Chapter 3 The External Assessment

Strategic Management: Concepts & Cases 11th Edition Fred David

Copyright 2007 Prentice Hall

Ch 3 -1

Key External Forces & the Organization

Beyond control of organization!

Key External Forces

Competitors Suppliers Distributors Creditors Customers Employees Communities Managers Stockholders Labor Unions Special Interest Groups Products Services

Opportunities & Threats

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Ch 3 -3

Performing External Audit

Long-term orientation

External Factors

Measurable Applicable to competing firms Hierarchical

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Ch 3 -4

Porters Five Forces

Potential development of substitute products

Bargaining power of suppliers

Rivalry among competing firms

Bargaining power of consumers

Potential entry of new competitors

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Ch Ch 6 3 -6

The Five-Forces Model of Competition (Porter)

Potential development of substitute products

Bargaining power of suppliers

Rivalry among competing firms

Bargaining power of consumers

Potential entry of new competitors

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Ch 3 -13

Industry Analysis: The External Factor Evaluation (EFE) Matrix Summarize & Evaluate
Economic Social Cultural Demographic Environmental Political Governmental Technological Competitive

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Ch 3 -15

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Ch 3 -16

External Factors
Its hard to write them! Weekend Exercise for Intuit

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Ch 3 -17

Industry Analysis EFE Total weighted score of 4.0

Organization response is outstanding to threats and weaknesses

Total weighted score of 1.0

Firms strategies not capitalizing on opportunities or avoiding threats

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Ch 3 -19

Industry Analysis: Competitive Profile Matrix (CPM)

Identifies firms major competitors and their strengths & weaknesses in relation to a sample firms strategic positions

Copyright 2007 Prentice Hall

Ch 3 -20

Gateway

Apple
Ratin g Wtd Score

Dell
Rating Wtd Score

CSFs
Market share

Wt

Rating

Wtd Score

0.15

0.45

0.30

0.60

Inventory sys
Fin. position Prod. Quality

0.08
0.10 0.08

2
2 3

0.16
0.20 0.24

2
3 4

0.16
0.30 0.32

4
3 3

0.32
0.30 0.24

Cons. Loyalty
Sales Distr Global Exp. Org. Structure

0.02
0.10 0.15 0.05

3
3 3 3

0.06
0.30 0.45 0.15

3
2 2 3

0.06
0.20 0.30 0.15

4
3 4 3

0.08
0.30 0.60 0.15

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Ch 3 -21

Gateway CSFs (contd)

Prod. Capacity
Wt Rating Wtd Score

Apple
Ratin g Wtd Score

Dell
Rating Wtd Score

0.04

0.12

0.12

0.12

E-commerce
Price competitive Mgt. experience

0.10

3
3 4 2

0.30
0.30 0.08 0.02

3
2 1 4

0.30
0.20 0.02 0.04

3
4 3 2

0.30
0.40 0.06 0.02

Customer Serv 0.10 0.02 0.01

Total

1.00

2.83

2.47

3.49
Ch 3 -22

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USTKey External Factors

Opportunities
Global markets untapped
Increased demand

Weight

Rating

Weighted score

.15

1
3

.15
.15

.05

Astronomical Internet growth

Pinkerton leader in discount market More social pressure to quit smoking

.05
.15 .10 .10 .05 .05 .10 .20 1.00

1
4 3 2 3 2 2 1

.05
.60 .30 .20 .15 .10 .20 .20 2.10
Ch Ch 6 3 -23 -23

Threats
Legislation against the tobacco industry Production limits on tobacco Smokeless market SE region U.S. Bad media exposure from FDA Clinton Administration TOTAL
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(CPM)
Critical Success Factor Advertising

Avon

LOreal

Procter & Gamble

Weight Rating Score Rating Score Rating Score

0.20

Product Quality
Price Competition Management Financial Position Customer Loyalty Global Expansion Market Share

0.10
0.10 0.10 0.15 0.10 0.20 0.05

1 4 3 4 4 4 4 1

0.20

0.40
0.30 0.40 0.60 0.40 0.80 0.05

4 4 3 3 3 4 2 4

0.80

0.60

0.40
0.30 0.30 0.45 0.40 0.40 0.20

3
4 3 3 2 2 3

0.30
0.40 0.30 0.45 0.20 0.40 0.15

Total

1.00

3.15

3.25

2.80
Ch Ch 6 3 -24 -24

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Mission Statement (proposed)

Our mission is to provide cruise and travel services (2) to travelers worldwide (1, 3), to develop household name brand awareness, to respect and protect the earth and seas on which we sail (6), to serve the communities in which our consumers and employees reside (8,9), and to stay an innovator by bringing cutting edge technology and research for our consumers benefit (4). We recognize that we must stay financially solvent and must make those decisions that will capitalize on opportunities for growth and longevity (5). We believe we must exceed every consumers expectations, supplying lasting memories, and enticing repeat business all at a fair value. We recruit, compensate and retain the best staff and ship employees in the business (7, 9).

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Ch 3 -25

Competitive Profile Matrix Royal Caribbean

Critical Success Factors Market Share Customer Loyalty Distribution Network Financial Position Global Expansion Advertising Product Quality Expansion of departure ports Total

Weight 0.20 0.15 0.15 0.10 0.05 0.05 0.15 0.15 1.00

RCL Rating Weighted Score 3 0.60 3 0.45 4 0.60 1 0.10 4 0.20 3 0.15 4 0.60 4 0.60 3.30

CCL Rating Weighted Score 4 0.80 4 0.60 3 0.45 4 0.40 3 0.15 4 0.20 3 0.45 3 0.45 3.50

POC Rating Weighted Score 2 0.40 2 0.30 2 0.30 3 0.30 2 0.10 2 0.10 2 0.30 2 0.30 2.10

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Ch 3 -26

EFE Matrix
Key External Factors Opportunities Nearly 88% of North Americans have never been on a cruise. Cruise vacations are seen as a choice of older travelers; leaving minorities and young adult markets virtually untapped Distribution networks at home and abroad may be an untapped source for generating increased business Internet use is increasing; commonly the tool used to secure reservations for many travelers Several markets overseas, such as, France, Italy, have a market of would be cruisers Threats Increase in regulation by US regarding environmental issues and economic downturns Alaskan legislators are considering a $50 tax per cruise ship passenger Location and severity of terrorist attacks; namely September 11th events War and political uprisings Drastic changes in the world oil market and currency exchange Existing and potential litigation Increased capacity of competitors and pricing wars Transfer of information through collective bargaining agreements Competitors: Carnival and P & O Total Weight 0.15 0.08 Rating 4 3 Weighted Score 0.60 0.24

0.07 0.08 0.10

3 3 2

0.21 0.24 0.20

0.08 0.05 0.10 0.10 0.02 0.02 0.05 0.03 0.07 1.00

2 2 3 3 1 1 2 1 2

0.16 0.10 0.30 0.30 0.02 0.02 0.10 0.03 0.14 2.56

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Ch 3 -27