strategic Management, Chapter 3 Frank T. Rothaermel

PESTLE Model

a framework that categorizes and analyzes an important set of external factors that might impinge upon a firm.

Political Factors

processes and actions of government bodies that can influence the decisions and behavior of firms

Economic Factors

in a firm's external environment are largely macroeconomic, affecting economy-wide phenomena.

growth rate

a measure of the change in the amount of goods and services produced by a nation's economy

levels of employment

Growth rates directly affect this

interest rate

the amount that creditors are paid for use of their money and the amount the debtors pay for that use

price stability

the lack of change in price levels of goods and services (rare)

Inflation

when there is too much money in an economy, we tend to see rising prices

Deflation

a decrease in the general level of prices

currency exchange rate

determines how many dollars one must pay for a unit of foreign currency

sociocultural factors

a society's cultures, norms, and values

Technological Factors

application of knowledge to create new processes and products

ecological factors

broad environmental issues such as the natural environment, global warming, and sustainable economic growth

Legal Factors

official outcomes of political processes as manifested in laws, mandates, regulations, and court decisions

Industry Effects

firm performance attributed to the structure of the industry in which the firm competes

Firm Effects

firm performance attributed to the actions managers take

industry

a group of incumbent companies that face more or less the same set of suppliers and buyers

Industry Analysis

A method to (1) identify an industry's profit potential and (2) derive implications for a firm's strategic position within an industry.

strategic position

a firm's strategic profile based on the difference between value creation and cost (V-C)

Five Forces Model

A framework that identifies five forces that determine the profit potential of an industry and shape a firm's competitive strategy.

Threat of Entry

the risk that potential competitors will enter an industry

Entry barriers

obstacles that determine how easily a firm can enter an industry and often significantly predict industry profit potential

economies of scale

cost advantages to manufacturers that accrue from high-volume production, since the average cost of production falls with increasing output

network effects

the value of a product or service for an individual user increases with the number of total users

switching costs

incurred by moving from one supplier to another

capital requirements

describe the "price of the entry ticket" into a new industry

Power of Suppliers

the bargaining power of suppliers captures the pressure that suppliers place on industry profitability

Power of Buyers

pressure an industry's customers can put on producer's margins in the industry by demanding a lower price or higher product quality

Threat of Substitutes

the idea that products or services available from outside the given industry will come close to meeting the needs of current customers

Rivalry among existing competitors

the intensity with which companies within the same industry jockey for market share and profitability

competitive industry structure

Elements and features common to all industries, including the number and size of competitors, the firms' degree of pricing power, the type of product or service offered, and the height of entry barriers.

strategic commitments

firm actions that are costly, long-term oriented, and difficult to reverse

exit barriers

obstacles that determine how easily a firm can leave an industry

complement

a product, service, or competency that adds value to the original product offering when the two are used in tandem

complementor

a company that provides a good or service that leads customers to value your firm's offering more when the two are combined

Co-opetition

cooperation by competitors to achieve a strategic objective

industry convergence

a process whereby formerly unrelated industries begin to satisfy the same customer need

strategic group

the set of companies that pursue a similar strategy within a specific industry

strategic group model

a framework that explains differences in firm performance within the same industry

mobility barriers

industry-specific factors that separate one strategic group from another