Essential of Economics part IV

My examination and assignments are over already. Those questions are really less competitive and boring due to their simple words. But it is good that i made myself more competitive. However, I found the notes may be different some from the textbook due to different theories from different economists and different countries. I started to notice the economics textbook are labelled in selected countries and realised that the economists’ theories are different in different countries. If you find my post has something different from your knowledge, then don’t get confused!! In additional, I learnt new about “Porter’s Five Forces” when i was researching for the assignment. I like to introduce about the Porter’s Five Forces. Thank you. Mere reading

Next issue is Four Environments that affect on an organisation

Competitive Environment ( It is another similar theory of Porter Five Forces)



1) Power of Consumers

– To affect the consumers’ responsiveness and sensitivity to the price changes: market of the outputs.

2) Power of Suppliers

– To depend on supports and contributions of the supplier : market of the inputs.

3) Threat of substitutes

– To affect other products for accomplishing the customers’ demand and satisfaction

4) Degree of Competitive Rivalry

– To depend on the competitiveness of the organization against others.

  • Number of substitutes and level of leadership

 – For instance, Coffee Cafe A and Coffee B are selling same type of the coffee cup. But the Cafe A is selling more various types of Latte such as green tea latte, chocolate latter and coffee latte while the Cafe B does not sell these types.

 – If the organisation hire many talent and skilled workers, they will contribute more resources to the organisation.

  • High storage /perishability

 – Some firms own a few warehouse. Example: Gardenia Co has 2 warehouses. (you never hear of it before. Then google for it)

  • Cross-subsidization

  –  To transfer the profit deposit from the division to another division in order to secure a financial status of the latter.

  • Capacity Changes

 – To replace some unwanted/low provision raw material which is rare to be consummated with competitive raw materials. For instance, the soy bean stall try to reduce stock of grass jelly products.

5) Threat of Entrants

  •  Advertisement

A new entrant put more efforts in creating an advertisement against the existing firm.

  •  Availability of Distribution Channels

  Similarity to Vertical Integration. For instance, different national airports park the shared lots. If the parking lots are fully occupied

  – a new entrant put many efforts in improvement of the service and reduction of the selling price for the customers” expecting.

  •  Expected Entry Wars

A new entrant’s joining reacts other existing firms and they become more competitive against the new firm.

  •  Natural Monopoly Condition

A firm is a monopoly and does not need to be more competitive against other firms because that firm’s product is only unique or impossible to copy/substitutes. For instance, Newater Company (this organisation in my country) is also a monopoly. It’s special machinery is able to remove dirt from containment water and cleanse the water. After that, the cleaned water becomes drinkable.

  •  Product Differentiation

  – a firm creates a better product to compete against the existing firms.

Political Environment

  • Government Report

 – A useful guide to support either legal policy or laws.

  • Party’s Policy
  • Changes in Law

– For instance, the Government bans the importation of anthesis which contains eighty percentage. It affects the selling companies/ pubs’ marketing.

Interest/Specialisation Group

– To influence the organisations with their special interest/identity. In situation, the activists encourage many chinese restaurants to reduce selling shark fin soups because the extinction of sharks are nearly coming.

Technical Environment

  • Communication Access

  – To improve the communication system in some organisations to serve the customers better

  • Improvement/Quality of Product and Service

 – To improve the quality of service/product.

  • Cost Reduction

 – To help the organisation to reduce the wastage cost and the labour costs.

Sociocultural Environment


  •  Rate of Growth

It is to measure the numbers of birth against the number of death or to measure the number of various age group or ethnic group for the macroeconomics. For example, an economist reports that the high rate of the population in the selected area affects the rate of consumptions and natural resources in the same area.

Lifestyle, Attitude and Culture

  • Examples: Inter-racial, single professional women who care about their career and leisure time. Thus, they are consummating more services or products on the leisure organisation.

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