30 Questions
What aspect of the organization do economic conditions like interest rates, inflation, and unemployment primarily impact?
Financial performance
In Michael Porter's approach to industry analysis, what does the intensity of competition within an industry depend on?
Basic competitive forces
What do new entrants bring to an industry that makes them threats to established corporations?
Desire to gain market share and substantial resources
Which element of the task environment involves evaluating the impact of environmental issues such as climate change and natural disasters?
Ecological factors
Which individual is considered an authority on competitive strategy?
Michael Porter
What is the primary focus of a corporation's scanning of the environment in terms of analyzing relevant elements?
Intensity of competition
What type of barrier is characterized by declines in the unit costs of a product as the absolute volume per period increases?
Economies of scope
Which barrier involves financial resources needed for infrastructure, machinery, R&D, and advertising?
Capital requirements
What makes it hard for entrants to overcome existing company brand identification and customer loyalties?
Product differentiation
Which factor refers to one-time costs faced by buyers when switching from an existing supplier's product to a new entrant?
Switching costs
What could prevent entry to an industry by controlling factors like licensing requirements and access to raw materials?
Government policy
Which of the following barriers involves cost advantages that a potential entrant cannot replicate?
Cost disadvantages independent of size
What is the main focus of environmental scanning?
Evaluating external and internal information for key stakeholders
Which of the following is NOT included in the natural environment?
Political forces
What does a STEEP analysis focus on when scanning the societal environment?
Sociocultural, Technological, Economic, Ecological, and Political-legal forces
Which environmental force influences our behavior and purchasing decisions?
Sociocultural forces
What is the main difference between the societal environment and the task environment in industry analysis?
Societal environment involves elements directly affecting the corporation; task environment includes general societal forces.
What does industry analysis involve a detailed examination of?
Key factors within a corporation's task environment
What is a substitute product?
A product that appears different but can satisfy the same need as another product
In what situation is Buyer Power considered high/strong?
Buyer switching costs are high
What can increase the Bargaining Power of Buyers?
High threat of backward integration by buyers
What do strategic groups consist of?
Firms pursuing similar strategies with similar resources
What defines a strategic type of firm?
Having a common strategic orientation and unique structure
How do Defenders differ from Prospectors?
Defenders have a limited product line while Prospectors focus on efficiency
What characterizes the product lines of analyzers?
Focus on market opportunities and product innovation
What is a key feature that distinguishes analyzers from reactors?
Operating in two different product-market areas
What defines hypercompetition in an industry?
Constant disequilibrium and change due to player movements
How does market stability get threatened in hypercompetitive environments?
Frequent entry by unexpected outsiders and short product life cycles
What does Richard D’Aveni suggest happens to environments in hypercompetitive situations?
Escalate towards higher uncertainty and dynamism
What does the term 'reactors' signify in the context of the text?
Companies lacking a consistent strategy-structure-culture relationship
Study Notes
Substitute Products
- A substitute product is a product that appears to be different but can satisfy the same need as another product.
Bargaining Power of Buyers
- Buyer power is high if: • Buyers are more concentrated than sellers • Buyer switching costs are low • Threat of backward integration is high • Buyer is price sensitive • Buyer is well-educated • Buyer purchases product in high volume • Undifferentiated product • Substitutes are available
Bargaining Power of Suppliers
- Refers to the pressure suppliers can exert on businesses by raising prices, lowering quality, or reducing availability of their products.
Relative Power of Other Stakeholders
- Refers to the pressure exerted by other groups or entities, depending on which factor has the greatest influence.
Strategic Groups
- A set of business units or firms that “pursue similar strategies with similar resources.
- Categorizing firms in any one industry into a set of strategic groups is very useful for understanding the competitive environment.
Strategic Types
- A category of firms based on a common strategic orientation and a combination of structure, culture, and processes consistent with that strategy.
- Examples: • Defenders: focused on improving the efficiency of their existing operations. • Prospectors: focused on product innovation and market opportunities.
Environmental Scanning
- Monitoring, evaluation, and dissemination of information from the external and internal environments to key people within the corporation.
Industry Analysis
- An in-depth examination of key factors within a corporation’s task environment.
Task Environment
- Includes those elements or groups that directly affect a corporation and, in turn, are affected by it.
STEEP Analysis
- Sociocultural: social forces that influence attitudes, interests, opinions, and behavior.
- Technological: advances in technology that may affect the organization’s operations, products, or services.
- Economic: economic conditions that may impact the organization’s financial performance.
- Ecological: environmental issues that may impact the organization.
- Political-legal: government policies, regulations, and political stability that may impact the organization.
Hypercompetition
- An industry situation characterized by constant disequilibrium and change due to factors such as: • Short product life cycles • Short product design cycles • New technologies • Frequent entry by unexpected outsiders • Repositioning by incumbents • Tactical redefinitions of market boundaries as diverse industries merge.
Learn about the role of Socio-cultural, Political-legal, Economic, and Technological forces in environmental scanning and industry analysis. Understand how to identify external environmental variables like the natural environment and other factors influencing corporations.
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