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Environ 3
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Environ 3

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  • 1. The Environment of Business III
  • 2. Stakeholders
    • Stockholders : dividend
    • price appreciation
    • Customers : product/service
    • quality
    • Employees : employment
    • wages
    • personal growth opportunity
  • 3. Stakeholders
    • Suppliers : revenue through sale
    • growth opportunity
    • Local community : jobs
    • civic involvement economic development
    • Society at large : economic health environment protection
  • 4. The Components of a Company’s MACROENVIRONMENT Legislation and Regulation Societal Values and Lifestyles Population Demographics Technology The Economy at Large COMPANY Suppliers Substitutes Buyers New Entrants Rival Firms  IMMEDIATE INDUSTRY AND COMPETITIVE ENVIRONMENT
  • 5. Political and Legal
    • Deregulation
    • Repeal of Glass-Steigall Act 1999
    • Tort Reform
    • Disabilities Act
  • 6. Economy
    • Interest rate
    • Exchange rate
    • Unemployment
    • Trend in GDP
  • 7. Technology
    • Reduced height of entry barrier
    • Biotechnology
    • Pollution/Global Warming
    • Wireless communication
    • Miniaturization
  • 8. Socio-cultural
      • Health Consciousness
    • Postponement of family formation
    • More women in workforce
    • Greater concern for environment
  • 9. Demography
    • Aging population
    • Rising affluence
    • Greater disparities in income levels
    • Geographic distribution of population
  • 10. Global
    • WTO
    • Currency Exchange Rate
    • Emergence of China and India
  • 11. #1. Dominant Economic Traits
    • Market Size
    • Scope of Competition (Local, Regional, National, Global)
    • Industry Growth Cycle (Early, Takeoff, Mature, Stagnant, Decline)
    • Number of Rivals and their relative sizes
    • Number of Buyers and their relative sizes
    • Prevalence of Backward and Forward Linkage
    • Ease of Entry and Exit
    • Pace of Technological Change
    • Learning Curve Effect
    • Capital Requirement
    • Profitability (above/below par)
  • 12. #2 Porter’s Five Forces Substitute Products (of firms in other industries) Suppliers of Key Inputs Buyers Potential New Entrants Rivalry Among Competing Sellers
  • 13. Bargaining Power of Buyers
    • - Many small companies and few buyers, Large buyers
    • - Buyers can switch orders between suppliers enabling them to play one supplier against another
    • - Vertical integration is a feasible option
  • 14. Suppliers
    • - Product has few substitutes and are important to the buyers
    • - Products are differentiated to the extent that buyers cannot easily switch
    • - Threat of vertical integration
    • - Buying companies cannot threaten with backward integration
  • 15. Rivalry
    • - Demand conditions : growing/declining
    • - Exit barriers : high/low
    • - Competitive structure : fragmented, consolidated
  • 16. Substitutes
    • - Products serving similar consumer needs
    • sugar vs artificial sweetener
    • taxi vs bus
    • private vs public university
  • 17. Threat of Entry
    • - Brand loyalty
    • - Economies of scale
    • - Entry barriers
    • - Govt. regulation
  • 18. Generic Competitive Strategies
    • Two basic types:
    • - Low cost
    • - Differentiation
    • Three generic strategies resulting from the scope of application :
    • - Cost
    • - Differentiation
    • - Focus.
  • 19. Generic Competitive Strategies
    • COST leadership
    • promoted by means such as frugality, discipline and attention to details.
    • DIFFERENTIATION
    • facilitated by a culture of encouraging innovation, individualism and risk taking.
  • 20. Cost OR Differentiation
    • An organizational structure that is supportive of cost leadership can be ruinous for differentiation
    • e.g.
    • tight control system
    • pursuit of scale economies
    • dedication to learning curve.
  • 21. Stuck in the Middle
    • Being all things to all people can be a recipe for disaster and such firms cannot have a sustainable competitive advantage.
    • Whatever strategy is chosen, it has to be sustainable.
    • This can be made through making it difficult for imitators by putting up a moving target.
  • 22. Risks
    • Cost : imitation
            • technology changes proximity to differentiation
    • Differentiation : imitation
    • loss of attraction of differentiation base
    • Focus : imitation
            • target segment gets unattractive
            • new focusers arrive

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