21632 Chapter Notes - Chapter 2: Switching Barriers, Vertical Integration, Pest Analysis
The Environment - External Context
Layers of the Business Environment:
-Macro-environment
-Industry or sector
-Markets and competitors
-The organisation
Three concepts of change:
-Megatrends
-Inflexion points
-Weak signals
Porter’s Five Forces:
•Threat off entry
•Threat of substitutes
•Power of buyers
•Power of suppliers
•Extent of rivalry between competitors
Entry barriers:
-Scale and experience
-Access to supply or distribution channels
-Expected retaliation
-Legislation or government action
-Differentiation
Power of buyers:
-Concentrated buyers
-Low switching costs
-Buyer competition threat
Power of suppliers:
-Concentrated suppliers
-High switching costs
-Supplier competition treat
Factors defining the extent of rivalry in a
market:
-Competitor balance
-Industry growth rate
-High fixed costs
-High exit barriers
-Low differentiation
Types of industry:
•Monopolistic
•Oligopolistic
•Hyper-competitive
•Perfectly competitive
Implication of five forces analysis:
-Which industries to occupy
-What influence may be exerted
-How competitors are differently affected
Issues of the five force framework:
-Defining the ‘right’ industry
-Converging industries
-Complementary organisations !
Market Segment - group of customers who have similar needs that are different from customer
needs in other parts of the market.
Strategy Canvas - compares competitors according to their performance on key success factors in
order to establish the extent of differentiation, highlighting three features:
-Critical success factors: factors valued by customers or provide a significant advantage in terms
of cost
-Value curves: graphic depiction of how customers perceive competitors’ relative performance
across the critical success factors
-Value innovation: creation of new market space by excelling on established critical success
factors
Strategic Groups - organisations within an industry or sector with similar strategic characteristics,
following similar strategies or competing on similar bases.
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Document Summary
Porter"s five forces: threat off entry, threat of substitutes, power of buyers, power of suppliers, extent of rivalry between competitors. Factors de ning the extent of rivalry in a market: Types of industry: monopolistic, oligopolistic, hyper-competitive, perfectly competitive. Market segment - group of customers who have similar needs that are different from customer needs in other parts of the market. Strategy canvas - compares competitors according to their performance on key success factors in order to establish the extent of differentiation, highlighting three features: Critical success factors: factors valued by customers or provide a signi cant advantage in terms of cost. Value curves: graphic depiction of how customers perceive competitors" relative performance across the critical success factors. Value innovation: creation of new market space by excelling on established critical success factors. Strategic groups - organisations within an industry or sector with similar strategic characteristics, following similar strategies or competing on similar bases.
