The macro-environment encompasses the broad environmental context in which a company's industry is situated that includes strategically relevant components over which the firm has no direct control.
PESTEL analysis
PESTEL
analysis is a popular framework for organizing these factors and trends and
isolating how they influence industries and the firms within them. There is six
dimensions associated with PESTEL analysis: political, economic, social,
technological, environmental and legal.
The Five Competitive Forces
Just like its title, it have 5 subtopics, which is competition
from rival sellers, competition
from potential new entrants, competition
from producers of substitute products, supplier
bargaining power and customer
bargaining power.
Best position to compete on the basis of price, use the appeal of lower price to grab sales from rivals, to remain profitable in the face of strong price competition, to survive price wars, to earn returns after its competitors have competed away their profits through rivalry.
- Rival Competitors
Best position to compete on the basis of price, use the appeal of lower price to grab sales from rivals, to remain profitable in the face of strong price competition, to survive price wars, to earn returns after its competitors have competed away their profits through rivalry.
- Entry Barriers
Pricing power provides substantial entry barriers in terms of scale economies or cost advantages. It can use price-cutting to make it harder for a new rival to win customers.
- Substitutes
Positioned to use low price as defense against companies trying to gain market inroads with a substitute.
- Suppliers
Defense again powerful suppliers by providing more flexibility to cope with input cost increases.
- Buyers
Powerful defense because buyers can exert power only to drive down prices to the level of the next most efficient competitor.
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