Strategic Management: PESTEL and Industry Analysis Flashcards

Vocabulary-style flashcards covering the PESTEL framework, industry structure, Porter's Five Forces, and strategic group analysis.

PESTEL framework

A framework used to scan, monitor, and evaluate external factors including Political, Economic, Sociocultural, Technological, Ecological, and Legal elements to identify opportunities and threats.

General environment

The external environment segment consisting of factors managers have little direct influence over, such as macroeconomic trends.

Task environment

The environment over which strategic leaders have some influence, including industry structure and strategic groups.

Nonmarket strategy

Activities outside market exchanges, such as lobbying, public relations, and litigation, used to influence the political and legal environment.

Economic growth rates

A measure of the change in the value of all goods and services produced by a nation over time.

Inflation

A sustained rise in the overall prices of goods and services.

Sociocultural factors

PESTEL factors that capture a society's cultures, norms, values, and demographic trends such as an aging population.

Process technology

Innovations in how goods or services are produced, such as Six Sigma, artificial intelligence, and genetic engineering.

Product technology

Innovations that result in new types of goods or services, such as drones and high-performing electric cars.

Ecological factors

Factors concerning the relationship between organizations and the natural environment, including sustainability and climate change.

Legal factors

The official outcomes of political processes, such as laws, mandates, and official court decisions.

Industry effects

Firm performance attributed to the structure of the industry in which the firm competes, contributing approximately $20\%$ to performance.

Firm effects

Firm performance attributed to the actions strategic leaders take, accounting for up to $55\%$ of performance.

Business strategy

The strategic approach that addresses the question of how to compete within a specific industry.

Corporate strategy

The strategic approach that addresses the question of where to compete in terms of industries and markets.

Industry

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

Strategic position

A firm's profile based on value creation and cost, aimed at creating a gap between the value created ($V$) and the cost to produce ($C$).

Economic value creation

The difference between the value a consumer attaches to a product or service ($V$) and the cost to produce it ($C$), expressed as $V - C$.

Five Forces Model

A framework developed by Michael Porter to determine the profit potential of different industries based on five competitive forces.

Economies of scale

Cost advantages for firms with larger output, as they can spread fixed costs over more units and employ technology more efficiently.

Network effects

The positive impact that one user of a product or service has on the value of that product for other users.

Customer switching costs

The costs, such as time or money, that a consumer incurs when moving from one supplier's product to another.

Power of suppliers

A competitive force that is high when suppliers can demand higher prices for their inputs or reduce the quality of the inputs.

Power of buyers

A competitive force that is high when customers can pressure producers to lower prices or demand higher product quality.

Perfect competition

An industry structure characterized by many small firms, commodity products, and low entry barriers.

Oligopoly

An industry structure dominated by a few large firms with differentiated products, high entry barriers, and high interdependence between firms.

Monopoly

An industry structure where there is only one firm providing a unique product, protected by very high entry barriers.

Strategic commitments

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

Exit barriers

Economic and social obstacles that prevent a firm from leaving an industry even if returns are low or negative.

Complement

A product or service that adds value to the original offering when the two are used in tandem.

Co-opetition

A strategy involving cooperation by competitors to achieve a strategic objective.

Industry convergence

A process whereby formerly unrelated industries begin to satisfy the same customer need, often driven by technological progress.

Strategic group

A set of companies that pursue a similar strategy within a specific industry.

Mobility barriers

Industry-specific factors that inhibit the movement of firms between different strategic groups.

Strategic fit

The result of an organization matching its internal resources to the external environment to exploit opportunities.

Dynamic capabilities

A firm's ability to create, deploy, modify, reconfigure, or leverage its resources over time in a changing environment.