Ch.4 - Macro environment

Question 1

What is PESTEL analysis?

Answer 1

• environmental analysis to identify potential opportunities and threats facing the industry
  1. Political
  2. Economic
  3. Social and demographic
  4. Technological
  5. Ecological (environmental)
  6. Legal

Question 2

How can be explain competitive advantage of nations in certain industries?

Answer 2

• competitive advantage can be explained using Porter’s diamond model

1. Factor conditions – availability of factors of production (land, capital, labour, enterprise)
2. Demand conditions – demanding local consumers force firms to become more innovative
3. Related and supporting industries – proximity of those industries, easy access to components, knowledge sharing increases innovation
4. Strategy – cost leadership or differentiation
5. Structure – flat=wide or tall=narrow organisation structure
6. Rivalry – forces local firms to become more efficient to survive

Question 3

What is Porter’s Diamond?

Answer 3

• used to explain why some nations have a competitive advantage in certain industries