ECON 1 Lecture Notes - Lecture 10: Product Differentiation, Differentiated Services, Brand Equity
Document Summary
External analysis: industry structure, competitive forces and strategic groups. Understanding the forces in the external environment allows managers to mitigate threats and leverage opportunities. A firm is embedded in different layers in its environment. The firm falls into a strategic group, the set of companies that pursue a similar strategy within a specific industry. The strategic group, in essence, consists of the firm"s closest competitors. Just outside the strategic group is the industry in which the company operates. We can group the forces at the most macro level into six segments: political, economic, sociocultural, technological, ecological and legal which form the acronym. The political environment describes the processes and actions of government bodies that can influence the decisions and behaviour of firms: economic factors. The economic factors in the external environment are largely macroeconomic, affecting economy-wide phenomena. Managers need to consider how the following five macroeconomic factors can affect firm strategy:
