Textbook Notes (363,693)
United States (204,655)
Management (20)
33:620:301 (19)
Xi Wang (11)

Management Ch 3 Notes.docx

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Xi Wang

Intro to Management Chapter 3 Notes Evaluating a Company’s External Environment a) Questions managers should address in analyzing and making strategic sense of their external situation: 1) What are the strategically relevant factors of the macro-environment? - The macro-environment encompasses 6 key things: political factors, economic conditions in the firm’s general environment, sociocultural forces, technological factors, environmental factors (concerning the natural environment), and legal/regulatory conditions. - An analysis of the impact of these factors is known as a PESTEL (political, economic, social, technological, environmental, and legal forces) analysis - Strategically relevant mean important enough to have a bearing on the decisions the company ultimately makes about its long term direction, objectives, strategy, and business model 2) How strong are the industry’s competitive forces? - Five sources of competitive pressure: competition from rival sellers, competition from potential new entrants to the industry, competition from sellers of substitute products, supplier bargaining power, and customer bargaining power - Strongest of five forces is usually rivalry for buyer patronage among competing sellers of a product or service - Rivalry between sellers of similar products increases when buyer demand is growing slowly or declining, as it becomes less costly for buyers to switch brands, and as products of rival sellers become less strongly differentiated, when there is excess supply or unused production, as number of competitors increases and they become equal in size and capacity, and when high exit barriers keep unprofitable firms from leaving industry. - Newcomers to the market often encounter barriers to entry, such as cost advantages enjoyed by industry incumbents, strong brand preferences and high degrees of customer loyalty, strong network effects in customer brand, high capital requirements, difficulties of building a network of distributors or dealers, and restrictive gov’t policies - The strength of competitive forces from substitute products depends on whether substitutes are readily available and attractively priced, whether buyers view substitutes as being comparable or better in terms of quality, performance, etc., and whether the costs that buyers incur in switching to substitutes are low or high. - Whether suppliers of industry members represent a weak or strong competitive force depends on the degree to which suppliers have sufficient bargaining power to influence terms and conditions of supply in their favor; things that affect supplier bargaining power include whether demand for suppliers’ products is high and they are in short supply, and refer to page 86 for the rest - Buyer bargaining power increases when buyer demand is weak in relation to industry supply (buyers will lower demand can press for better deals and special treatment), increases when industry goods are standardized or differentiation is weak, increases when their costs of switching brands is relatively low, when buyers are large and few in number relative to the numb
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