Chapter 2
Understanding the external
environment
True strategy involves
making deliberate choices
about how to compete.
 It requires companies to establish a unique position within their industry by
performing different activities or performing similar activities in distinct ways.
 For example, Southwest Airlines' low-cost, point-to-point service model
differentiates it from traditional airlines that operate through major hubs
Michael E. Porter Five Forces
Absolute cost advantage
Customer switching costs
Govt. regulations
1. These indicate the overall competitive level arising from crucial factors
2. Companies gauge it these influences in making their strategies
Michael E. Porter Five Forces
Availability of substitutes
Availability of financing options
Consumer lifestyles
Industry demand
Cost conditions (structure FC vs VC)
Exit barriers
How to influence barriers to competitive environment
Strategic groups within industries
…….refer to clusters of companies
that share similar strategies or characteristics,
allowing for a more detailed analysis of competition.
1.
2.
3.
4.
Target customers
Price band
Product quality
Mobility barriers
Big Bazaar, Spencer's
Nature’s Basket
Le Marche
Why is it important to consider the life cycle?
https://www.youtube.com/watch?v=Hz0XDRnzlhM
Customers
The Unified Payments Interface (UPI)
has undergone significant growth
since its inception in 2016.
Phase 4: Mainstream Adoption (2022)
Widespread Use: UPI accounted for more than 75% of
India's retail digital payments by early 2023. By March
2023, transaction volume reached around 24.9 billion with
a value of ₹39.7 trillion
Phase 3: Rapid Expansion (2019-2021)
Moderating factors
 Timeline of phases is relative
and changing
 Innovation
 Government support
 Company differences in
financing and other abilities
 International factors like
international competition
Shakeout => excess capacity….. Closures, mergers, fall in profits
Environmental
A company’s macro-environment
Legal
2007
https://urbanemissions.info/india-air-quality/india-satpm25/
Recent Changes in India Contract Law and Their Impacts
Recent amendments to India's contract law, particularly the Indian Contract Act, 1872
Significant changes aimed at modernizing the legal framework governing contracts.
=> the evolving economic landscape
=> increasing importance of digital transactions.