Reviewer (Prelim) PDF - Business Landscape

First lesson | 21st Century business landscape Changing landscape of competition Technology has altered the competitive base - Availability of goods and services through retail portals - Entertainment content available on demand 24/7 Mobility of individuals chal...

First lesson | 21st Century business landscape Changing landscape of competition Technology has altered the competitive base - Availability of goods and services through retail portals - Entertainment content available on demand 24/7 Mobility of individuals challenges businesses to rethink their business models - Gasoline stations as dining and convenience store destinations - Personal assets utilized as commercial resources Globalization Lifting and/or reduction of import tariffs – enabling entry of foreign brands in several industries and product categories. Worldwide spread of manufacturing bases – gaining access to skilled inexpensive labor and domestic markets Improvement of manufacturing standards, operating efficiencies, workers’ wages Outsourcing of other business functions Global Connectivity Information age – enabling quicker access to customers through social media, email, online advertising, Flexibility of mobile gadgets enables users to multi-task Business functions carried out online, expediting transactions, eliminating the traditional middle-man Key Business Concept Core competence: Resources and capabilities that serve as the source of a business organization’s competitive advantage Strategic Intent: Leveraging a firm’s internal resources, capabilities, and core competencies to accomplish a firm’s goals in a competitive environment. Strategic Mission: Statement of a firm’s unique purpose and the scope of its operations in product and market terms Stakeholders Theory Stakeholders: Individuals and groups who can affect, and are affected by outcomes that are achieved, and who have enforceable claims on a firm’s performance. Capital Market Stakeholders Product/Market Stakeholders Organizational Stakeholders —------------------------------------------------------------------------------- Lesson 2 | External Environment Analysis General Environment DEMOGRAPHICS - Population Size - Age Structure - Geographic and Ethnic Mix - Income Distribution Generations Baby Boomers : 1946 – 1960 (60-76 years old) Gen X: 1961 -1980 (40-59 years old) Gen Y (Millenials) 1981 – 2000 (22-40 years old) Gen Z: 2000 – 2012 (8-23 years old) Economic segment - Inflation Rates - Interest Rates - Gross Domestic Product - Per Capita Income - Traditional Livelihood Sources - Growth Industries Political Segment - Political System - National and Local Government - Tax Laws - Investor Incentives Socio-Cultural Segment - Social norms and practices - Religious beliefs and values - Cultural traditions - Social trends, popular culture Technological Segment - Communications infrastructure - Transportation infrastructure and facilities - Stability of supply of essential utilities - Workforce adaptability to tech innovations Global Segment - Trade policies - Local currency valuation - Regional trade environment - Availability of foreign-sourced commodities —------------------------------------------------------------------------------------ Lesson 3 | Industry Environment Analysis | Porter’s 5 Forces Forces Model 1. Threat of New Entrants 2. Bargaining Power of Suppliers 3. Bargaining Power of Buyers 4. Threat of Substitute Products 5. Intensity of Rivalry Among Competitors Threat of new entrants Barriers to Entry Expected Retaliation from Existing Firms Barriers to Entry - Economies of Scale: Marginal improvements in efficiency that a firm experiences as it incrementally increases its size. - Product Differentiation: Perception that existing products are unique, creating product/brand loyalty. - Capital Requirements: Capital required for successful market entry may be too large or not available. - Switching Costs: One-time costs customers incur when buying from a different supplier. - Access to Distribution Channels: New entrants have to persuade distributors and retailers to carry their products; in addition to, or in place of those already being stocked. - Cost Disadvantages Independent of Scale: Favorable access to raw materials, favorable business location, etc - Government Policy: Licensing and permit requirements, congressional franchises, etc. Retaliation From Existing Firms - When existing firms have substantial investments in assets with no alternative uses. - When existing firms have substantial resources. - There is a lack of differentiation or low switching costs where customer purchasing decisions are based solely on price. - Capacity augmented in large increments where substantial increases in capacity can be disruptive to a balance between industry supply and demand. - Diverse competitors where it is difficult to identify an industry’s competitive rules. - High strategic stakes where success of a diversified firm in one industry may influence its effectiveness in other industries. - When industry growth is slow or constrained where firms battle to defend their market share against the newcomer. - High exit barriers such as separation pay, strategic inter-relationships, emotional barriers, government and social restrictions. Bargaining power of suppliers The supplier group is powerful when - It is dominated by a few large companies - Satisfactory substitute products are not available to industry firms - Industry firms are not a significant customer group for the supplier group - Suppliers’ goods are critical to buyers’ marketplace success. - The effectiveness of suppliers’ products has created high switching costs for industry firms. - Suppliers are a credible threat to integrate forward into the buyers’ industry. Bargaining Power of Buyers The Buyer Group is powerful when - They purchase a large portion of the industry’s output. - The product being produced from an industry accounts for a significant portion of the buyers’ cost. - They could switch to another product at little, or no cost. - The industry’s products are undifferentiated and standardized, and buyers can integrate backward into the sellers’ industry. Threat of substitute products Substitute products are different goods or services from outside a given industry that perform similar or the same functions as a product that the industry produces. Intensity of rivalry among competitors Competitive rivalry intensifies when a firm is challenged by a competitor’s actions or when an opportunity to improve market position is recognized. Factory Influencing Intensity of Rivalry - Numerous or equally balanced competitors - Slow industry growth, where firms battle to increase their shares by attracting competitors’ customers - High fixed costs or high storage costs