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Payne
(4)
Key Text Readings: Chapter 2, Chapter 3, Appendix A
Environmental Scanning
Assessing
Environmental
Monitoring
Forecasts
projections
development of plausible projections about the direction, scope, speed and intensity of environmental change.
2
Macro Level
Economic
MACROENVIRONMENT
Demographic
Suppliers Global
Industry
Customers Technological
MICROENVIRONMENT
Its
General Environment
Government Institutions Educational Institutions Religious Institutions Research Organizations Consumers
Service Area
Competitors Government Services Businesses Non-profits Other Locals Educational Institutions Individuals/Consumers
Organization
4
Socio-cultural segment
Women in the workplace Workforce diversity Attitudes about quality of worklife Concerns about environment Shifts in work and career preferences Shifts in product and service preferences
Political/Legal Segment
Antitrust laws Taxation laws Deregulation philosophies Labor training laws Educational philosophies and policies
5
Economic segment
Inflation rates Interest rates Trade deficits or surpluses Budget deficits or surpluses Personal savings rate Business savings rates Gross domestic product Product innovations Applications of knowledge Focus of private and government-supported R&D expenditures New communication technologies
6
Technological Segment
Global Segment
Important political events Critical global markets Newly industrialize countries Different cultural and institutional attributes
Demographic
Population size Age structure Geographic distribution Ethnic mix Income distribution
7
Industry
Health Care Baby products
Positive
Neutral
Negative
Threat of Substitutes
Bargaining Power of Buyers
Buyers
Rivalry among competitors Substitute products Potential entry Bargaining power of suppliers Bargaining power of buyers
Explain how each force acts to create competitive pressure Decide whether overall competition is brutal, fierce, strong, normal/moderate, or weak
10
Usually the most powerful of the five forces Check which weapons of competitive rivalry are most actively used by rivals in jockeying for position
Price Quality Performance features offered Customer service Warranties/guarantees Advertising/promotions Dealer networks Product innovation
11
Lots of firms, more equal in size and capability Slow market growth Industry conditions tempt some firms to go on the offensive to boost volume and market share Customers have low costs in switching brands One or more firms initiates moves to bolster their standing at expense of rivals A successful strategic move carries a big payoff Costs more to get out of business than to stay in Firms have diverse strategies, corporate priorities, resources, and countries of origin
12
Economies of scale Inability to gain access to specialized technology Existence of learning/experience curve effects Strong brand preferences and customer loyalty Capital requirements and/or other specialized resource requirements Cost disadvantages independent of size Access to distribution channels Regulatory policies, tariffs, trade restrictions
14
Sales of substitutes are growing rapidly Producers of substitutes are planning to add new capacity Substitutes profits are up
Readily available Attractively priced Believed to have comparable or better performance features Customer switching costs are low
15
Eyeglasses vs. Contact Lens MD vs. DPM vs. DC Plastic vs. Glass vs. Metal
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Item makes up large portion of product costs, is crucial to production process, and/or significantly affects product quality It is costly for buyers to switch suppliers They have good reputations and growing demand They can supply a component cheaper than industry members can make it themselves They do not have to contend with substitutes Buying firms are not important customers
Suppliers are a stronger force the more they can exercise power over: Prices charged Quality/performance of items supplied Amounts and delivery times
17
They are large and purchase a sizable percentage of industrys product They buy in volume quantities They can integrate backward Industrys product is standardized Their costs in switching to substitutes or other brands are low They can purchase from several sellers Product purchased does not save buyer money
Buyers are a stronger competitive force the more they have leverage to bargain over: Price or Quality or Service Other terms and conditions of sale
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Rivalry is strong Entry barriers are low Competition from substitutes is strong Suppliers and customers have considerable bargaining power
Rivalry is moderate Entry barriers are high Good substitutes do not exist Suppliers and customers are in a weak bargaining position
Insulate firm from competitive forces Influence competitive pressures in ways that favor firm Build a sustainable competitive advantage 19
Stakeholder Analysis
Stakeholder A
Focal Firm
Stakeholder B
Stakeholder C
20
Identifying stakeholders is one way of sizing up the internal and external constituents that influence the firm.
Stakeholders are individuals and groups who can affect and are affected by a firms strategic outcomes and who have enforceable claims on its performance Stakeholders include individuals, groups, and other organizations who have an interest in the actions of an organization and who have the ability to influence it
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Managing down Relationships with subordinates Managing up Relationships with bosses and corporate staff Managing out Relationships with customers and suppliers Managing across Relationships with peers
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Stakeholder Analysis
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stakeholders
stakeholders
stakeholders
24
Organizations have dependency relationships with stakeholders Firms are not equally dependent on all stakeholders and not every stakeholder has the same level of influence An effective organization strategy requires consensus from a plurality of key stakeholders about what it should be doing and how these things should be done
25
KSFs or CSFs are competitive elements that most affect every strategic group members ability to prosper in the marketplace:
Specific strategy elements Product attributes Resources or Competencies Competitive capabilities Profit and loss Competitive success or failure
Optimize Performance
KSF 3
KSF 2
A sound strategy incorporates efforts to be competent on all industry key success factors and to excel on at least one factor!
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Answers to three questions pinpoint KSFs On what basis do customers choose between competing brands or offerings of sellers? What must a seller/provider do to be competitively successful -- what resources and competitive capabilities does it need? What does it take for sellers/providers to achieve a sustainable competitive advantage? KSFs consist of the 3 - 5 really major determinants of financial and competitive success in a strategic group.
(Recall our discussion on developing objectives?)
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Technologyrelated
29
High numbers of procedures, which is a component of price, experience, and service. Low rate of complications and high rate of success (20/20) Positive word-of-mouth and reputation
30
One technique for revealing the different competitive positions of industry rivals is strategic group mapping A strategic group consists of those rivals with similar competitive approaches in an industry
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Firms in same strategic group have two or more competitive characteristics in common . . . Sell in same price/quality range
Have comparable product line breadth Emphasize same types of distribution channels Offer buyers similar services Use identical technological approaches
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Medium
Local Jewelers
Credit Jewelers
Low
Specialty Jewelers
Full-line Jewelers
Limited-category Retailers
Broad-category Retailers
34
Variables selected as axes should not be highly correlated Variables chosen as axes should expose big differences in how rivals compete Variables do not have to be either quantitative or continuous Drawing sizes of circles proportional to combined sales of firms in each strategic group allows map to reflect relative sizes of each strategic group If more than two good competitive variables can be used, several maps can be drawn
35
Driving forces and competitive pressures often favor some strategic groups and hurt others such recognition may be the key to developing a competitive advantage. Profit potential of different strategic groups varies due to strengths and weaknesses in each groups market position. Important niches may be identified that are not currently being filled by competitors. The closer strategic groups are on map, the stronger the competitive rivalry among member firms tends to be (Organizations most like yours are the most dangerous.)
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Medium
Low
Specialty Full-line Providers Limited-category Retailers Broad-category Retailers
37
Price
High
Vertical Balance
1.5
2.0
Exxon -Mobil Chevron Pemex Petronas INTEGRATED Royal Dutch Texaco Lukoil PetroChina INTERNATIONAL -Shell Gp. Conoco Phillips Indian Oil Phillips MAJORS Petrobras ENI Elf-Fina-Total ENI Nippon Repsol YPF INTERNATIONAL Repsol DOWNSTREAM Valero Neste OIL COMPANIES Ashland Sunoco
0.5
1.0
BP-Amoco
10
20
30
40
50
60
70
80
Geographical Scope
39
Understanding their strategies Watching their actions Evaluating their vulnerability to driving forces and competitive pressures Sizing up their resource strengths and weaknesses and their capabilities Trying to anticipate rivals next moves
40
Current strategies of competitors Actions competitors are likely to take next Predicting rivals next moves involves:
Analyzing their current competitive positions Examining public pronouncements about what it will take to be successful in industry Gathering information from grapevine about current activities and potential changes
Studying past actions and leadership Determining who has flexibility to make major strategic changes and who is locked into pursuing same basic strategy
41
Regional
National
Expansion via internal growth Expansion via acquisition Hold on to present share Give up present share to achieve shortterm profits
Multi-country
Global
Dealer network/distribution
New product innovation Financial resources Relative cost position Customer service capability Sum of weights Overall strength rating
0.05
0.05 0.10 0.35 0.15 1.00
9/0.45
9/0.45 5/0.50 5/1.75 5/0.75
4/0.20
4/0.20 10/1.00 10/3.50 7/1.05
10/0.50
10/0.50 7/0.70 3/1.05 10/1.50
5/0.25
5/0.25 3/0.30 1/0.35 1/0.15
1/0.05
1/0.05 1/0.10 4/1.40 4/1.60
6.20
8.20
7.00
2.10
2.90
45