Transcript Lecture 2 External Environment

Lecture 2
External Environment
The external environment of
companies
General environment
Industrial
environment
company
The Components of a Company’s Macro-Environment
MACROENVIRONMENT
The Economy
at Large
Suppliers
Rival
Firms
Substitutes
COMPANY
New
Entrants

IMMEDIATE INDUSTRY
AND COMPETITIVE
ENVIRONMENT
Buyer
s
General environment
• PEST
– Political environment:
• law, peace,
– Economic environment:
• development level, economic system, price, labor and etc.
• GDP, interest rate, exchange rate, CPI?
– Social and cultural environment:
• population, value and so on
– Technological environment
• Technical development
– Industrial technology
– Internet
• Social and culture
– aging population
– At the end of 1990’s，old ages in china is
over 10%，at the middle of 2000’s, old ages
may be over 30%.
– 2004，average old ages rate is 10.97%,
Shanghai（18.48%）,Tianjin(13.75)、
Jiangsu(13.75%)、Beijing（13.66%）、
Zhejiang(13.18%).
• Natural resources
– Analysis natural resources of Shanghai
EFE-external factors evaluation
(外部因素评价矩阵）
1、key factors
2、weight for each
factors (0-1)。
3、score for each
factors
4、weight * score for
each factors
5、added all the
weighted score。
战略环境要素评价模型示例
关键战略环境要素
西部大开发
利率下降
政府管制放宽
主要竞争对手采取扩张战略
信息系统计算机化
总加权分数
权数
0.2
0.1
0.3
0.2
0.2
1
分数
1
4
3
2
4
加权分数
0.2
0.4
0.9
0.4
0.8
2.7
Industrial environment
Substitute Products
(of firms in
other industries)
Suppliers
of Key
Inputs
Rivalry
Potential
New
Entrants
Buyers
Rivalry:
Current competition
• Number of competitors and their relative
sizes
• Cost structure
• The industrial development (growth rate):
• Differences of products and services
• Barrier of exiting
• E.g.
– Automobile industry
– Beer
– supermarket
– Express: UPS/FEDEX/DHL /EMS/TNT
• Strategic groups
– The companies that have same strategy or
similar strategy in the industry
– Example:
Bargaining power of suppliers
• Concentration of the upper stage of production chain
• The difference of products of different suppliers
• The menace of substitute products
• The forward integration power of supplier
• The importance of the company to its supplier
Bargaining power of buyers
• The purchase volume of buyers
• Standard products or not
• The cost position of the product for
customer
• The profit level of buyers
• The transferred cost of buyers
• The backward integration power of buyers
Substitutes
• The new industry
• The effect to profits
Examples




Eyeglasses vs. Contact Lens
Sugar vs. Artificial Sweeteners
Newspapers vs. TV vs. Internet
E-mail vs. Overnight Delivery vs “Snail
mail” ( Post Office)
The entering and exiting barriers
Entering barriers
high
low
Exiting barrier
high
high risk, high profit
low
Low risk, high profit
high risk, low profit
low risk, low profit
Beyond the 5-forces
• Too much emphasis on adversarial “value
capture”, not enough on “value creation”
• Too much emphasis on competition not on
cooperation
• Too much emphasis on Industry, not on
company’s resources and ability (Industry
accounts for about 20% of total variance in
ROA)
• Evolution of industry structure
• Discussion
• Why does automobile industry become
more competitive recently?