ADM 1300

Topics: Barriers to entry, Profit, Existence Pages: 3 (446 words) Published: November 19, 2013
Assessing External Environments

Three levels
General 

Task

Internal

*****GRAPH FROM SLIDE ON STEPS****
 
Two steps containing environment is where the external environment influences organizations actions

GENERAL ENVIRONMENT
Changing Population
Population size
Demographics of the population
Possible implications of certain demographic situations such as an Aging Populations

Assesing Broad Changes in External Environment
Very broad – implications for many businesses
Break down into categories using PEST-G
P-olitical
E-conomical
S-ociocultural
T-echnological
G- lobal

TASK ENVIRONMENT

Relevancy
Task environment is the most organizationally relevant forces in the business environment i.e. “the industry” An industry defined very broadly in terms of needs served and how group of organizations serving consumers in similar manor

5 Forces Driving Profitability
Average Industry profit – profit of all firms in the industry/the # of firms in the industry Weaker the forces, the better for the industry profits, the higher the forces, the industry is worse off and profit is lower Manger Job: position themselves the best in terms of the forces

1- Rivalry Among Established Companies
Intensity of competition and basis of competition - affects the profitability More intense competition, profit is lower
Intensity is greater if: rivals are numerous, similarly matches, growth is slow Basis of completion: differentiation (profits depend on costs to you of uniqueness supporting a higher price for your product) or price-based (drive cost down before profit)

2- Risk of new entrants into the industry
 Examples of barriers to entry (making the force lower, and better for companies in the industry) a.       Size of existing industries
b.      Timing advantages – existing firms have established brands c.       Buyer switching costs – i.e. cell phone cancellation d.      Restrictive government regulation – government won’t let in

3+4...
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