Business Environment Analysis Quiz

Pestel Ecological Factors

• Broad environmental issues include natural environment and climate change
• The relationship between organizations and the environment can be adversarial or provide business opportunities

Pestel Legal Factors

• Official outcomes of political processes include laws, mandates, regulations, and court decisions
• Many industries have been deregulated, such as airlines, telecom, energy, and trucking

Porter's Five Forces

• The Five Forces Model determines industry profit potential
• Threat of Entry:
  • Low when barriers are high (e.g., economies of scale, network effects, customer switching costs, capital requirements, government regulation)
  • High threat of entry → low industry profit
• Supplier Power:
  • High when supplier industry concentration is high, switching costs are high, and supplier brands are important to consumers
  • High supplier power → low industry profit
• Buyer Power:
  • High when there are few buyers, switching costs are low, and buyer profitability is low
  • High buyer power → low industry profit
• Threat of Substitutes:
  • High when customer awareness is high, substitutes are available, and switching costs are low
  • High threat of substitutes → low industry profit
• Competitive Rivalry:
  • High when industry concentration is low, prices are similar, and discounting is frequent
  • High competitive rivalry → low industry profit

Strategic Groups

• A set of companies with similar strategies in the same industry
• How to model: choose 2 key dimensions, graph companies along dimensions, and bubble size = market share
• Hard-to-reverse investments restrict movement between groups

Resources and Capabilities

• Resources: firm assets that can be used for crafting and executing strategy
• Capabilities: organizational and managerial skills necessary to put resources to good use
• Examples: structure, routines, and culture
• Dynamic Capabilities:
  • Firms need to modify and leverage their resource base
  • Respond to a constantly changing environment

Core Competencies

• Unique strengths embedded deep within a firm
• Allow the firm to strategically position and create higher value or lower costs
• Expressed through structures, processes, and routines

VRIO Framework

• Valuable: helps capture value or offset a threat
• Rare: few firms possess it
• Costly to Imitate: competitors can't develop it for a reasonable price
• Organized to capture value: effective internal organizational structure and coordination

Activity Systems

• A network of interconnected activities
• Can be the foundation of competitive advantage
• Socially complex and causally ambiguous
• Characteristics: one or more elements can be easily observed, but how activities are managed is not as easily observed, and difficult to imitate

Vision, Mission, and Values

• Vision: captures an organization's aspiration and long-term objective
• Examples: Nordstrom's vision ("Provide outstanding service every day, one customer at a time"), Tesla's vision ("Accelerate the world's transition to sustainable transport"), SpaceX's vision ("Make human life multiplanetary")
• Vision is strategic intent and outlines a firm's stretch goal

Strategic Types

• Differentiation:
  • Seeks to create higher value vs. competitors
  • Charges higher prices
  • Focuses on unique product features, service, and marketing
• Cost Leadership:
  • Goals: reduce cost below competitors and offer adequate value
  • Lowers prices for customers
  • Optimizes the value chain for low cost
• Risks and Benefits of Differentiation and Cost Leadership
• Blue Ocean Strategy:
  • Aligns innovation with total perceived consumer benefits, price, and cost
  • Not about out-competing with better features or lower costs, but making a leap in value creation