppliers’ products are differentiated

Suppliers’ products have high switching costs

*

Supplier poses credible threat of forward integration -- Nike

*

Bargaining Power of Suppliers

Powerful suppliers can squeeze industry profits if firms are unable to recover cost increases

slide11

Buyer groups are likely to be powerful if:

Buyers purchases are large relative to seller’s sales -- Wal-Mart

*

Buyers compete with the supplying industry by:

Purchase accounts for a significant fraction of supplier’s sales

*

Products are undifferentiated

*

* Bargaining down prices

Buyers face few switching costs -- Gasoline

*

* Forcing higher quality

*

* Playing firms off of

each other

Buyer presents a credible threat of backward integration

*

Product unimportant to quality

*

Buyer has full information

*

Bargaining Power of Buyers

slide12

Threat of Substitute Products

Keys to evaluate substitute products:

Products with improving price/performance tradeoffs relative to present industry products

Products with similar function limit the prices firms can charge

*

For Example:

  • On-line trading in place of stock brokers
  • Plastic vs. glass vs. aluminum containers for soft drinks
slide13

Intensity of Rivalry Among Existing Competitors

Plays out in the following ways:

Jockeying for strategic position

*

Using price competition -- AT&T vs. MCI

*

Staging advertising battles -- Bud vs. Miller

*

Increasing consumer warranties or service

*

Making new product introductions

*

slide14

Intensity of Rivalry Among Existing Competitors

Cutthroatcompetition is more likely to occur when:

Numerous or equally balanced competitors

*

Slow growth industry -- Heavy trucks

*

High fixed costs

*

High storage costs

*

Lack of differentiation -- Long distance phone svc.

*

Capacity added in large increments

*

Diverse competitors

*

High strategic stakes

*

High exit barriers

*

strategic group map department stores
Strategic Group MapDepartment Stores

High

Quality

Upscale

Branded

Chains

Wholesale

Clubs

Low

Quality

Closeout

Low Price

High Price

strategic group map beer pre light pre microbrew
Strategic Group Map: Beer (Pre-light / Pre-microbrew)

Dark/Full

Guinness

Amber

Regular

Heineken

Miller

Bud

Old Swill

Light

Low Price

High Price

strategic group map beer
Strategic Group Map: Beer

Dark/Full

Guinness

Blackened Voodoo

Anchor Porter

Killian’s Brown

Lowenbrau Dark

Amber

Regular

Killian’s Red

Red Wolf

Amber Bock

Lowenbrau

Sam Adams

Bass Ale

Pilsner Urquell

Old Swill

Bud

Miller

Amstel

Cardinal

Miller Lite

Bud Ice

Milwaukee’s

Best Light

Light

Low Price

High Price

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