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3 Designed to give you knowledge and application of: Section B: Key environmental influences & constraints on business & accounting B1. Political & legal factors B2. Macro-economic factors B3. Social & demographic factors B4. Technological factors B5. Competitive factors

4 Learning Outcomes B5: Competitive factors  Factors that influence level of competitiveness  Activities of an organisation that affect its competitiveness

5 5 main factors or forces that affect the level of competitiveness in an industry or sector The greater the number or strength of these forces The more competitive the industry or sector is Michael Porter (in his 5 forces model) identifies Factors that influence level of competitiveness Refer to Case Study on page 172

6 Threat of alternate products or services Bargaining power of suppliers Bargaining power of buyers Firm structure New entrants Threat of potential entrants Buyers Substitutes Suppliers Competitive rivalry Factors that influence level of competitiveness in an industry

7  existence of economies of scale  high capital requirements  limited access to supply / distribution channels &  strong customer loyalty to existing products Forces Factors affecting strength of the force Threat of new entrants Threat of substitutes  ease with which customer can switch to a competitor’s product Bargaining power of buyers  level of concentration of buyers  volume of purchases  cost of switching to an alternative supplier Continued…

8  level of concentration of suppliers  switching costs for the consumer  level of balance between competitors  level of market maturity  level of fixed costs Forces Factors affecting strength of the force Bargaining power of suppliers Competitive rivalry Refer to Test Yourself 2 on page 177 Continued…

9 4 main departments that can provide a competitive advantage Purchasing By procuring all goods / services an organisation needs more quickly and cheaply than the competition Production By manufacturing the products an organisation sells, more efficiently and effectively than its competitors Service By providing a high level and quality of service Marketing By efficiently and effectively  ascertaining the current needs & demands of customers and  communicating to the market what the organisation’s products and services are Activities of an organisation that affect its competitiveness

10 RECAP  Factors that influence level of competitiveness  Activities of an organisation that affect its competitiveness