Learning Objectives To learn to identify the different types of environments that affect a firm To learn to identify the different types of environments that affect a firm To learn what the components of the industry and macroenvironment are To learn what the components of the industry and macroenvironment are To learn how to apply environmental evaluation to understanding how a firm selects competitive strategies To learn how to apply environmental evaluation to understanding how a firm selects competitive strategies

The Five Forces Model Risk of Entry Risk of Entry Rivalry among established companies Rivalry among established companies Bargaining power of buyers Bargaining power of buyers Bargaining power of suppliers Bargaining power of suppliers Threat of substitute products Threat of substitute products Complementors Complementors

Risk of Entry Economies of scale Economies of scale Brand loyalty Brand loyalty Absolute cost advantage Absolute cost advantage Customer switching costs Customer switching costs Government regulation Government regulation

Rivalry Among Established Companies Industry competitive structure Industry competitive structure Industry demand Industry demand Cost conditions Cost conditions Exit barriers Exit barriers

Bargaining Power of Buyers Size of suppliers Size of suppliers Size of buyers Size of buyers Number of suppliers Number of suppliers Number of buyers Number of buyers Purchase quantity Purchase quantity Supplier dependence on buyers Supplier dependence on buyers Switching costs Supplier competition Likelihood of vertical integration by buyer

Bargaining Power of Suppliers Size of suppliers Size of suppliers Size of buyers Size of buyers Number of suppliers Number of suppliers Number of buyers Number of buyers Number of substitute products that can be supplied Number of substitute products that can be supplied Importance of the product supplied Importance of the product supplied Importance of the customer to the supplier Supplier product differentiated Likelihood of vertical integration by supplier

Industry Life Cycle Analysis Embryonic industries Embryonic industries Growth industries Growth industries Industry shakeout Industry shakeout Mature industries Mature industries Declining industries Declining industries Limitations Limitations

The Macroenvironment Macroeconomic forces Macroeconomic forces Global forces Global forces Technological forces Technological forces Demographic forces Demographic forces Social forces Social forces Political & legal forces Political & legal forces