MGT341 Competitive Strategy: External Environment Analysis

Determinants of Bargaining Power of Buyers

• The bargaining power of buyers in an industry is determined by factors such as the concentration of buyers, the importance of each individual buyer to the seller, the availability of existing substitute products, and the cost of switching between products.

Determinants of Supplier Power

• The bargaining power of suppliers in an industry is determined by factors such as the concentration of suppliers, the importance of each individual supplier to the buyer, the availability of substitute products, and the cost of switching between suppliers.
• The factor that is NOT used to determine the supplier power in the industry is the availability of existing substitute products to the buyer.

Determinants of Competitive Rivalry

• The nature of product offerings in an industry is determined by factors such as the degree of product differentiation, the level of advertising expense, and the number of firms competing in the industry.
• The element that does NOT determine the competitive rivalry in an industry is the threat of new entrants.

Strategic Groups

• Strategic groups within an industry are based on factors such as the similarity of product lines, the similarity of target markets, and the similarity of production processes.

Determinants of Threat of Substitutes

• The threat of substitutes in an industry is determined by factors such as the availability of substitute products, the price of substitute products, and the level of switching costs.

Strategic Group Maps

• A strategic group map is used within an industry to identify groups of firms that are similar in terms of their product lines, target markets, and production processes.

Five Forces Analysis

• The purpose of the Five Forces Framework is to analyze the competitive structure of an industry and identify the key factors that influence the industry's profitability.
• The determinants for buyer power in a Five Forces Analysis include the concentration of buyers, the importance of each individual buyer to the seller, the availability of existing substitute products, and the cost of switching between products.
• The determinant that is NOT used to determine the threat of new entrants in a Five Forces Analysis is the level of advertising expense.
• The purpose of environmental analysis in strategy development is to identify the key opportunities and threats facing an organization.

Profit Margin Formula

• The profit margin formula represents the ratio of net income to total revenue.

Incumbents and New Entrants

• The term 'incumbents' refers to existing firms in an industry, while new entrants refer to firms that are considering entering the industry.

General Environment Analysis

• The general environment analysis is also known as the PESTEL analysis, which evaluates the political, economic, social, technological, environmental, and legal context in which an organization operates.

Threat of Substitute Products

• The threat of substitute products in the Five Forces Analysis assesses the likelihood that customers will switch to substitute products or services in response to changes in price or other factors.