THE EXTERNAL ENVIRONMENT

THE FIRMS EXTERNAL ENVIRONMENT

Remote Environment ( Global & Domestic )
Economic, Social, Political, Technological, and Ecological

Industry Environment ( Global & Domestic )

Entry barrier, Supplier power, Buyer power, Substitute availability, and Competitive rivalry

Operating Environment ( Global & Domestic )

Competitors, Creditors, Customers, Labor, Suppliers

THE FIRM

REMOTE ENVIRONMENT
ECONOMIC FACTOR
Inflation rate, availability of credit, interest rate, the growth of GNP, disposable income, propensity to consume.
The belief, values, attitudes, opinions, lifestyle of people as developed from cultural, ecological, demographic, religious, educational, and ethnic conditioning. Direction and stability of political, fair trade decisions, antitrust laws, tax programs, minimum wage legislation, pollution and price policies, administrative jawboning.

SOCIAL FACTOR

POLITICAL FACTOR

REMOTE ENVIRONMENT ( Continue)

TECHNOLOGICAL
Technological changes that might influence an industry. Creative technological adaptation can suggest possibilities for new product, improvement existing product, manufacturing and marketing techniques.
Air pollution, water pollution, land pollution is the most important factors and is often the mutual relationship between business and the ecology.

ECOLOGICAL

FORCES DRIVING INDUSTRY COMPETITION

BY MICHAEL E. PORTER

Potential Entrants
Threat of new entrants

Bargaining power of suppliers

Industry competitors Buyers Rivalry among existing firms

Bargaining power of buyers

Suppliers

Threat of substitute product & service

Substitutes

INDUSTRY ENVIRONMENT
THREAT OF ENTRY
6 majors sources: Economies of scale, product differentiation, capital requirement, cost disadvantages independent of size, access to distribution channels, government policy.
Few companies, unique product or switching costs, not contend with other product, the industry is unimportant customer of the supplier group.

POWERFUL SUPPLIERS

INDUSTRY ENVIRONMENT (Continue)

POWERFUL BUYERS
Purchase in large volumes, purchase standard or undifferentiated product, products purchased form a component of buyers products, earn low profit, the industrys product is unimportant the quality of buyers product, the industrys product doesnt save the buyer money.
By placing a ceiling on the prices it can charge, substitute products or services limit the potential of an industry.

SUBSTITUTE PRODUCTS & SERVICES

INDUSTRY ENVIRONMENT (Continue)

JOCKEYING FOR POSITION
Rivalry among existing competitors is related to the presence of a number of factors:

Competitors are numerous or are roughly equal in size and power. Industry growth is slow. The product and service lacks differentiation or switching costs. Fixed costs are high or the product is perishable. Capacity normally is increased in large increments. Exit barriers are high. The rivals are diverse (various) in strategies, origins, and personalities.

OPERATING ENVIRONMENT
COMPETITIVE POSITION
The common criteria of competitors profile:

Market share Wideness of product line Effectiveness of sales distribution Proprietary (pemilik) and key-account advantages Price competitiveness Advertising and promotion effectiveness Location and age of facility Capacity and productivity Experience Raw material costs

OPERATING ENVIRONMENT (Continue)

COMPETITIVE POSITION

Financial position Relative product quality R & D advantages-position Caliber of personnel General image

CUSTOMER PROFILES

Customer segmentation based on:

Geographic (Letak) Demographic (Penduduk) Psychographic (Kejiwaan) Buyer behavior

OPERATING ENVIRONMENT (Continue)

SUPPLIERS
Questions should be addressed: Are the price competitive? Are there any quantity discount? How costly are the shipping charges? How are the production standards? Are the suppliers abilities, reputations, and services competitive? Are the suppliers reciprocally (timbal balik) dependent on the firm?

OPERATING ENVIRONMENT (Continue)

CREDITORS
Questions should be addressed: Do the creditors fairly? Do the creditor perceive the firm as having an acceptable record of past payment? A strong working capital position? Little or no leverage? Are the creditors loan terms compatible with the firms profitability objectives? Are the creditors able to extend the necessary lines of credit?

HUMAN RESOURCES:
NATURE OF THE LABOR MARKET

Reputation Employment rates Availability