Sm The Environment Exam

Front 1

For the airline industry, an initial list of influences under the six PESTEL analysis categories might include the following:

Back 1

Front 2

What are the so-called "key drivers for change"

Back 2

Key drivers for change are the high-impact factors likely to affect significantly the success or failure of strategy. Typical key drivers will vary by industry or sector.

- For ex- ample, a clothing retailer may be primarily concerned with social changes driving customer tastes and behaviour, for example forces encouraging out-of-town shopping.

Front 3

How does the economic theory define an "industry" ?

Back 3

‘a group of firms producing the same principal product’

or, more broadly,

‘a group of firms producing prod- ucts that are close substitutes for each other

Front 4

What is the purpose of Competitive forces - the five forces framework developed by Porter?

Back 4

Porter’s five forces framework was originally developed as a way of assessing the attractiveness (profit potential) of different industries. Porter’s essential message is that where these five forces are high, then industries are not attractive to compete in.

The five forces constitute an industry's structure.


Front 5

Draw the Porter's 5 forces framework

Back 5

Front 6

Describe the threat of entry.

Back 6

● Scale and experience.
● Access to supply or distribution channels.
● Expected retaliation.
● Legislation or government action.
● Differentiation.

Front 7

Describe the threat of substitutes

Back 7

● The price/performance ratio
● Extra-industry effects

Front 8

Describe the power of buyers

Back 8

● Concentrated buyers.
● Low switching costs.
● Buyer competition threat.

Front 9

Describe the power of suppliers

Back 9

● Concentrated suppliers.
● High switching cost.
● Supplier competition threat.

Front 10

Describe the competitive rivalry

Back 10

Competitive rivals are organisations with similar products and services aimed at the same customer group (that is, not substitutes).

● Competitor balance
● Industry growth rate.
● High fixed costs.
● High exit barriers.
● Low differentiation.

Front 11

Apply the 5 forces to the case of consolidating steel industry.

Back 11

Front 12

What are the key issues in using the five forces framework?

Back 12

● Defining the ‘right’ industry.

● Converging industries.
- Technological change has brought convergence between the telephone and photographic industries, for example

● Complementary products
- Dell and Microsoft are complementors insofar as computers and software are complementary products for buyers.

Front 13

What issues raise the complementors in the Porter's model?

Back 13

Complementors raise two issues:
1. Complementors have opportunities for cooperation (companies keep in touch with their technological developments)

2. There is a potential for some complementors to demand a high share of the available value for themselves. (Microsoft has been much more profitable than the manufacturers of complementary computer products and its high margins may have depressed the sales and margins available to com- panies like Dell.)

While Porter’s five forces sees organ- isations as battling against each other for share of industry value, comple- mentors may cooperate to increase the value of the whole cake.

Front 14

Draw the industry life cycle

Back 14