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M A R C U S

M A R C U S. 2. EXTERNAL ANALYSIS. Chapter Objectives. Understand how to analyze the external environment of the firm.

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M A R C U S

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  1. M A R C U S

  2. 2 EXTERNAL ANALYSIS

  3. Chapter Objectives • Understand how to analyze the external environment of the firm. • Being aware that the external environment consists of three elements – the immediate industry environment, the larger macroenvironment, and the environment of groups with a stake in the firm. • Using these three elements to identify opportunities and threats the firm faces. • Using them to construct scenarios of possible futures and repertoires of responses and other moves that the firm might take in the light of divergent contingencies.

  4. Ex. 2.1Strategic Thinking: Linking the Firm and the External Environment • THE EXTERNAL ENVIRONMENT • Industry environment • Macro-environment • Stakeholders THE INTERNAL ENVIRONMENT STRATEGY

  5. External Environment Industry Environment • The immediate context in which the firm operates Macroenvironment • Consisting of forces such as politics and law, technology, demography, society, the economic climate, and the state of the physical environment Stakeholder Groups • Groups that affect and are affected by the firm’s activities

  6. Critical Questions in Developing a Strategy • Is the game good? • What is the company’s position in the game? Michael Porter

  7. Ex. 2.2 Porter’sFive Forces Affecting Industry Attractiveness

  8. Main Entry Barriers • Scale economies • Product differentiation • Capital requirements • Learning-and experience-curve effects • Distribution channels • Government policies

  9. Ex. 2.3 Profitability of U.S. Industries, 1985-1995

  10. Ex. 2.4 10 Best and Worst Performing Industries: Stock Market Performance 2002

  11. The Strategist’s Role in Industry Analysis Industry analysis provides critical information and should always be carried out before a company makes a move. The strategist must examine the structure of an industry and understand the five forces. Each industry is likely to be somewhat different. In each industry, some of the five forces are likely to be more significant than others. For the strategist, it is important to figure out which are the most important forces and what can be done about them. He or she should give greatest attention to the forces that can be most readily influenced in a way that improves a company’s performance.

  12. Ex. 2.5 From Industry Analysis to Analysis of the Macroenvironment

  13. External Environment - Technology Invention is the creation of an item or process, usually in a laboratory Innovation is the process putting an invention into widespread use

  14. Technological Environment – Factors Affecting a Project’s Feasibility • Probable development, production, and marketing costs • The approximate timing of these costs • Probable future income streams • The time these income streams are likely to occur

  15. Ex. 2.8Promising Technological Developments(Abridged) • Genetic Engineering • Advanced Computing • Telecommunications • Biomedical Engineering • Material Sciences • Energy

  16. Achieving Eco-Efficiency • Reduce the material intensity of goods and services • Reduce the energy intensity of goods and services • Reduce toxic dispersion • Enhance material recyclability • Maximize sustainable use of renewable resources • Increase material durability • Increase the service intensity of goods and services

  17. Questions to Ask in Assessing the Macroenvironment • Which segment is currently most important and is likely to dominate the choices available to the company now? • What are the emerging trends? • Which segment is likely to be most important in the future and dominate the choices available to a company then?

  18. Scenarios A scenario is essentially a story or plot that describes how a particular end point might be reached under certain conditions. Scenarios play out various “what-if” possibilities.

  19. Ex. 2.9Eco-Efficiency Strategies(Abridged)

  20. Ex. 2.11Value Net – An Alternative to Five Forces? CUSTOMERS COMPLEMENTORS COMPETITORS COMPANY SUPPLIERS

  21. Ex. 2.12 Stakeholder Map • External Stakeholders • Customers • Suppliers • Competitors • Governments • Scientific/Technical organizations • Local Communities • The Media • General Public • Environmental Advocates Contributors THE CORPORATION Inducements Inducements Contributors • Internal Stakeholders • Shareholders • Board Members • Managers • Scientists/Engineers • Employees/Unions

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