Test3_StudyGuide

Test3_StudyGuide - Chapter 2 Study Guide The External and...

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Chapter 2 Study Guide The External and Internal Environments I. Definitions – External environment, task environment, internal environment (see Figure 2. 1) a. Opportunities + Threats = External b. Strengths + Weaknesses = Internal c. SWOT Analysis II. The Task Environment a. Five Forces Model (determining profit potential of an industry) i. Threat of Entry – See Barriers to Entry (page 30), Economies of Scale, and Brand Loyalty (examples of FedEx and DHL) ii. Bargaining Power of Buyers – When are buyers more powerful? When are buyers in a weak position? See Switching Costs (page 31). iii. Bargaining Power of Suppliers – Suppliers provide inputs to the firm. What are the conditions when suppliers are powerful? iv. Threat of Substitutes – Example, new technologies render others obsolete. v. Intensity of Rivalry – Factors that determine rivalry: 1. Nature of the Product – Commodity products vs. Differentiated products 2. Demand and Supply Conditions – Can firms raise prices? Is there enough capacity (for example, to refine oil… see page 34). What are barriers to exit? See figure 2.3 on page 35. 3. Cost Structure of Firms 4. Competitive Structure – fragmented vs. consolidated industry III. Synthesis – Please study Figure 2.4 on page 38. It’s a nice representation of the 5-Forces Model IV. The General Environment – Indirectly influences firms a. Political-Legal – laws and regulations b. Economic Forces – interest rates, dollar strength, inflation, etc c. Socio-Cultural Forces – See example of tobacco industry on page 41. Do you agree? d. Technological – Does it re-shape competition within an industry? Class example – Google. e. Demographic and International – We discussed “The World is Flat” here – growth in China and India V. Dynamic Changes in the External Environment a. Incremental vs. Discontinuous Change (page 42) b. What is Punctuated Equilibrium c. Environmental Uncertainty – Collecting data and exerting control mechanisms VI. Internal Environment a. Culture – shared values of employees b. Employees (human capital) c. Resources – tangible vs. intangible. Which are more important (see Resource-Based View, page 46)
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Chapter 2 Practice Questions (answers below) 2.1) Which of the following gives buyers more power according to the five forces model? A) There are many buyers. B) They can choose between equivalent products from many firms. C) Switching costs are high. D) They purchase small quantities. 2.2) The task environment is more favorable when: A) additional competitors are entering. B) overall customer demand is growing. C) the supplier base is shrinking. D) overall customer demand is shrinking. 2.3) Outcomes of changes in the characteristics of a population (i.e., age, gender, and social class) are: A) cultural forces. B)
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Test3_StudyGuide - Chapter 2 Study Guide The External and...

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