BSM 600 Chapter Notes - Chapter 2: Product Differentiation, Sunk Costs, Big Data
17 May 2016
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Business environment of a firm = all external influences that affect its decisions and performance. Core of firm"s business environment = formed by relationships with customers, suppliers, and competitors: its industry environment . Basic principles: to make profit a firm must create value for customers. Must understand customers: in creative value, firm acquires goods and services from suppliers. Must understand suppliers and manage relationships with them: ability to generate profitability depends on intensity of competition among firms that compete for the same value-creating opportunities. Don"t just focus on pestel/external forces instead focus on how they affect the three players/industry environment (customers, suppliers, competition) Firm is surrounded by industry environment (customers, suppliers, competition) which is surrounded by remote environment (pestel) Prerequisite for profit = value for customer: value = price a customer is willing to pay for something exceeds costs incurred by the firm.
