External environment PPT in English
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This document discusses the external environment that firms operate within, including the remote environment, industry environment, and operating environment. The remote environment includes economic, social, political, and technological factors outside of the firm's control. The industry environment analyzes the competitive forces within an industry, including the threat of new entrants, power of suppliers and buyers, availability of substitutes, and jockeying among existing competitors. Powerful suppliers and buyers can impact industry profitability. Intense rivalry exists when competitors are numerous, industry growth is slow, products lack differentiation, costs are high, and exit barriers are significant. The operating environment consists of interactions with customers, competitors, creditors, labor, and suppliers that directly influence the firm.
External environment PPT in English
- 1. 1 EXTERNAL ENVIRONMENT Remote Environment Industry Environment Operating Environment Firm REMOTE ENVIRONMENT (Global & Domestic) Economic eg. inflation rate, interest rate, disposable income, OPEC’s policy Social eg. beliefs, values, attitudes, opinions, lifestyles. as social attitudes change, so does the demand for various goods and services Political Direction & stability of political factors is a major consideration for managers on formulating company strategy. REMOTE ENVIRONMENT (Global & Domestic) Technological Factors Technological change to avoid obsolence and promote innovation Ecological Factors eg. pollution (water, air, land) Industry Environment (Global and Domestic) Threat of new entrants Powerful suppliers Powerful buyers Substitutes products Jockeying for position Operating Environment (Global and Domestic) Customers Competitors Creditor Labor Suppliers Situasi Industri 5-FORCES DETERMINING INDUSTRY COMPETITION Jockeying Position
- 2. 2 Threat of new entrants (1) New entrants to an industry bring new capacity, the desire to gain market share, and often substantial resources. Six major sources of barriers to entry : 1. Economies of scale the entrants either to come in on large scale or to accept a cost disadvantage. 2. Product differentiation Brand identification creates barrier by forcing entrants to spend heavily to overcome customer loyalty Threat of new entrants (2) 3. Capital requirements 4. Cost disadvantages independent of size eg. effects of learning curve, proprietory technology, access to the best raw materiala sources, government subsidies, assets purchased at pre inflation prices, or favorable location. Threat of new entrants (3) 5. Access to distribution channels 6. Government policy The govt. can limit or even foreclose entry to industries with such controls as license requirements and limits on access to raw materials Powerful Suppliers A suppliers group is powerful if : 1. It is dominated by a few companies and is more concentrated than the industry it sells to 2. Its product is unique or at least differentiated 3. It is not obliged to contend with other products for sale to the industry 4. The industry is not an important customer of the supplier group. 5. It poses a credible threat of integrating forward into the industry’s business. Powerful Buyers (1) A buyer group is powerful if : 1. It is concentrated or purchases in large volumes. 2. The products it purchases from the industry are standard or undifferentiated. 3. The products it purchases from the industry form a component of its product and represent a significant fraction of its cost Powerful Buyers (2) 4. The industry’s product is unimportant to the quality of the buyers’ products or services. 5. The industry’s product does not save the buyer money. 6. The buyers pose a credible threat of integrating backward to make the industry’s product.
- 3. 3 Substitutes Products Substitute products that deserve the most attention strategically are those that : a. are subject to trends improving their price performance trade-off with the industry’s product, or b. are produced by industries earning high profits. Jockeying for position (1) Intense rivalry is related to the presence of a number factors : 1. Competitor are numerous or are roughly equal in size and power. 2. Industry growth is slow, precipatating fight for market share that involve expansion-minded members. 3. The product or service lacks of differentiation Jockeying for position (2) 4. Fixed cost are high or the product is perishable , creating strong temptation to cut prices. 5. Exit barriers are high. 6. The rivals are diverse in strategies, origins, and “personalities”. They have different ideas about how to compete and continually run head-on into each other in the process.