1. Suppliers’ Power: Here you assess how easy it is for suppliers to drive up prices. The fewer the supplier choices you have, and the more you need suppliers' help, the more powerful your suppliers are. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on.
2. Buyers’ Power: Here you ask yourself how easy it is for buyers to drive prices down. Again, this is driven by the number of buyers, the importance of each individual buyer to your business, the cost to them of switching from your products and services to those of someone else, and so on. If you deal with few, powerful buyers, then they are often
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Rapid changes keep taking place and are frequent because of the changes in demographic, economic environment, politico-legal, socio-cultural, technological and global environment
Demographic Environment: The term demographics denote characteristics of population in an area, district, country or in world. Some of the demographic factors have great impact on the business. Factors such as general age profile, sex ratio, income, education, growth rate affect the business with different magnitude.
Economic Environment: The economic environment refers to the nature and direction of the economy in which a company competes or may compete. The economic environment includes general economic situation in the region and the nation, conditions in resource markets (money, manpower, raw material and so on) which influence the supply of inputs to the enterprise, their costs, quality, availability and reliability of supplies.
Political-Legal Environment: There are three important elements in political-legal environment:
(a) Government: Business is highly guided and controlled by government policies. Hence the type of government running a country is a powerful influence on
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It is an important force of the micro environment of a company.
Customers: They are highly influential as they are the central point of every business. Success of business largely depends on identifying the need, desire, tastes liking etc of a customers.
Market Intermediaries: Every business enterprise is assisted market intermediaries, which include agents, brokers, who help the company to find customers. These acts as a link between company and final consumer.
Competitors: Activites of a business adjust according to the actions and reactions of a competitors. This factor should be known to a company as the upcoming profit or revenue will only be driven when this factor is in control.
Public: Any group that has actual or potential interest in the business, has its impact on the business. e.g., growth of consumer groups may affect the working of a newly developed business.
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According to antitrust laws put in place by the government,the unfair competition and the act of setting premium prices without considering the buying power of the suppliers is condemned. Antitrust laws discourages monopolistic competition which elimi...
We the consumer would rather pay less for any product that is needed or want. Ultimately we are the reason for high prices as well as low prices. Prices of products do not always stay the same and more popular products have higher prices than less popular products. These fluctuations, high prices and low prices are from the idea of supply and demand. Supply and demand defines the effect that the availability of a particular product and the desire or demand for that product has on price. Generally, if there is a low supply and a high demand, the price will be high (Investopedia). To understand the idea of supply and demand, the understanding of supply and the understanding of demand must be defined. The Law of Supply states that at higher prices, producers are willing to offer more products for sale than at lower prices, also that the supply increases as prices increase and decreases as prices decrease (Curriculum Link). The Law of Demand states people will buy more of a product at a lower price than at a higher price, if nothing changes, at a lower price, more people can afford to buy more goods and more of an item more frequently, than they can at a higher price and that at lower prices, people tend to buy some goods as a substitute for others more expensive (Curriculum Link). In todays economics these ideas are seen frequently in everyday life. The laws of supply and demand are seen in many ways in the company Apple Inc. Each year Apple Inc unveils a long awaited mobile operating system and IPhone. We can also see many aspects of the law of supply and demand in Nike Inc’s Jordan Brand. Jordan Brand has released a number of...
It tends to be high in pharmaceutical business as main sales are done using whole sales. Institutions that purchase drugs in large quantities are considering the discounts that drug producers are willing to give and therefore are able to influence price. As long as Eli Lilly have competitors with similar products it is obvious that bargaining power of buyers is high for the industry. Buyers with smaller volumes of purchases do not influence price policy, but such buyers are outnumbered by wholesale buyers. It is also important that people purchasing drugs for themselves are usually covered by healthcare insurance and therefore are not interested in pulling price down. Yet the volumes of sales to such buyers are not significant.
Chen, Zhiqi. Buyer Power Policy. Rep. Vol. Elsevier Ltd. 2007. Web. 05 Mar. 2011. .
But also giving importance to legitimacy execute for the organisations with the respect of government rules and regulations which they are bound to do. However , sometimes big business who have huge investments and collaboration on political level leads organisations and collaborators both on risk level (Helm 2007). Because of their high standards and big names they both have to be on attentive on their each actions to protect and save their reputation and image For them they are always playing on risk. Sometime they do succeed and sometime miserably failed and that breakdown is the starting point of risk for them because failed in risk leads to serious crisis (Barton, 2001).
External stakeholders that are affected in some way from the decisions of the business include customers, suppliers, community, trade unions, and the government. Customers may chose not to purchase ...
The suppliers bargaining power is generally strong because of the big monopolies and the high importance of purchasing components and operating system, therefore it decreases the profitability of the market players.
Environmental – External environmental factors are forces or trends that can affect a business whether it is an opportunity, threat, or constraint. They can be divided into three interrelated subcategories of remote, industry, and operating environments. The remote environment includes factors beyond a company’s operating situation such as the economic, social, political, technological, and ecological factors. The industry environment includes factors that have more of a direct influence on a company’s business such as entry barriers, competitor rivalry, the availability of substitutes, and the bargaining power of buyers and suppliers.
Businesses play a significant role with the economies of all countries, whether developed or developing. It contributes to the welfare of the society through the satisfaction of needs, provides a source of livelihood to millions of people worldwide. Businesses do not operate in vacuums but operate within business environments. The events in the environment of a company have a direct effect on the success or failure of that company. According to Jain, Trehan and Trehan (2009), business environments can be categorized in two: (1) internal business environment; (2) external business environment. Institutions and organizations are usually in a position of controlling their internal business environment. By doing so, they gain the ability of affecting their institutional performance. On the contrary, it is difficult for a business to control the external environment; however, businesses can identify in advance the opportunities and threats presented by the external environment and take decisive actions to ensure its continued success (Jain, Trehan & Trehan, 2009; Goyal & Goyal, 2009).
Buyer power within the industry is low as substitute products are not easily accessible, unless the customer decides to negotiate with the providers.
The factors affecting the external environment of a business are Political, Economic, Social and Technological. The political are based on how government policies affect a business. The economic are how the economy affects the business; inflation, interest rates. The social are how consumers and communities act and their opinions. Finally the technological shows the fast pace of change in processes and innovation that can affect the business.
New entrants to an industry, with a desire to gain market share, will put pressure on prices, costs and capital needed to compete. It can affect the profit potential.
As the title of this paper states, “How our World is Changing” our world is constantly changing. Our world changes everyday without most of us ever seeing or noticing any changes, but as we look back in history we can see some tremendous changes. As history is studied these changes become apparent and truly jump out and become real.
Environmental analysis is a strategic tool. It is a process to identify all the external and internal elements, which can affect the organization’s performance. The analysis entails assessing the level of threat or opportunity the factors might present. These evaluations are later translated into the decision-making process. The analysis helps align strategies with the firm’s environment. The importance of Environmental Analysis lies in its usefulness for evaluating the present strategy, setting strategic objectives and formulating strategies.
Environmental factors affect an organisation in 2 ways. They set limits and pose threats and they also provide opportunities and challenges. A change in the government export policy may suddenly threaten an export oriented organisation. A reduction in the rate of interest may provide cheap finance to an organisation.