Enviroment of Business

1170 Words Jun 23rd, 2015 5 Pages
ENVIRONMENT OF BUSINESS

ASSIGNMENT

Describe 6 Forces that Operation
Managers go for or look out for in the Environment of their Businesses or Organizations.

There are many forces that Operations managers go for or look for in their business environments. They Include:
1. Threat of New Entrants –
The easier it is for new companies to enter the industry, the more cut-throat competition there will be. Factors that can limit the threat of new entrants are known as barriers to entry. Some examples include:
• Existing loyalty to major brands
• Incentives for using a particular buyer (such as frequent shopper programs)
• High fixed costs
• Scarcity of resources
• Government restrictions or legislation
• Entry protection
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• Are there existing technological hubs that you could work with or learn from?
• Are there any other technological factors that you should consider

3. Power of Suppliers
This is how much pressure suppliers can place on a business. If one supplier has a large enough impact to affect a company’s margins and volumes, then they hold substantial power. Here are a few reasons that suppliers might have power:
• There are very few suppliers of a particular product
• There are no substitutes
• The product is extremely important to the buyer, they cannot do without it
• The supplying industry has a higher profitability than the buying industry
• Supplier switching costs relative to firm switching costs
• Degree of differentiation of inputs
• Presence of substitute inputs
• Supplier concentration to firm concentration ratio
• Threat of forward integration by suppliers relative to the threat of backward integration by firms
• Cost of inputs relative to selling price of the product
4. Power of Buyers/ Customers
This is how much pressure customers can place on a business. If one customer has a large enough impact to affect a company’s margins and volumes, then they hold substantial power. Here are a few reasons that customers might have power
• Small number of buyers
• Purchases of large volumes
• Switching to another (competitive) product is simple
• The product is not extremely important to the buyer, they can do without it for a period of time.
• Customers
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