Learning Objectives

1
Learning Objectives

• To learn to identify the different types of
  environments that affect a firm
• To learn what the components of the industry and
  macroenvironment are
• To learn how to apply environmental evaluation to
  understanding how a firm selects competitive
  strategies

2
The Five Forces Model

• Risk of Entry
• Rivalry among established companies
• Bargaining power of buyers
• Bargaining power of suppliers
• Threat of substitute products
• Complementors

3
Risk of Entry

• Economies of scale
• Brand loyalty
• Absolute cost advantage
• Customer switching costs
• Government regulation

4
Rivalry Among Established Companies

• Industry competitive structure
• Industry demand
• Cost conditions
• Exit barriers

5
Bargaining Power of Buyers

• Size of suppliers
• Size of buyers
• Number of suppliers
• Number of buyers
• Purchase quantity
• Supplier dependence on buyers

• Switching costs
• Supplier competition
• Likelihood of vertical integration by buyer

6
Bargaining Power of Suppliers

• Size of suppliers
• Size of buyers
• Number of suppliers
• Number of buyers
• Number of substitute products that can be
  supplied
• Importance of the product supplied

• Importance of the customer to the supplier
• Supplier product differentiated
• Likelihood of vertical integration by supplier

7
Industry Life Cycle Analysis

• Embryonic industries
• Growth industries
• Industry shakeout
• Mature industries
• Declining industries
• Limitations

8
The Macroenvironment

• Macroeconomic forces
• Global forces
• Technological forces
• Demographic forces
• Social forces
• Political legal forces