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is the monitoring, evaluating and disseminating of information from the external and internal environments to key people within corporation.. Environmental Scanning. The Components of a Company's Macro-Environment. . MACROENVIRONMENT. Legislation and Regulation. Societal Values and Lifestyles.
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1. Environmental Scanning and Industry Analysis
2. is the monitoring, evaluating and disseminating of information from the external and internal environments to key people within corporation.
3. The Components of a Company’s Macro-Environment
7. Things that make activity more difficult for people or organizations raise the cost of doing business.
The higher the cost of doing business in a region, the more project profitability is squeezed or eliminated.
And the lower the amount of economic activity, the poorer and less capable societies tend to be.
Wherever there is rapid or major change in an area, there are likely to be new opportunities and threats that arise.
Few situations are perfect: it is up to us to make the most of the situation in which we find ourselves.
9. The Five-Forces Model of Competition (Porter’s approach)
10. The stronger that each of these five forces is, the more limited is the ability of established companies to raise prices and earn greater profits within their industry.
Strength of forces may change
11. Threats of new competitors entering the market. The
threat of entry depends on the presence of entry
barriers and the reaction that can be expected from
existing competitors.
The possible barriers to entry:
economies of scale
product differentiation
capital requirements
switching costs
access to distribution channels
cost disadvantages independent of size
governmental policy
12. Intensity of rivalry among firms in the industry.
Corporations are mutually dependent.
Intense rivalry is related to the presence of several
factors:
number of competitors
rate of industry growth
product or service characteristics
amount of fixed costs
capacity
height of exit barriers
diversity of rivals
13. Substitute products or services are those products/services that appear to be different but can satisfy the same need as another product/service.
“Substitutes limit the potential returns of an industry by placing a ceiling on the prices firms in the industry can profitably charge.” (M. Porter)
14. Is Pepsi Cola a substitute for a Coca-Cola?
15. A buyer or a group of buyers is powerful if:
a buyer purchases a large proportion of the seller’s product or service (oil filters purchased by a major auto maker)
alternative suppliers are plentiful because the product is standard or undifferentiated (gas stations)
changing suppliers costs very little
a buyer earns low profits and thus sensitive to costs and service differences (grocery stores)
the purchased product is unimportant to the final quality or price of buyer’ products or services (electric wire bought for use in lamp).
16. Suppliers can affect an industry through their ability
to raise prices or reduce the quality of purchased
goods and services:
the supplier industry is dominated by a few companies, but it sells to many (petroleum industry)
its product or service is unique and/or has built up switching costs (Word software)
substitutes are not readily available (electricity)
suppliers are able to integrate forward and compete directly with the present customers (Intel can make PCs)
a purchasing industry buys only a small portion of the supplier group’s goods and services and its unimportant for supplier
17. An unattractive industry is one in which intense rivalry already exists among competitors, there are substantial threats in terms of new competitors and substitute products, and suppliers and buyers are very powerful in bargaining over prices and quality.
An attractive industry is one with less intense competition, few threats from new entrants or substitutes, and low bargaining power among suppliers and buyers.
18. Things to Consider in Assessing Industry Attractiveness
Industry’s market size and growth potential
Whether competitive conditions are conducive to rising/falling industry profitability
Will competitive forces become stronger or weaker
Whether industry will be favorably or unfavorably impacted by driving forces
Potential for entry/exit of major firms
Stability/dependability of demand
Severity of problems facing industry
Degree of risk and uncertainty in industry’s future
19. Strategic Group Mapping Firms in same strategic group have two or more competitive characteristics in common
Sell in same price/quality range
Cover same geographic areas
Be vertically integrated to same degree
Have comparable product line breadth
Emphasize same types of distribution channels
Offer buyers similar services
Use identical technological approaches
20. Identifying Industry Key Success Factors Answers to three questions pinpoint KSFs
On what basis do customers choose between competing brands of sellers?
What resources and competitive capabilities does a seller need to have to be competitively successful?
What does it take for sellers to achieve a sustainable competitive advantage?
KSFs consist of the 3 - 5 really major determinants of financial and competitive success in an industry
21. Common Types of Key Success Factors
22. Strategic Management Principle A sound strategy incorporates efforts to be competent on all industry key success factors and to excel on an least one factor!
23. Environmental scanning provides reasonably hard data on the present situation and current trends , but intuition and luck are needed to predict accurately if these trends will continue.
Faulty underlying assumptions are the most frequent cause of forecasting errors.
24. Various techniques are used to forecast future:
Extrapolation is extension of present trends into the future.
Brainstorming is no quantitative approach requiring simply the presence of people with some knowledge if the situation to be predicted.
Expert opinion is no quantitative technique in which experts in a particular area attempt to forecast likely developments.
Delphi technique in which separated experts independently assess the likehoods of special events. These assessments are combines and send back to each expert for fine tuning until an agreement is reached.
Statistical modeling is a quantitative technique that attempts to discover casual or ay least explanatory factors that link two or more time series together.
Scenario writing is focused descriptions of different likely future presented in a narrative fashion (Royal Dutch Shell).
Industry scenario is a forecasted description of particular industry’s likely future.
28. Total weighted score of 5.0
Organization response is outstanding to threats and weaknesses
Total weighted score of 1.0
Firm’s strategies not capitalizing on opportunities or avoiding threats
29. Wayne Gretzky:
The key to winning is skating not where the puck is but to where it is going to be.
People talk about skating, puck handling and shooting, but the whole sport is angels and caroms, forgetting the straight direction the puck is going, calculating where it will be diverted, factoring in all the interruptions.
