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Questions and Answers
What is strategy formation?
The process of developing and implementing plans to achieve an organization's long-term goals.
Which of the following are types of external environment?
Match the external environmental forces with their definitions:
Economic Forces = Factors affecting the economy such as growth and interest rates. Technological Forces = Factors related to technological advancements and infrastructure. Political, Legal And Government Forces = Government regulations and political stability. Social, Cultural, Demographic, Natural Environmental Forces = Demographic changes and cultural attitudes.
PESTEL analysis is used to assess the competitive intensity of an industry.
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What does PESTEL stand for?
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Which of the following are barriers to entry?
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What is the bargaining power of suppliers?
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The bargaining power of buyers increases when there are fewer buyers in the market.
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The availability of alternative products or services that can satisfy customer needs is known as the threat of ______.
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What factors affect the threat of substitutes?
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Study Notes
Strategic Formulation
- Development and implementation of plans aimed at achieving long-term organizational goals.
External Environmental Factors
- Comprises outside influences that affect business operations.
- Helps organizations adapt to changes, identify growth opportunities, mitigate risks, and aligns strategies with the business landscape.
Types of External Environment
- Micro Environment: Immediate environment, including customers and suppliers.
- Macro Environment: Larger societal forces affecting all businesses.
Forces in External Environment
- Economic: Influences such as growth, interest rates, and exchange rates.
- Technological: Innovations, research advancements, and infrastructure.
- Competitive: Factors related to market competition.
- Political, Legal, and Government: Regulations, stability, and incentives.
- Social, Cultural, Demographic, Natural: Societal trends and demographic shifts.
External Environment Analysis Tools
- PESTEL Analysis: Evaluates Political, Economic, Social, Technological, Environmental, and Legal factors impacting operations.
- Porter’s Five Forces Analysis: Assesses industry competitiveness and profitability through five key factors.
PESTEL Analysis Breakdown
- Political: Government policies, stability, and incentives.
- Economic: Economic cycles, interest rates, and exchange fluctuations.
- Social-Cultural: Demographics, cultural attitudes, and lifestyle trends.
- Technological: R&D and technological capabilities.
- Environmental: Impact of climate change and natural resources.
Porter’s Five Forces Analysis
- Threat of New Entrants: Difficulty for newcomers, influenced by existing competitors and high barriers to entry.
- Bargaining Power of Suppliers: Suppliers can demand better prices based on their control and dependency.
- Bargaining Power of Buyers: Customers’ ability to negotiate favorable terms impacts supplier dynamics.
- Threat of Substitute Products: Availability of alternatives affects pricing and competition.
- Rivalry Among Existing Competitors: Intensity of competition influences market dynamics.
Barriers to Entry
- Economies of scale, product differentiation, capital requirements, and government policies.
Supplier Power Factors
- Number and concentration of suppliers, product differentiation, and switching costs.
Buyer Power Factors
- Number and concentration of buyers, product differentiation, and switching costs.
Threat of Substitutes Factors
- Price-performance ratio and buyer switching costs.
Competition and Profitability
- All these forces collectively shape market competitiveness and influence overall business success.
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Description
This quiz covers the fundamentals of strategy formation, emphasizing the importance of anticipating external environmental factors. It explores how organizations can develop plans to meet long-term goals while adapting to changes and identifying growth opportunities.
