BUS 010 Lecture Notes - Lecture 5: Moe Williams, Economic Surplus, Pest Analysis
Document Summary
Porter"s 5 forces model: industry competitors: rivalry among existing firms. Five forces model challenges: defining the industry. Product & geographical scope: choosing the appropriate level of analysis, dealing with other factors, dealing with uncertainty and rapid structural change. Business environment: all the external influences that affect a firm"s decisions and performance. Environmental factors can be organized by source (pestel analysis) or by proximity (micro and macro environment) Key to effective analysis is distinguishing the vital from the merely important. Core of the business environment: customers, suppliers, competitors. The determinants of industry profit: demand & profit. Consumer surplus: the stronger the competition among producers, the more the consumer surplus. Producer surplus: the stronger the competition among producers, the less the producer surplus. Profits are determined by: the value of the product to customers, the intensity of competition, the bargaining power of the producers relative to their suppliers. Industry analysis brings these 3 factors into a single analytical framework.
