NME Business Environment Lesson: International Environment ...
Industry & International Environment
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Transcript of Industry & International Environment
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8/6/2019 Industry & International Environment
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INDUSTRY & INTERNATIONAL
ENVIRONMENT
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INDUSTRY ENVIRONMENT
3 Important sectors
1. Customers2. Suppliers
3. Competitors
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INDUSTRY ENVIRONMENT -Customer
sector
Strategist must include 3 factors when analyzing
industry in terms ofcustomer segment
1. Buyer Identification
2. Demographic factors
3. Geographic locations
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INDUSTRY ENVIRONMENT -Customer sector
.continued
Distinct classes of buyer
Availability Price
Convenience Quality Warranty
Credit Reputation
Competitive product Product Turnover
Consumer Recognition Profit Potential
Product Availability Promotional & Merchandising support
Product Line-Breadth Supply Dependability
Cost vs. Profitability Price Product Performance
Financing Product Information Source Availability
Legal Conformity Product line Technical Assistance
CONSUMER
Retailers and/or Wholesalers
Industrial and/or institutional Buyers
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Industry Environment- Supplier
Sector1. Suppliers acquire more power if there industry is
more concentrated than the industry to which they
sell
2. The power of the supplier to raise price & lower
profits is lessened when the buyer firm is a
monopolist or oligopolies
3. The power of the supplier to raise price & lower
profits is greatest when the buyer is not an important
customer
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Industry Environment- Supplier
Sector4. The supplier has least power when there are
substitute materials available at a reasonable
cost and power is the maximum when thesubstitutes are not available
5. The power of the supplier is greatest when the
supplier can integrate forward. However the
threat can be offset if the buyer can integrate
backward
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Industry Environment- Supplier
Sector6. Supplier power is more when its product are
differentiated & switching cost is high
7. Suppliers power is high when they can supply
a component at cheaper rate than buyers can
make it themselves
8. When the suppliers product are crucial for
buyers market place success
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Industry Environment- Supplier
Sector1. Availability & cost of raw materials and sub-
assemblies
2. Availability & cost of energy
3. Availability & cost of energy
4. Availability & cost of labor
5. Lead Time
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Industry Environment- Competitor sector
ENTRY & EXIT OF MAJOR COMPETITORS
A) Barriers to entry
Product differentiation
Economies of scale
Absolute cost advantage, independent of size
Learning experience curve effects
Technology & specialized know how of firms already inindustry
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Industry Environment- Competitor sector
6. Access to marketing channels
7. Brand preference & customer loyalty
8. Capital requirement
9. Likely reaction of current firms
10. Regulatory policies
11. Tariffs & international trade restrictions
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Industry Environment- Competitor
sectorBARRIERS TO EXIT1. Managerial values prevent it
2. Other products or services are related to exitcandidates
3. Costs are sunk in assets
4. Direct exit costs are high
5. Indirect costs may reduce exit behavior
B) Availability to substitutes
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Industry Environment- Competitor
sectorC. Changing Fashions
D. Internet
E. Intensity of rivalry1. Number of equally balanced competitors
2. Slow industry growth
3. High fixed or storage cost4. Lack of differentiation or switching cost
5. High strategic stakes
6. High exit barriers
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INTERNATIONAL ENVIRONMENT
THREATS- From host countries;
1. Ownership
2. Employment3. Profits & Fees
4. Internal Debt-capital
5. Training & Development6. Host country markets
7. Technological bases
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INTERNATIONAL ENVIRONMENT
THREATS from potential risk
1. Political Risk
2. Social risk
3. Economic risk
4. Financial risk
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INTERNATIONAL ENVIRONMENT
OPPORTUNITIES- Driving forces
1.Increasing globalization of the industry
2.Product innovation3.Marketing innovation
4.Entry & Exit of major firms
5.Growing buyer preferences for differentiatedproducts
6.Diffusion of technical know-how across morecompanies & more countries
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INTERNATIONAL ENVIRONMENT
7. Changes in the long term industry growth rate
8. The internet & e-commerce opportunities & threats
9. Shifts in buyer demographics & new ways of usingproducts
10. Technological changes
11. Changing societal concerns, attitudes & lifestyles
12. Regulatory influences & government policy changes
13. Changes in uncertainty & risk
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FACTORS AFFECTING DIAGNOSIS
OF ENVIRONMENT
1. Dependency of the firm on the environment
2. Degree of development & complexity
3. Volatility
4. Time
5. Cost of search & luck
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Environmental Threats & Opportunities Profile
GLUECK (ETOP)
Market Industry Growth rate in 7%-8%
p.a. sports cycle -30%
p .a Unsaturated demand
Supplier Mostly ancillaries &associated companies -
spare parts &
components -REP license
for imported rawmaterials available
Technological Technological
upgradation in progress
import of m/c under OGL
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ETOP ANALYSIS
1. List all the most important opportunities &
threats facing the company
2. Assign weight to each factor 0 -1 (Notimportant to important) based on that factors
probable impact on a the Companys strategic
position (All weight sum to 1.00 regardless of
number of factors)
3. Assign a rating to each factor from 1-5 (poor
to outstanding) based on the companys
current response to that particular factor
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ETOP ANALYSIS
4. Get the weighted score -Weight x rating
5. 1-poor, 3 -average, 5 -Outstanding6. Total weighted score -how well the company is
responding to current and expected factor in
environment7. Comments -Why a particular factor was
selected and how weight and rating were
estimated