Competitive Structure Of Industries/Porter's Model, Strategic Groups & Types, Limitations, Critics Of Business Environment.

1. BUSINESS ENVIRONMENT

2. DEFINITION
The definition of
business environment
means all of the
internal and external
factors that affect
how the company
functions including
employees, customers,
management, supply
and demand and
business regulations.

3. MEANING The term ‘business
environment’ connotes
external forces,
factors and institutions
that are beyond the
control of the business
and they affect the
functioning of a
business enterprise.
These include
customers,competitors,
suppliers, government,
and the social,
political, legal and
technological factors
etc.

4. MEANING

5. FEATURES OF BUSINESSENVIRONMENT
(a) Business environment is the
sum total of all factors external
to the business firm and that
greatly influence their
functioning.
(b) It covers factors and forces
like customers, competitors,
suppliers, government, and the
social, cultural, political,
technological and legal
conditions.

6. FEATURES OF BUSINESSENVIRONMENT..
(e) The business environment is dynamic in
nature, that means, it keeps on
changing.
(d) The changes in business environment
are unpredictable. It is very difficult to
predict the exact nature of future
happenings and the changes in economic
and social environment.
(e) Business Environment differs from place
to place, region to region and country to
country. Political conditions in India
differ from those in Pakistan. Taste and
values cherished by people in India and
China vary considerably.

7. CHARACTERISTICSOF INDIANBUSINESS
BUSINESS
Bigger Role
For Govt.
Competition
Opportunities
Management
As a Science
Globalisation
Technology
Waning
Trust
Transition

8. IMPORTANCE OF BUSINESS
(a) Determining Opportunities and Threats: The
interaction between the business and its
environment would identify opportunities for and
threats to the business. It helps the business
enterprises for meeting the challenges
successfully.
(b) Giving Direction for Growth: The interaction
with the environment leads to opening up new
frontiers of growth for the business firms. It
enables the business to identify the areas for
growth and expansion of their activities.
(c) Continuous Learning: Environmental analysis
makes the task of managers easier in dealing
with business challenges. The managers are
motivated to continuously update their
knowledge, understanding and skills to meet the
predicted changes in realm of business.

9. IMPORTANCE..
(d) Image Building: Environmental understanding helps the
business organisations in improving their image by showing
their sensitivity to the environment within which they are
working. For example, in view of the shortage of power,
many companies have set up Captive Power Plants (CPP) in
their factories to meet their own requirement of power.
(e) Meeting Competition: It helps the firms to analyse the
competitors’ strategies and formulate their own strategies
accordingly.
(f) Identifying Firm’s Strength and Weakness: Business
environment helps to identify the individual strengths and
weaknesses in view of the technological and global
developments.

10. OBJECTIVES
Every business enterprise has
certain objectives which
regulate and generate its
activities. Objectives are
needed in every area where
performance and results
directly affect survival and
prosperity of a business.
The vision of Infosys –
“To be globally respected
corporation that provides
best-of-breed business
solutions, leveraging
technology, vendors and
society at large.”

11. Robosoft Technologies is an Indian information
technology company
which provides software
product development
services. Robosoft was
founded in 1996 by
Rohith Bhat, who
established the company
to develop software
products for
theMac market.
The company's Corporate
Office is located in
Santhekatte near Udupi
on National Highway 66.

12. ROBOSOFT TECHNOLOGIES
VISION
Creating memorable products
for the world market by
attracting and empowering
the best minds
MISSION
To consistently win best-of-
show and best-of-class
awards for our products
PURPOSE
To artistically design,
professionally develop,
attentively test software &
hardware products to make
them easily accessible to
millions of consumers which,
in turn, will give the best to
our people & customers

13. 1. EconomicObjectives
Business is basically an economic activity.
Therefore, its primary objectives are
economic in nature. The main economic
objectives of business are as follows
(i) Earning profits
(ii) Creating customers
(iii) Innovations

14. 2.Social objectives
Business does not exist
in a vacuum. It is a part
of society. It cannot
survive and grow without
the support of society.
Business must therefore
discharge social
responsibilities in
addition to earning
profits.
According to Henry
Ford, "the primary aim
of business should be
service and subsidiary
aim should be earning of
profit." The socials
objectives of business
are

15. SOCIALOBJECTIVES..
Supplying desired
goods at reasonable
prices
Fair Remuneration to
employees
Employment
Generation
Fair return to
investor
Social welfare

16. 3.HUMAN OBJECTIVES
Business is run by people
and for people. Labour
is a valuable human
element in business.
Human objectives of
business are concerned
with the well-being of
labour. These objectives
help in achieving
economic and social
objectives of business

17. HUMAN OBJECTIVES..
Labour welfare
Developing human
resources
Participative
management
Labour management
cooperation

18. BUSINESS OBJECTIVES
BUSINESS
GOALS
POWER
QUALITY
PRODUCTS
& SERVICES
CHALLENGING
JOY OF
CREATION
SERVICE
TO
SOCIETY
MARKET
LEDERSHIP
EMPLOYEE
SATISFACTION
&
DEVELOPMENT
GROWTH
PROFIT

19. LIMITATIONS
Unexpected and
unanticipated
events
No sufficient
guarantee
Uncritical Faith
Too much
information

20. TYPES

21. COMPETITIVE STRUCTURE OF INDUSTRIES/PORTER’S 5 MODEL

22. 1.THREAT OF ENTRY
Important common entry
barriers are
1.Government Policy
2.Economies Of Scale
3.Cost Disadvantages
Independent Of Scale
4.Product Differentiation
5.Monopoly Elements
6.Capital Requirements

23. 2.RIVALRY AMONG EXISTING COMPETITORS
Factors influencing the
intensity of rivalry
1.Number of Firms and their
Relative Market Share,
Strengths etc.
2.State of Growth of
Industry.
3.Fixed or Storage Costs.
4.Indivisibility of Capacity
Augmentation.
5.Product Standardisation &
Switching Costs.

24. 2.RIVALRY AMONG EXISTING COMPETITORS..
6.Strategic Stake
7.Exit Barrier
8.Diverse Competitors
9.Switching Costs
10.Expected
Retaliation

25. 3.THREAT OF SUBSTITUTES
An Important force of
competition is the power of
substitutes.
“Substitutes limit the potential
returns in an industry by
placing a ceiling on the price
firms in the industry can
profitability charge .The more
attractive the price
performance alternative
offered by substitute, the
firmer the lid on industry
profits.’’

26. BARGAINING POWER OF BUYERS
Important determinants of the buyer
power, explained by Porter, are the
following
1.The volume of purchase relative to
the total sale of the seller.
2.The importance of the product to
the buyer in terms of the total
cost.
3.The extent of standardisation or
differentiation of the product.
4.Switching costs.

27. BARGAINING POWER OF BUYERS..
5.Profitability of the buyer
(low profitability tends to
pressure costs down).
6.Potential for backward
integration by buyer.
7.Importance of the
industry’s product with
respect to the quality of
the buyer’s product or
services.
8.Extent of buyers’s
information.

28. BARGAINING POWER OF SUPPLIERS
IMPORTANT DETERMINANTS
1.Extent of concentration & domination
in the supplier industry.
2.Importance of the product to the
buyer.
3.Importance of the buyer to the
supplier
4.Extent of substitutability of the
product
5.Switching costs
6.Extent of differentiation or
standardisation of the product
7.Potential for forward integration by
suppliers.

29. RIVAL FIRM
SUPPLIERS
SUBSTITUTE
PRODUCTSBUYERS
NEW
ENTRANTS
POLITICAL
LEGAL
ECONOMIC
TECHNOLOGY
GLOBALISATION
CULTURAL
PHYSICAL
FIRM
INTERNAL
ENVIRONMENT
EXTERNAL
ENVIRONMENT

30. STRATEGIC GROUPS
According to Porter, “a strategic
group is the group of firms in an
industry following the same or
similar strategy along the
strategic dimensions’’.
Normally , a small number of
strategic groups capture the
essential strategic differences
among firms in the industry
although one may even think of
the extreme cases of an industry
having only one strategic group
on the one end and each firm in
an industry amounting to a
strategic group on the other end.

31. IMPLICATIONS OF STRATEGIC GROUPS
This concept has implications for industry analysis &
identification of opportunities & threats
1.A company’s immediate competitors are firms within
the same strategic group
2.The nature and intensity of competition & business
prospects vary from strategic group to group.
3.High mobility barriers normally help insulate the group
from new entrants and facilitate high profitability.
4.Just like entry barriers, mobility barriers can change;
& as they do firms often abandon some strategic
groups & jump into new ones,changing the pattern of
strategic group.
5.The competitive standing of the different strategic
groups would be different with respect to each of the
five competitive forces.

32. LIMITATIONS OF PORTERIAN MODELSPorter has recognised the
role of innovation in
revolutionising industry
structure. Innovations,
according to him, can
unfreeze & reshape
industry structure.
MICHAEL
PORTER

33. ENVIRONMENTAL ANLYSIS & STRATEGIC
MANAGEMENT
Chandler describes strategic
management as “the
determination of the basic
long-term goals &
objectives of an enterprise
& the adoption of courses
and allocation of resources
necessary to carry out
these goals”
Strategic management or
business policy is, thus ,
the means to achieve the
organisational purpose.

34. ENVIRONMENTAL ANLYSIS & STRATEGIC
MANAGEMENT
1.Formulation of Mission &
Objectives
2.SWOT Analysis
3.Strategic Alternatives &
Choice of Strategy
4.Implementation
5.Evaluation

36. BUSINESS CRITICS

37. THANK YOU