What is pestle?
Political
Economic
Social
Technological
Legal
Environmental
What is pestle used for?>
analysing the Macro-environment factors that can influence performance or strategic decisions. Identifies threats and opportunities
Positives and negatives of pestle:
Positives: Assesses Long term growth opportunities and Risks
Negatives: only a snapshot in time due to ever changing environment
What are Porter’s Five forces of competition?
Threat of new entry
Existing rivalry
Threat of Substitutes
Buyer Power
Supplier Power
What is the 5 forces model used for
Helps identify which forces are threats, so you can tailor your growth strategy in those forces to leverage for a competitive advantage
What factors affect the threat of substitutes
Availability of substitutes
Relative price of substitutes
Relative performance of substitutes
Switching costs to substitutes
Technological change
What factors affect the threat of new entrants
Heavy R&D costs and initial investment
Limited access to distribution channels
Limited access to skilled expertise or advanced technology
Incumbent firms will retaliate to deter new entrants (price wars)
Existing firms have strong brand loyalty
Government regulation
Factors that affect buyer power
Low switching costs increases buying power
Buyers being well informed means they can negotiate better terms
Price sensitivity
Undifferentiated products increase buyer power
Factors that influence supplier power
Number of suppliers
Uniqueness of the resources they have to offer
Lack of substitutes increase their power
Backwards integration reduces their power, but if they are capable of entering the industry themselves then that increases
