( Evaluating a Company's External Environment )

Assalamualaikum..

Hi everyone! Today, I want to share about what I’ve learned in my class last two weeks. Hehe. Sorry because I’m late update my blog. (^_*) Actually, I’ve no idea to update my blog before this. Now, I think I can share a little bit about chapter 3 (Evaluating a Company’s External Environment). Sorry if I make a mistake especially grammatical error. J Alright! Let’s start! Ok, first question is what is macro-environment? Generally, macro-environment also known as general environment includes all the environmental factors that have an impact on all organizations and firms within the economy. It is represents factors that will influence directly or indirectly. A simple acronym to remember the factors is PESTEL.

The examples of each factor as below:

The macro-environment or PESTEL analysis, however, is not to enough to identify meaningful opportunities and threats to a firm. A group of firms that produce similar products or sell the same product to the same markets is defined as an industry. The industry environment includes the key forces shaping and influencing competition in that industry. These forces are known as Michael Porter’s Five Forces Model (1980) and described as below:

Now, I will explain one buy one for the five competitive forces. Firstly, threats of new entrants. A new entrant to an industry can raise the level of competition. An industry’s barrier-to-entry can limit the number of new entrants into the industry. Barrier-to-entry refers to factors that can obstruct or limit the threat of new entrants. The following have identified as barrier-to-entry for new firms into an industry:

Secondly, the bargaining power of suppliers. Suppliers are the source for an organization to obtain the inputs such as labors, parts and raw materials needed to produce its goods and services. For instance, a supplier group is powerful when the suppliers’ goods are critical to the buyers’ marketplace success. Next is bargaining power of buyers. Customers are the potential buyers of the products that are supplied by the firm in the industry. Customers also have the most power when they are large and purchase most of the industry’s input. Fourthly, substitute products. Generally, product substitute present a strong threat to affirm when the customers can obtain a product which is almost of the same quality or the same functions as a product the industry produces and at a lower price. The substitute products can be a treat when the product is undifferentiated. Last but not list, rivalry among competitors. Rivalry among competitors can be most intense when there are numerous competitors in the industry. Other than that, the rivalry among competitors can be strong and powerful when there are high fixed costs of production.

Ok! I think I should stop here. It is because I have no idea anymore to share more about this topic. I’m really sorry for the weaknesses. I hope what I have explained before can help you a little bit. Alright! I stop here. Arigato! Haik! Hehe (^_*) See you soon! ^^