Chapt 2 - Organizational Policy Chpt 2 January 26th, 2012...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Organizational Policy Chpt 2 January 26 th , 2012 Industry: - A group of companies offering products or services that are close substitutes for each other, that satisfy a customers needs. Sector: - A group of closely related industries. Market segments: - Are distinct groups of customers within a market that can be differentiated from each other on the basis of their distinct attributes and specific demands. Changing Industry Boundaries: - Industry boundaries may change overtime as customer needs evolve or new technologies emerge. Once boundaries of an industry are identified, it is the managers duties to analyze competitive forces in the industry environment to identify opportunities and threats. Porter’s 5 forces model helps with that. Porter’s 5 forces model: 1) The risk of entry by potential competitors 2) The intensity of rivalry among established companies within an industry 3) The bargaining power of buyers 4) The bargaining power of suppliers 5) The closeness of substitutes to an industries products - The important issue is to recognize how changes in the 5 forces give rise to new opportunites and threats and to formulate appropriate strategic responses. Risk of potential competitors: - Companies that are not currently competing but have the capacity to do so. Once potential profits rise, more competitors usually enter industry. And viceverse - Economics of Scale/Brand loyalty/Absolute Cost Advantage o Economies of scale: arise when unit costs fall as a firm expands its output 1) Cost reductions gained through mass production a standardized output 2) Discounts on bulk purchases of raw material inputs and component parts 3) The advantages gained by spreading fixed production costs over a
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/02/2012 for the course ACCOUNTING 361 taught by Professor Giarccia during the Spring '11 term at McGill.

Page1 / 4

Chapt 2 - Organizational Policy Chpt 2 January 26th, 2012...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online