Corporate Strategy

The Environment
Presented by

-Manven Dubey

For Academic Purpose Only

Introduction How Managers can make sense of uncertain world around their organisation the business environment? The business environment is difficult to predict for several reasons. The environment encapsulates many different influences the difficulty is making sense of this diversity. The problem of complexity which arises because many of the separate issues in the business environment are interconnected. There is the issue of the speed of change. The pace of technological change and the speed of global communication is changing faster now than ever before.
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Layers of the Business Environment

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Framework for understanding Environment

The organisation is surrounded by three layers of environment :1. Macro Environment Starting point of understanding
PESTEL Framework, Porters Diamond

2. Industry or Sector Group of organisations producing

same products or services. Porters Five Forces Model

3. Competitors and Markets Organisations with different

characteristics and different bases. Concept of strategic groups to identify Direct or Indirect Competitors.
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KEY DRIVERS OF CHANGE

Key Drivers of change are forces likely

to affect the structure of an industry, sector or market.

These key drivers are . . .

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Drivers of Globalisation

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Drivers of Globalisation

Porters Diamond
the determinants of national advantage

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Definition of 'Porter Diamond '

It is a model that attempts to explain the competitive advantage some nations or groups have due to certain factors available to them. It helps analyze and improve a nation's role in a globally competitive field. The model was developed by Michael Porter, who is recognized as an authority on company strategy and competition.
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Porter Diamond Explanation

Traditional economic theories cite land, location, natural resources, labour and population as determinants in competitive advantage. The Diamond Model uses a more proactive approach in considering factors such as:
The firm strategy, structure and rivalry Demand conditions for products Related supporting industries Factor conditions
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Analysing Industry Structure

Defn. : An industry is a group of firms that market products which are close substitutes for each other (e.g. the car industry, the travel industry). Some industries are more profitable than others. Why? The answer lies in understanding the dynamics of competitive structure in an industry. The most influential analytical model for assessing the nature of competition in an industry is Michael Porter's Five Forces Model .
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Strategy : Porter's Five Forces Model

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Identify -

Five Competitive Forces"

Porter explains that there are five forces that determine industry attractiveness and long-run industry profitability. These five "competitive forces" are : - The threat of entry of new competitors (new entrants) - The threat of substitutes - The bargaining power of buyers - The bargaining power of suppliers - The degree of rivalry between existing competitors

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Suppliers power
Here you assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you.

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Buyer Power
Here you ask yourself how easy it is for buyers to drive prices down. Again, this is driven by the number of buyers, the importance of each individual buyer to your business, the cost to them of switching from your products and services to those of someone else, and so on.

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Substitution
This is affected by the ability of your customers to find a different way of doing what you do. For example, if you supply a unique software product that automates an important process, people may substitute by doing the process manually or by outsourcing it. If substitution is easy and substitution is viable, then this weakens your power.
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Potential Entrants
Power is also affected by the ability of people to enter your market. If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair advantage of it.

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Competitive Rivalry
What is important here is the number and capability of your competitors. If you have many competitors, and they offer equally attractive products and services, then you'll most likely have little power in the situation, because suppliers and buyers will go elsewhere if they don't get a good deal from you.

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Building Scenarios
Scenarios are detailed and credible views of how the business environment of an organisation might develop in the future based on groupings of key environmental influences and drivers of change about which there is a high level of uncertainty.

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Where Does Scenario Take?

. It should lead to formulation of
Core Strategies Hedging Strategies Contingency Strategies Scenarios provide clues about what might be important drivers of change in the future, and how those drivers might interact and affect the organisation. Aim is to identify strategies that are robust across all scenarios, given what we know about how the future might develop. Also, to identify early warning indicators
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Dynamics of competition
These process of erosion may be speeded up by changes in the competitors manage to overcome adverse forces. These process of erosion may be speeded up by changes in the macro environment such as technologies globalization or deregulation.

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Cycles of competition

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