The Competitive Enviroment.
The competitive enviroment includes the organizations with which the organization directly interacts.
The competitive environment includes rivalry among currentcompetitors and the impact of new entrants, substitutes and complementary products, suppliers, and customers.
This model was developed by Michael Porter, a noted authority on strategic management. Instrategic decision making Porter’s model is an excellent method to help managers to analyze the competitive environment and adapt or influence the nature of their competition.
Competitorswithin the industry must first deal with one another. When organizations compete for the same customers and try to win market share at the others’ expense, all must react to and anticipate theircompetitors’ actions.
We have to identify the competitors, then analyze how they compete.
New entrants into an industry compete with established companies. Many factors prevent new companiesfrom entering an industry, the threat to established firms is less serious. If there are few such barriers to entry, the threat of new entrants is more serious.
*Barriers to entry: conditionsthat prevent new companies from entering an industry.
Substitutes and Complements.
Other products can affect a company’s performance by being substitutes for or complements of the company’sofferings.
A substitute is a potential threat; customers use it as an alternative, buying less of one kind of product but more of another.
A complement is a potential opportunity because customers buymore of a given product if they also demand more of the complementary product.
Suppliers provide the resources needed for production, and those resources may come in the form of people(supplied by trade schools and universities),raw materials (from producers, wholsalers, and distributors), information (supplied by researches and consulting firms), and financial capital (from...
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