ENVIRONMENTAL ANALYSIS

An exploratory process undertaken to ascertain what could be happen in future. A holistic exercise in which total view of the environment is taken rather than viewing the environmental forces in a piecemeal manner.

Process of Environmental Analysis

Environmental Scanning

Environmental Monitoring

Environmental Forecasting

Diagnosis

Importance of Environmental Analysis

Makes manager aware between organization and environment. Provides the understanding of how the industrys environment is being transformed. Helps company to identify the threats and opportunities before it. Company can know the causes of disequilibrium.

Limitations of the Environmental Analysis

Based on assumption

Not absolute truth

Timeconsuming and Expensive

Techniques of Environmental Analysis

SWOT Analysis

ETOP Analysis

Approaches to Environmental Analysis

Systematic approach Ad hoc approach Processed form approach

Environmental Analysis and Strategic Management

Defining business mission and objectives

SWOT analysis
Strategic alternatives and choice of strategy

Implementation of strategy
Evaluation and control of strategy

Competitive Structure of Industries

Propounded by Michael Porter in his book Competitive Advantage-Techniques for Analyzing Industries and Competitors Strategy, 1988. Industry depends upon five main factors.

Definition of Competitiveness
Objective of a business is to make a profit. Profit based on providing value to customers. How can a business assure value to customers? A good competitor knows: Which products and services it offers. Who its customers are. Who its competitors are.

Competitive Advantage
To assure positioning for profit, a company must maintain competitive advantage. Methods that are achievable and sustainable. Work smarter. Assess whether Information Systems are appropriate to gaining a competitive advantage? Focus on three primary inputs: HR , Capital, Technology.

Porters Five forces of competitive structure of industry

Used to understand and evaluate the structure of an industrys business environment and the threats of competition to a specific company.
1.Threats of entry 2. Bargaining power of buyers 3. Bargaining power of suppliers 4. Threats of substitute products 5.Rivalry among existing firms

Porter Competitive Structure Model

Potential entrants
Threats of entry Bargainin g power of suppliers Bargainin g power of buyers

Suppli ers

Rivalry among existing firms

Buyers

Threat ofv substitutes products

substitutes

Threats of entry
Economies of scale Product differentiation Capital requirement Cost disadvantages independent of size Access to distribution channels Government policy

Possible Barriers to Entry

Economies of scale.

Strong, established cost advantages.

Strong, established brands. Proprietary product differences.

Major switching costs.

Limited or restrained access to distribution. Large capital expenditure requirements.

Government policy.
Definite strong competitor retaliation.

 Parts Manufacturers Electronic Components Specialty Metal Suppliers Machine Tool Vendors Labor Unions IT Vendors

Porter Competitive Model Heavyweight Motorcycle Manufacturing Industry North American Market

Foreign Manufacturer Established Company Entering a New Market Segment New Startup

Potential New Entrant

Intra-Industry Rivalry Bargaining Power of Suppliers

SBU: Harley-Davidson
Rivals: Honda, BMW, Suzuki, Yamaha

Bargaining Power of Buyers

Automobiles Public Transportation Mopeds Bicycles

Substitute Product or Service

Recreational Cyclist Young Adults Law Enforcement Military Use Racers