Business Environment and Porter's Diamond

Factors outside a company's control that influence its decisions and performance. These include the general environment and competitive landscape.

A broad set of external factors like socio-economic systems, political climate, and cultural trends that affect all businesses.

External factors that directly impact a company's day-to-day operations within a specific industry. It includes competitors, customers, and suppliers.

Factors that present opportunities for a company to expand its operations, improve its position, or gain an advantage.

Factors that pose a threat to a company's operations, stability, or profitability.

Analyzing the general environment helps a company understand the big picture and its impact on specific operations, considering political, economic, and social aspects.

A framework developed by Michael Porter to explain the competitive advantage of nations and how specific industries within those nations thrive. It examines factors like factor conditions, demand conditions, related and supporting industries, and firm strategy, structure, and rivalry.

The Porter Diamond helps understand how belonging to a specific country and industry impacts a company's competitive advantage in the global market.

Factors that influence a country's economic competitiveness, including availability of skilled labor, infrastructure, and technology.

The level of demand for goods and services within a country. Strong domestic demand supports businesses.

Other industries in the same or related sectors that keep each other competitive, driving innovation and growth.

How companies within an industry compete, including their strategies, organizational structures, and rivalry.

Methods for analyzing and predicting future trends and events in a dynamic environment.

A planned representation of the future environment under different conditions, like optimistic, pessimistic, or expected scenarios.

A structured examination of the general environment of an organization, identifying key factors and their potential impact.

Significant environmental variables that affect a company's business, such as economic conditions, technological advancements, or regulatory changes.

A group of companies offering products or services that are close substitutes for each other.

Companies that provide substitute products, meaning their products can be used interchangeably by customers.

The process of understanding and analyzing the forces that shape competition within an industry.

The degree to which a product can be replaced by another product, considering both customer needs and producer capabilities.

When products can be easily swapped out for each other by both consumers and producers.

When products are distinct and cannot be easily replaced, meaning they have unique features or cater to specific needs.

The barriers that prevent new businesses from entering a particular industry.

The risk premium charged by financial institutions to compensate for the potential of a business failing.

Groups of companies within the same industry that compete in similar ways, offering similar products or services, targeting similar customer segments, and employing comparable strategies.

The ease with which companies can move between strategic groups, determined by barriers to entry and exit.

Factors that prevent companies from easily entering or leaving a strategic group, such as high investment costs, regulations, or brand reputation.

The degree to which companies within a strategic group are actively competing with each other, influenced by factors like market share, product differentiation, and price competition.

The potential attractiveness of a strategic group based on its opportunities and threats. A group with high growth potential and low risk will be more attractive.

New companies aiming to enter a specific industry, drawn by its attractiveness.

Entry barriers that are extremely difficult or impossible to overcome, regardless of the resources the firm has.

Entry barriers that can be overcome depending on the firm's resources and capabilities, often related to additional costs.

An excess of installed operating capacity within an industry can lead to intense competition as firms struggle to utilize their resources.

When competitors differ significantly in their strategies, origins, and approaches, competition becomes more intense due to difficulty in predicting behavior.

When multiple firms are highly interested in an industry's success, competition intensifies as they actively pursue their goals.

When the industry's success is attractive to many firms, they compete fiercely to achieve their own goals, potentially leading to more aggressive actions.

The degree to which companies in an industry have similar market shares. A concentrated industry has a few dominant players, while a fragmented one has many smaller competitors.

Refers to how quickly an industry is growing. Emerging industries are on the rise, while declining industries are shrinking.

Factors that make it difficult for companies to leave an industry. High exit barriers force companies to stay and compete even when profitability is low.

Costs incurred when a customer switches from one supplier to another.

The mix of fixed costs (staying the same regardless of production) and variable costs (changing with production). A high proportion of fixed costs creates pressure to operate at full capacity and compete aggressively.

The extent to which companies offer products that are different from their competitors. High product differentiation reduces competition because customers are loyal to specific brands.

The more intense the competition, the greater the pressure on businesses. Intense competition can lead to price wars, advertising battles, and other efforts to win customers.