Average Process
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Elements of a firm's general environment
- technological change
- international events
- demographic trends
- cultural trends
- economic climate
- legal conditions
- political conditions
The S-C-P model for evaluating a firm's environment includes
- structure
- conduct
- performance
In the S-P-C framework structure includes
- number
- homogeneity
- cost
In the S-P-C framework conduct includes
The strategies a firm implements to gain competitive advantage
In the S-P-C framework performance includes
- competitive ; competitive ; parity
- productiveallocative
The Five Forces model of environmental threats includes the threats
- threat of entry
- threat of rivalry
- threat of substitutes
- threat of powerful suppliers
- threat of powerful buyers
Barriers to entry into an industry
- economies of scale
- product differentiation
- cost advantages independent of scale
- government regulation of entry
Industry characteristics that increase the threat of rivalry
- large number of competing firms of similar size
- slow industry growth
- lack of product differentiation
- capacity added in large increments
Definition: complementor
If the customers value a specific firm's product more when they also have another firm's product, the latter firm is a complementor
Common characteristics of mature industries
- slowing growth in total demand
- a slowdown in the increase in industry capacity
- increase in the amount of international competition
- experienced repeat customers
- slowdown in the introduction of new products and services
- an overall reduction in profitability of firms in the industry
The harvest strategy
- implemented by firms which do not intend to stay in the industry
- mostly in declining industries
- long systematic withdrawal
- extracting as much value as possible
- firms should have enjoyed some profits in their history
Characteristics of divestment
- quick withdrawal from an industry
- better for firms without established competitive advantage
Types of competition structures
- monopoly - one firm; costly entry
- oligopoly - a few firms; homogenous products; costly entry and exit
- monopolistic competition - large number of firms; heterogeneous products; low-cost entry and exit
- perfect competition - large number of firms; homogenous products; low-cost entry and exit
When the five threats in the five forces model of environmental threats are low the industry approaches the type of competition structure known as
monopoly
When the five threats in the five forces model of environmental threats are high the industry approaches the type of competition structure known as
perfect competition