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Chapter 9 Responding to the Environment.docx

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Administrative Studies
ADMS 1000
Peter Tsasis

Chapter 9 Responding to the Environment: Developing Business Strategy  Strategy and Planning  Strategy  A comprehensive and integrated plan that states how the organization will use its resources in the pursuit of its mission and objectives.  Strategic Planning  A process that involves defining the mission of the business and laying out the broad strategies or courses of action the firm will use to achieve that mission.  The Five-Forces Model  Threat of New Entrants  Can be new firms or diversifying entrants  Incumbents must create barriers to entry: • Economies of scale • Capital requirements • Switching costs • Access to distribution channels • Cost disadvantages unrelated to scale • Intellectual property (patents, trademarks, trade secrets)  Bargaining Power of Suppliers • How critical are the inputs provided by suppliers? • Are there many suppliers relative to producers?  Bargaining Power of Buyers  Are switching costs for buyers high?  Are competitive products undifferentiated?  How important are the products to buyers?  Are there many buyers relative to producers?  Threat of Substitutes  Is the industry facing many competitive substitutes?  Air vs. rail travel  Movie theaters vs. DVD rentals  CDs vs. MP3 downloads  Rivalry Among Existing Firms Undifferentiated products and low switching costs encourage more  intense rivalry  Many similar producers tend to compete more fiercely  High exit barriers increase competitive rivalry  High fixed costs  Specialized assets and sunk costs  Escalating commitment  Social pressures  Types of Strategies Corporate-level strategy   Identifies the portfolio of businesses that compose the corporation and the ways in which these businesses fit together • Concentration • Market penetration
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