Management Module 4

competitive environment

Factors and situations both inside the firm and outside the firm that have the potential to impact its operations and success.

strengths

Resources and capabilities of a firm; what it is good at.

sociocultural factors

S in PESTEL; identifies trends, facts, and changes in society's composition, tastes, and behaviors, including demographics.

macro environment

The outermost layer of elements in a firm's external environment that can impact a business but are generally beyond the firm's direct control, such as the economy and political activity.

pay-for-performance model

The process and structure for tying individual performance levels to rewards levels

performance management

The process by which an organization ensures that its overall goals are being met by evaluating the performance of individuals within that organization.

environmental scanning

The systematic and intentional analysis of a firm's internal state and its external environment.

business-level strategy

ways that single-product firms organize their activities to succeed against rivals; at this level, include cost leadership and differentiation.

buyer power

In the relationship between a firm and its customers, buyers with high power can negotiate product price or features, while buyers with low power cannot.

barriers to entry

Industry factors (such as high start-up costs) that can prevent new firms from successfully launching new operations in that industry.

internal environment

Innermost layer of a firm's competitive environment, including members of the firm itself (such as employees and managers), investors in the firm, and the resources and capabilities of a firm.

legal factors

L in PESTEL; the laws impacting business, such as those governing contracts and intellectual property rights and illegal activities, such as online piracy.

threat of new entrants

One of Porter's Five Forces, assesses the potential that a new firm will start operations in an industry.

supplier power

One of Porter's Five Forces; describes the balance of power in the relationship between firms in an industry and their suppliers.

threat of substitutes

One of Porter's Five Forces; products or services outside a firm's industry that can satisfy the same customer needs as industry products or services can.

industry rivalry

One of Porter's Five Forces; refers to the intensity of competition between firms in an industry.

political factors

P in PESTEL; identifies political activities in the macro environment that may be relevant to a firm's operations. (tax rates; tariffs; trade agreements; labor and environmental regulations)

strategy

Process of planning and implementing actions that will lead to success in competition.

strategic analysis

Process that firms use to study and understand their competitive environment.

value chain

Sequence of activities that firms perform to turn inputs (parts or supplies) into outputs (goods or services).

technological factors

T in PESTEL; includes factors such as the Internet, social media, automation, and other innovations that impact how businesses compete or how they manufacture, market, or sell their goods or services.

human resources compliance

The HR role to ensure adherence to laws and regulations that govern the employment relationship.

support activities

Value chain activities that a firm performs to sustain itself; do not directly create a product or service but are necessary to support the firm's existence, such as accounting and human resources.

competitive advantage

When a firm successfully attracts more customers, earns more profit, or returns more value to its shareholders than rival firms do.

stability strategy

a grand strategy for a company that wants maintain its current income, market share, or geographic reach.

defensive strategy

a grand strategy pursued by companies facing challenges.

growth strategy

a grand strategy to increase the size of the firm in terms of revenue, market share, geographic reach, or a combination of these elements.

capabilities

A firm's skill at coordinating and leveraging resources to create value.

focus strategy

A generic business-level competitive strategy that firms use in combination with either a cost-leadership or differentiation strategy in order to target a smaller demographic or geographic market with specialized products or services.

cost-leadership strategy

A generic business-level strategy in which a firm tightly controls costs throughout its value chain activities in order to offer customers low-priced goods and services at a profit.

differentiation strategy

A generic business-level strategy in which firms add value to their products and services in order to attract customers who are willing to pay a higher price.

industry

A group of firms all offering products or services in a single category, for example restaurants or athletic equipment.

opportunity

A situation that a firm has the resources and capabilities to take advantage of.

PESTEL

A strategic analysis tool that examines several distinct categories in the macro environment: political, economic, sociocultural, technological, environmental, and legal.

threat

Anything in the competitive environment that would make it harder for a firm to be successful.

generic business-level strategy

Basic methods of organizing firm value chain activities to compete in a product market that can be used by any sized firm in any industry.

competition

Business actions a firm undertakes to attract customers to its products and away from competitors' products.

strategic groups

Businesses offering similar products or services and following the same generic competitive strategy.

internal factors

Characteristics of a firm itself, such as resources and capabilities, that the firm can use to successfully compete against its rivals.

primary activities

Firm activities on the value chain that are directly responsible for creating, selling, or servicing a product or service, such as manufacturing and marketing.

strategic positioning

Firm's decisions on how to organize its actions and operate to effectively serve customers and compete against rivals.

environmental factors

E in PESTEL; examines a firm's external situation with respect to the natural environment, including pollution, natural resource availability and preservation, and alternative energy.; include resource scarcity, recycling, alternative energy sources

economic factors

E in PESTEL; includes facts (such as unemployment rates, interest rates, and commodity prices) about the state of the local, national, or global economy.

resources

Things a firm has, such as cash and skilled employees, that it can use to create products or services.

external factors

Things in the world or industry environments that may impact a firm's operations or success, such as the economy, government actions, or supplier power. Strategic decisions can be made in response to these things but normally cannot directly influence or change them.

weaknesses

Things that a firm does not have good capabilities to perform or gaps in firm resources.

VRIO

analytical tool that evaluates a firm's resources and capabilities to determine whether or not it can support an advantage for the firm in the competitive environment: value, rarity, imitation, and organization.

sociocultural forces

include: demographic trends; lifestyle changes; availability skills; attitudes toward work; gender issues; willingness to move; ethics

economic forces

include: globalization; competitors and supply chain; currency exchange rates; employment and wage rates; lending policies of financial institutions

government and political forces

include: government legislation; international law; wars; local regulations; taxation; trade union activities

technological forces

include: information technology and the internet; new production forces; how technology is sold and serviced

natural disasters and human induced problems

include: weather; extreme storms; pollution; health, food, stress

corporate strategy

the broadest level of strategy, concerned with decisions about growing, maintaining, or shrinking very large companies.

international strategy

the level of strategy concerned with the large-scale actions involved in entering a brand-new geographic market.

dog

these business units are doing poorly in a low-growth market and should be divested

question mark

these business units aren't doing well in a high-growth market and the CEO will need to decide to invest or scrap the business

star

these business units have high market share in a high-growth market. they're generating revenue, but the CEO should invest to keep growing the market share

cash cow

these business units have high market share in a market that isn't growing. CEOs should use the money they earn to invest in stars