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notes_MGMT101_summary of the book

Aiv these three things are used to help in

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a.iv. These three things are used to help in environmental forecasting – making projections about the scope, speed, and direction of the industry. a.iv.1. Danger in forecasting is that managers sometimes view uncertainties as black and white, which they aren’t. a.iv.2. Some abandon grey areas as irrelevant a.iv.3. Some places use scenario analysis to prepare themselves b. SWOT – strengths, weaknesses, opportunities, and threats. Can be used to describe the general or competitive environment c. General (remote) environment has six segments c.i. Demographic – aging population, rising affluence, changes in ethnic composition, etc c.ii. Sociocultural – changes in beliefs, values or lifestyles. EX: more women in the workforce, inc in temporary workers, greater concern for fitness, etc c.iii. Political/Legal – changes in laws. EX: tort reform, inc in min wage, etc c.iv. Technological – genetic engineering, internet, pollution, etc c.v. Economic – interest rates, unemp rates, CPI, etc c.vi. Global – inc global trade, currency exchange rates, emerging economies, creation of WTO, etc c.vii. These elements can interact with each other, and a change in one can result in a change in another (aging pop -> change in taxes) d. Competitive Enviornment – competitors customer and suppliers. Porter’s five forces d.i. Threat of new entrants – this is based on the barriers to entry d.i.1. Economies of scale – if these exist barriers are higher d.i.2. *Product differentiation – if youre selling a differentiated product, its harder for people to come in because of customer loyalty d.i.3. Capital requirements d.i.4. Switching costs d.i.5. Cost advantages independent of scale such as favorable government policy for existing competitors d.ii. Bargaining power of buyers. Buyer power is higher if: d.ii.1. It’s concentrated or purchases large volumes relative to sales d.ii.2. The products it purchases are undifferentiated d.ii.3. The buyer faces few switching costs
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d.ii.4. The buyers can backward integrate d.ii.5. The industry’s product is unimportant to the buyer d.iii. The bargaining power of suppliers. Supplier power is higher if: d.iii.1. It is more concentrated than the industry it sells to d.iii.2. There are no substitute products for what they sell d.iii.3. The industry is not important to the supplier group d.iii.4. The supplier’s product is important to the buyer’s industry d.iii.5. The supplier’s products are differentiated or there are switching costs d.iii.6. The supplier group poses threat of forward integration d.iv. The threat of substitute products or services d.v. Intensity of Rivalry among competitors – can destabilize industry and erode profits d.v.1. Numerous or equally balanced competitors d.v.2. Slow industry growth – more fighting d.v.3. High fixed or storage costs – pushes firms to inc capacity d.v.4. Lack of differentiation or switching costs – commodities are chosen based on price, dec prices erodes profitability d.v.5. High exist barriers e. There are caveats to industry analysis e.i. Managers shouldn’t avoid industries with low margins e.ii.
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