BM Core 2 - Lesson 2

• General environment dimensions that influence an industry and firms within it
• Industry environment factors that directly influence a firm and its competitive actions and responses
• Competitor analysis: how companies gather and interpret information about their competitors
• Analysis of the general environment focuses on environmental trends and implications
• Analysis of the industry environment focuses on factors influencing an industry’s profitability potential
• Analysis of competitors focuses on predicting competitors’ actions, responses, and intentions
• External environmental analysis helps firms cope with ambiguous and incomplete environmental data
• Scanning: identifying early signals of environmental changes and trends
• Monitoring: detecting meaning through ongoing observations of environmental changes and trends
• Forecasting: developing projections of anticipated outcomes based on monitored changes and trends
• Assessing: determining the timing and importance of environmental changes and trends for firms’ strategies and management
• Opportunity: a condition in the general environment that helps a company reach strategic competitiveness if exploited effectively
• Threat: a condition in the general environment that may hinder a company’s efforts to achieve strategic competitiveness
• Scanning entails the study of all segments in the general environment
• Monitoring involves observing environmental changes to identify emerging trends
• Forecasting entails developing feasible projections based on detected events and trends
• Assessing aims to determine the timing and significance of identified environmental changes and trends
• Demographic segment concerns population size, age structure, geographic distribution, ethnic mix, and income distribution
• Economic environment refers to the nature and direction of the economy in which a firm competes
• Political/legal segment involves organizations and interest groups competing for attention and resources
• Sociocultural segment focuses on a society’s attitudes and cultural values
• Technological segment includes creating new knowledge and translating it into new outputs
• Global segment includes new global markets, changing existing markets, and international political events
• Global focusing is a cautious approach to globalization focusing on global niche markets
• Sustainable physical environment segment refers to changes in the physical environment and sustainable business practices
• Industry: a group of firms producing products that are close substitutes
• Identifying new entrants is important as they can threaten existing competitors’ market share
• Entry barriers determine the likelihood of new competitors entering an industry
• Economies of scale: cost per unit decreases with increased production quantity
• Product differentiation: customers perceive a firm’s product as unique over time
• Capital requirements are needed for physical facilities, inventories, and marketing in a new industry
• Switching costs: one-time costs customers incur when buying from a different supplier
• Access to distribution channels creates switching costs for distributors
• Substitute products perform similar functions to those in a given industry
• Analysis of the five forces in an industry determines its attractiveness for earning returns
• Strategic group: set of firms emphasizing similar strategic dimensions and using a similar strategy
• Competitive rivalry is greater within a strategic group than between groups
• Competitor analysis focuses on understanding competitors’ objectives, strategies, assumptions, and capabilities
• Competitor intelligence: data gathered to anticipate competitors’ objectives and strategies
• Complementors: companies selling goods or services compatible with the focal firm