Evaluating a firm's external environment - a model of enviromental threats

6 important questions on Evaluating a firm's external environment - a model of enviromental threats

What is an enviromental threat?

Any individual, group or organization outside a firm that seeks to reduce the level of the firm's performance

What are the 5 most common environmental threats?

  1. Threat of supplier leverage
  2. threat from superior or lower cost substitute products
  3. threat from competition among existing companies
  4. threat from new competition
  5. threat from buyer's influence

What are monopolistic industries?

  1. Only a single firm
  2. entry is very costly
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What are the economics of scale?

This exists in an industry when a firm's costs fall as a function of its volume of production

What is the threat of supplier leverage?

Suppliers increasing their price of their supplies or by reducing the quality of its supplies

What is forward vertical integration?

When suppliers can credibly threaten to enter into and begin competing in a firm's industry

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