11/23/2014

Hi,Curtis:

DrivingForces(orChangeDrivers)

A.DefinitionandConcept.

Drivingforcesareforcesoutsidethefirm(externalfactors)thattriggerthechangeofstrategyinan
organization.Industryconditionschangebecauseimportantforces(themostdominantonesthathave
thebiggestinfluenceonwhatkindsofchangeswilltakeplaceintheindustrysstructureand
competitiveenvironment)aredrivingindustryparticipants(competitors,customers,orsuppliers)to
altertheiractions,andthusthedrivingforcesinanindustryarethemajorunderlyingcausesof
changingindustryandcompetitiveconditions.Drivingforcesanalysishastwosteps:identifyingwhat
thedrivingforcesareandassessingtheimpacttheywillhaveontheindustry.

B.TheMostCommonDrivingForces

Manyforcescanaffectanindustrypowerfullyenoughtoqualifyasdrivingforces.Someareunique
andspecifictoaparticularindustrysituation,butmostdriversofchangefallintooneofthefollowing
categories:

1. TheInternetandnewecommerceopportunitiesandthreatsitbreedsintheindustry
2. Increasingglobalizationoftheindustry
3. Changesinthelongrunindustrygrowthrate
4. Changesinwhobuystheproductsandhowtheyuseit.
5. Productinnovation
6. Technologicalchange
7. Marketinnovation
8. Entryorexitofmajorfirms
9. Diffusionoftechnicalknowhowacrossmorecompaniesandmorecountries
10. Changesincostandefficiency
11. Growingbuyerforpreferencesfordifferentiatedproductsinsteadofacommodityproduct(or
foramorestandardizedproductinsteadofstronglydifferentiatedproducts)
12. Regulatoryinfluencesandgovernmentpolicychanges
13. Changingsocietalconcerns,attitudes,andlifestyles
14. Reductionsinuncertaintyandbusinessrisk.

C.Thelinkbetweendrivingforcesandstrategy

Soundanalysisofanindustrysdrivingforcesisaprerequisitetosoundstrategymaking.Without
keenawarenessofwhatexternalfactorswillproducethebiggestpotentialchangesinthecompanys
businessoverthenextonetothreeyears,managerswillillpreparetocraft(payattentiontotheusage
ofthiswordwhynotuseMAKE)astrategytightlymatchedtoemergingconditions.Similarly,if
managersareuncertainabouttheimplicationsofeachdrivingforceoriftheirviewsareincompleteor
offbase,itsdifficultforthemtocraftastrategythatisresponsivetothedrivingforcesandtheir
consequencesfortheindustry.Sodrivingforcesisnotsomethingtotakelightlyithaspractical
strategymakingvalueandisbasictothetaskofthinkingstrategicallyaboutwheretheindustryis
headedandhowtoprepareforthechanges.

KeySuccessFactors(orCriticalFactors)

WHATARETHEKEYFACTORSFORCOMPETITIVESUCCESS?

Anindustry'skeysuccessfactors(KSFs)arethosethingsthatmostaffectindustrymembers'
abilitytoprosperinthemarketplacetheparticularstrategyelements,prod
uctattributes,resources,
competencies,competitivecapabilities,andbusinessoutcomesthatspellthedifferencebetweenprofit
andlossand,ultimately,betweencompetitivesuccessorfailure.KSFsbytheirverynatureareso
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11/23/2014

Hi,Curtis:

importantthatallfirmsintheindustrymustpaycloseattentiontothemtheyaretheprerequisitesfor
indus
trysuccessor,toputitanotherway,KSFsaretherulesthatshapewhetheracompanywillbe
financiallyandcompetitivelysuccessful.Theanswerstothreequestionshelpidentifyanindustry's
keysuccessfactors:

Onwhatbasisdocustomerschoosebetweenthecompetingbrandsofsellers?What
productattributesarecrucial?
Whatresourcesandcompetitivecapabilitiesdoesasellerneedtohavetobecom

petitivelysuccessful?
Whatdoesittakeforsellerstoachieveasustainablecompetitiveadvantage?

Inthebeerindustry,theKSFsarefullutilizationofbrewingcapacity(tokeepman
ufacturing
costslow),astrongnetworkofwholesaledistributors(togainaccesstoasmanyretailoutletsas
possible),andcleveradvertising(toinducebeerdrinkerstobuyaparticularbrandandtherebypull
beersalesthroughtheestablishedwholesale/retailchannels).Inapparelmanufacturing,theKSFsare
appealingdesignsandcolorcombinations(tocreatebuyerinterest)andlowcostmanufacturing
efficiency(topermitattractivere
tailpricingandampleprofitmargins).Intinandaluminumcans,
becausethecostofshippingemptycansissubstantial,oneofthekeysishavingplantslocatedclose
toend
usecustomerssothattheplant'soutputcanbemarketedwithineconomicalshippingdis
tances
(regionalmarketshareisfarmorecrucialthannationalshare).Table3.4providesashoppinglistof
themostcommontypesofkeysuccessfactors.
Determiningtheindustry'skeysuccessfactors,givenprevailingandanticipatedindustryand
competitiveconditions,isatoppriorityanalyticalconsideration.Attheveryleast,managersneedto
understandtheindustrysituationwellenoughtoknowwhatismoreimportanttocompetitivesuccess
andwhatislessimportant.Theyneedtoknowwhatkindsofresourcesarecompetitivelyvaluable.
Misdiagnosingtheindus
tryfactorscriticaltolongtermcompetitivesuccessgreatlyraisestheriskofa
misdi
rectedstrategy.Incontrast,acompanywithperceptiveunderstandingofindustryKSFscangain
sustainablecompetitiveadvantagebytrainingitsstrategyonindustryKSFsanddevotingitsenergies
tobeingdistinctivelybetterthanrivalsononeormoreofthesefactors.Indeed,companiesthatstand
outonaparticularKSFenjoyastrongermarketpositionfortheireffortsbeingdistinctivelybetter
thanrivalsononeormorekeysuccessfactorspresentsagoldenopportunityforgainingcompetitive
advantage.Hence,usingtheindustry'sKSFsascornerstonesforthecompany'sstrategyandtry
ingto
gainsustainablecompetitiveadvantagebyexcellingatoneparticularKSFisafruitfulcompetitive
strategyapproach.
Keysuccessfactorsvaryfromindustrytoindustryandevenfromtimetotimewithinthesame
industryasdrivingforcesandcompetitiveconditionschange.Onlyrarelydoesanindustryhavemore
thanthreeorfourkeysuccessfactorsatanyonetime.Andevenamongthesethreeorfour,oneortwo
usuallyoutranktheothersinim
portance.Managers,therefore,havetoresistthetemptationtoinclude
factorsthathaveonlyminorimportanceontheirlistofkeysuccessfactorsthepurposeofidentifying
KSFsistomakejudgmentsaboutwhatthingsaremoreimportanttocompetitivesuc
cessandwhat
thingsarelessimportant.Tocompilealistofeveryfactorthatmattersevenalittlebitdefeatsthe
purposeofconcentratingmanagementattentiononthefac
torstrulycriticaltolongtermcompetitive
success.

PleaserefertotheattachmentforspecificexamplesforKSFs.

Jifu

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