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Unformatted text preview: Analyzing Industries & Business Ownership Thursday, September 25 th , 2008 MGM 101 - Introduction to Management Functions Key questions for today: How does The Five Forces Model help us to understand the Industry Environment in which firms operate? What are the additional complexities when a firm operates in more than one industry ? What are the important trends in business ownership? Important Housekeeping Items: You MUST be registered in MGM 101 to write Test 1 next Tuesday. Your test cannot be graded if your name does not appear on ROSI as registered in the course. Test will be written in this room, CC1080 Today The Industry Environment Businesses operate within multiple environments national/ regional/ municipal economies , technological environment, political-legal environment, the socio-cultural environment AND as actors within an industry environment- or even multiple industries The Five Forces Model helps us to understand the dynamics within any firms industry environment Michael Porter: The Five Forces Model SUPPLIER POWER NEW ENTRANTS BUYER POWER SUBSTITUTES RIVALRY Actions of Competitors By understanding the relative strengths of the players in each of these five areas, we can begin to understand the industry situation in which a firm operates Michael Porters Five Forces Model contd. Supplier Power Suppliers can exert power over participants in an industry by threatening to raise prices or reduce the quality of input goods & services Key question is how powerful is any individual supplier to that industry? Can a single supplier bring the industry to its knees, or do players in the industry have the power? Consider: power of Intel relative to PC makers & an individual potato farmer to McCains, which makes a LOT of frozen french fries Michael Porters Five Forces Model contd....
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