The External Environment ( Strategic Management)

1779 WordsNov 16, 20128 Pages
Review THE EXTERNAL ENVIRONMENT (STRATEGIC MANAGEMENT) A host of external factors influence a firm’s choice of direction and action, ultimately its organizational structure and internal factors. These factors, which constitute the external environment, can be divided into three interrelated subcategories there are as follows: A. REMOTE ENVIROMENT The remote environment comprises factors that originate beyond and usually irrespective of any single firm’s operating situation: economic, social, political, technological, and ecological factors. That environment presents firm with opportunities, treats, and constraint; but rarely does a single firm exert any meaningful reciprocal influence. 1. Economic Factors Economics factors…show more content…
There are six major sources of barriers to entry: * Economies of Scaledeter entry by forcing the aspirant either to come in on a large scale or to accept a cost disadvantage. * Product Differentiationto create high fences around their business, brewers couple brand identification with economies of scale in production, distribution, and marketing. * Capital Requirementscapital is necessary not only for fixed facilities but also for customer credit, inventories, and absorbing start-up losses. * Cost Disadvantage Independent of Sizeentrenched companies may have cost advantages not available to potential rivals, no matter what their size and attainable economies of scale. * Access to Distribution Channels the more limited distribution channels are and more that existing competitors have tied up, obviously the tougher that entry into the industry will be. * Government Policycan limit or even foreclose entry to industries, which such as controls as license requirements and limits on access to raw material. * b. Powerful Suppliers Suppliers can exert bargaining power on participants in industry by raising prices or reducing the quality of purchased goods and services. A suppliers group is powerful if: - it is dominated by a few companies and is more concentrate than to the industry is sells, - its product is unique or at least
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