ACCT2542 - Seminar 1 Summary External Environment Strategy...

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Seminar 1 Summary: External Environment - Strategy is implemented in the direction and scope of an organisation over the long term, where the organisation attempts to achieve competitive edge over its competitors in the changing business cycle environment including both internal and external. - The process of the strategy is achieved through the manipulation of the resources and its competencies. - Therefore, through these the firm can achieve strategic competitiveness and earn above-average returns. External Analysis (opportunities and threats – from SWOT) - Consists of both the general environment and industry environment. - General Environment trends: Little ability to predict Little control Varies across industries - General Environment segments: Demographic – characteristics of population that make up a state or country, e.g. aging population Economic – nature and direction of the economy where the firms operates e.g. interest rates Political – influences the regulations with which the industries must comply e.g. taxation Sociocultural – influences values, beliefs and lifestyles of society e.g. recycling Technological – developments in technology e.g. e-commerce Global – impact of international markets and economies on the organisation e.g. global trade - Opportunity / Threat: A condition in the external environment that helps a company achieve strategic competitiveness. A condition that may prevents the company’s efforts to achieve strategic competitiveness.
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- Industry Environment – Porter’s five-forces model 1. The Threat of New Entrants New entrants can threaten market share and company profitability. Two facts affecting new entrants: o Barriers of entry o Expected retaliation from existing players 2. The Bargaining Power of Suppliers o More concentrated than buyer group o Lack of substitutes o Industry firms are not significant customers to suppliers o Crucial input component o High switching costs for industry firms o Credible threat of forward integration 3. The Bargaining Power of Buyers o Buyers purchase a large portion of the industry’s total output o Buyers are highly concentrated o Industry products are undifferentiated o Low switching costs o Credible threat of backward integration 4. The Threat of Substitute Products and Services o Products/services from outside the industry that perform similar/same functions as the firm’s products or services. o Substitutes take different forms. Product substitution, substitution of need
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o Substitute is cheaper and better quality 5. The Intensity of Rivalry among competitors in an Industry o Competition within the industry Some examples for Industry Analyses Low Profit Potential: low entry barriers, suppliers and buyers have strong position, strong threats from substitute products, intense rivalry among competitors.
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