AISE Ch02 stratergic management mba

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PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie Cook

The University of West AlabamaThe University of West Alabama

StrategicStrategic

ManagementManagementCompetitiveness and Globalization:Competitiveness and Globalization:

Concepts and CasesConcepts and Cases Michael A. Hitt • R. Dane !relan" • Robert #. Hoskisson

$eventh e"ition

STRATEGIC

MANAGEMENT

INPUTS

Chapter 2Chapter 2

Analysis of the Analysis of the

External Environment External Environment

Management of StrategyManagement of Strategy

Concepts and CasesConcepts and Cases

K K NOWLEDGENOWLEDGE OOBJECTIVESBJECTIVES

.. !"#lain the im#ortan$e of analy%ing and understanding!"#lain the im#ortan$e of analy%ing and understanding

the firm&s e"ternal environment.the firm&s e"ternal environment.

2.2. 'efine and des$ri(e the general environment and the'efine and des$ri(e the general environment and the

industry environment.industry environment.

).). 'is$uss the four a$tivities of the e"ternal environmental'is$uss the four a$tivities of the e"ternal environmental

analysis #ro$ess.analysis #ro$ess.

*.*. +ame and des$ri(e the general environment&s si"+ame and des$ri(e the general environment&s si"

segments.segments.

,.,. dentify the five $om#etitive for$es and e"#lain ho theydentify the five $om#etitive for$es and e"#lain ho they

determine an industry&s #rofit #otential.determine an industry&s #rofit #otential.

Studying this chapter should provide you with the strategic

management knowledge needed to:

K K NOWLEDGENOWLEDGE OOBJECTIVESBJECTIVES (cont’d)(cont’d)

.. 'efine strategi$ grou#s and des$ri(e their influen$e on'efine strategi$ grou#s and des$ri(e their influen$e on

the firm.the firm.

7.7. 'es$ri(e hat firms need to no a(out their'es$ri(e hat firms need to no a(out their$om#etitors and different methods 1in$luding ethi$al$om#etitors and different methods 1in$luding ethi$al

standards used to $olle$t intelligen$e a(out them.standards used to $olle$t intelligen$e a(out them.

Studying this chapter should provide you with the strategic

management knowledge needed to:

FIGUREFIGURE 2.12.1 The External Environment The External Environment

General EnvironmentGeneral Environment

3 'imensions in the (roader so$iety that influen$e'imensions in the (roader so$iety that influen$ean industry and the firms ithin it4an industry and the firms ithin it4

'emogra#hi$'emogra#hi$

!$onomi$!$onomi$5oliti$al/legal5oliti$al/legal

So$io$ulturalSo$io$ultural

Te$hnologi$alTe$hnologi$al

6lo(al6lo(al

TABLE TABLE 2.12.1 The General Environment: Segments and Elements The General Environment: Segments and Elements

Industry EnvironmentIndustry Environment

3 The set of fa$tors dire$tly influen$ing a firm andThe set of fa$tors dire$tly influen$ing a firm andits $om#etitive a$tions and $om#etitiveits $om#etitive a$tions and $om#etitive

res#onsesres#onses

Threat of ne entrantsThreat of ne entrants

5oer of su##liers5oer of su##liers

5oer of (uyers5oer of (uyers

Threat of #rodu$t su(stitutesThreat of #rodu$t su(stitutes

ntensity of rivalry among $om#etitorsntensity of rivalry among $om#etitors

Cometitor AnalysisCometitor Analysis

3 6athering and inter#reting6athering and inter#retinginformation a(out all of theinformation a(out all of the

$om#anies that the firm$om#anies that the firm

$om#etes against.$om#etes against.

3 8nderstanding the firm&s8nderstanding the firm&s$om#etitor environment$om#etitor environment

$om#lements the insights$om#lements the insights

#rovided (y studying the#rovided (y studying the

general and industrygeneral and industry

environments.environments.

Analysis o! the External EnvironmentsAnalysis o! the External Environments

3 6eneral environment6eneral environment :o$used on the future:o$used on the future

3 ndustry environmentndustry environment

:o$used on fa$tors and $onditions influen$ing a firm&s:o$used on fa$tors and $onditions influen$ing a firm&s#rofita(ility ithin an industry#rofita(ility ithin an industry

3 ;om#etitor environment;om#etitor environment

:o$used on #redi$ting the dynami$s of $om#etitors&:o$used on #redi$ting the dynami$s of $om#etitors&a$tions< res#onses and intentionsa$tions< res#onses and intentions

TABLE TABLE 2.2 2.2 Comonents o! the External Environmental AnalysisComonents o! the External Environmental Analysis

$cannin% 3 dentifying early signals of environmental$hanges and trends

Monitorin% 3 'ete$ting meaning through ongoing

o(servations of environmental $hanges

and trends

&orecastin% 3 'evelo#ing #ro=e$tions of anti$i#ated

out$omes (ased on monitored $hanges

and trends

Assessin% 3 'etermining the timing and im#ortan$e

of environmental $hanges and trends for

firms& strategies and their management

"ortunities and Threats"ortunities and Threats

3 >##ortunity>##ortunity A $ondition in the general A $ondition in the general

environment that< if e"#loited<environment that< if e"#loited<

hel#s a $om#any a$hievehel#s a $om#any a$hieve

strategi$ $om#etitiveness.strategi$ $om#etitiveness.

3 ThreatThreat

A $ondition in the general A $ondition in the general

environment that may hinder aenvironment that may hinder a$om#any&s efforts to a$hieve$om#any&s efforts to a$hieve

strategi$ $om#etitiveness.strategi$ $om#etitiveness.

Segments o! the General EnvironmentSegments o! the General Environment

3 The 'emogra#hi$ SegmentThe 'emogra#hi$ Segment5o#ulation si%e5o#ulation si%e

Age stru$ture Age stru$ture

6eogra#hi$ distri(ution6eogra#hi$ distri(ution

!thni$ mi"!thni$ mi"

n$ome distri(utionn$ome distri(ution

#$ont%d&#$ont%d&

3 The !$onomi$ SegmentThe !$onomi$ Segment

nflation ratesnflation rates

nterest ratesnterest rates

Trade defi$its or sur#lusesTrade defi$its or sur#luses

?udget defi$its or sur#luses?udget defi$its or sur#luses

5ersonal savings rate5ersonal savings rate

?usiness savings rates?usiness savings rates

6ross domesti$ #rodu$t6ross domesti$ #rodu$t

#$ont%d&#$ont%d&

3 The 5oliti$al/@egal SegmentThe 5oliti$al/@egal Segment

Antitrust las Antitrust las

Ta"ation lasTa"ation las

'eregulation #hiloso#hies'eregulation #hiloso#hies

@a(or training las@a(or training las

!du$ational #hiloso#hies and!du$ational #hiloso#hies and

#oli$ies#oli$ies

#$ont%d&#$ont%d&

3 The So$io$ultural SegmentThe So$io$ultural Segment

Women in the or#la$eWomen in the or#la$e

Worfor$e diversityWorfor$e diversity

Attitudes a(out uality of orlife Attitudes a(out uality of orlife

;on$erns a(out environment;on$erns a(out environment

Shifts in or and $areer #referen$esShifts in or and $areer #referen$es

Shifts in #rodu$t and servi$e #referen$esShifts in #rodu$t and servi$e #referen$es

#$ont%d&#$ont%d&

3 The Te$hnologi$al SegmentThe Te$hnologi$al Segment

5rodu$t innovations5rodu$t innovations

A##li$ations of noledge A##li$ations of noledge

:o$us of #rivate and government-su##orted BC':o$us of #rivate and government-su##orted BC'

e"#enditurese"#enditures

+e $ommuni$ation te$hnologies+e $ommuni$ation te$hnologies

#$ont%d&#$ont%d&

3 The 6lo(al SegmentThe 6lo(al Segment

m#ortant #oliti$al eventsm#ortant #oliti$al events

;riti$al glo(al marets;riti$al glo(al marets+ely industriali%ed $ountries+ely industriali%ed $ountries

'ifferent $ultural and institutional'ifferent $ultural and institutional

attri(utesattri(utes

Industry Environment AnalysisIndustry Environment Analysis

3 ndustry 'efinedndustry 'efined A grou# of firms #rodu$ing #rodu$ts that are $lose A grou# of firms #rodu$ing #rodu$ts that are $lose

su(stitutessu(stitutes

3 :irms that influen$e one another:irms that influen$e one another

3 n$ludes a ri$h mi" of $om#etitive strategies thatn$ludes a ri$h mi" of $om#etitive strategies that$om#anies use in #ursuing strategi$$om#anies use in #ursuing strategi$

$om#etitiveness and a(ove-average returns$om#etitiveness and a(ove-average returns

FIGUREFIGURE 2.2 2.2 The Five For$es o! Cometition 'odel The Five For$es o! Cometition 'odel

Threat o! (e) Entrants: Barriers to Threat o! (e) Entrants: Barriers to

EntryEntry3 !$onomies of s$ale!$onomies of s$ale3 5rodu$t differentiation5rodu$t differentiation

3 ;a#ital reuirements;a#ital reuirements

3Sit$hing $ostsSit$hing $osts

3 A$$ess to distri(ution $hannels A$$ess to distri(ution $hannels

3 ;ost disadvantages inde#endent of s$ale;ost disadvantages inde#endent of s$ale

3 6overnment #oli$y6overnment #oli$y

3 !"#e$ted retaliation!"#e$ted retaliation

Barriers to EntryBarriers to Entry

3 !$onomies of S$ale!$onomies of S$aleMarginal im#rovements in effi$ien$y that a firmMarginal im#rovements in effi$ien$y that a firm

e"#erien$es as it in$rementally in$reases its si%ee"#erien$es as it in$rementally in$reases its si%e

3 :a$tors 1advantages and disadvantages related:a$tors 1advantages and disadvantages related

to large- and small-s$ale entryto large- and small-s$ale entry

:le"i(ility in #ri$ing and maret share:le"i(ility in #ri$ing and maret share

;osts related to s$ale e$onomies;osts related to s$ale e$onomies

;om#etitor retaliation;om#etitor retaliation

Barriers to Entry #$ont%d&Barriers to Entry #$ont%d&

35rodu$t differentiation5rodu$t differentiation 8niue #rodu$ts8niue #rodu$ts

;ustomer loyalty;ustomer loyalty

5rodu$ts at $om#etitive5rodu$ts at $om#etitive

#ri$es#ri$es

3 ;a#ital Beuirements;a#ital Beuirements 5hysi$al fa$ilities5hysi$al fa$ilities

nventoriesnventories

Mareting a$tivitiesMareting a$tivities

Availa(ility of $a#ital Availa(ility of $a#ital

3 Sit$hing ;ostsSit$hing ;osts

>ne-time $osts $ustomers>ne-time $osts $ustomers

in$ur hen they (uy from ain$ur hen they (uy from a

different su##lier different su##lier

3 +e eui#ment+e eui#ment

3 Betraining em#loyeesBetraining em#loyees3 5sy$hi$ $osts of ending a5sy$hi$ $osts of ending a

relationshi#relationshi#

3 A$$ess to 'istri(ution A$$ess to 'istri(ution

;hannels;hannels

Sto$ing or shelf s#a$eSto$ing or shelf s#a$e

5ri$e (reas5ri$e (reas

;oo#erative advertising;oo#erative advertising

alloan$esalloan$es

Barriers to Entry #$ont%d&Barriers to Entry #$ont%d&

3;ost 'isadvantages;ost 'isadvantages

nde#endent of S$alende#endent of S$ale 5ro#rietary #rodu$t5ro#rietary #rodu$t

te$hnologyte$hnology

:avora(le a$$ess to ra:avora(le a$$ess to ra

materialsmaterials 'esira(le lo$ations'esira(le lo$ations

3 6overnment #oli$y6overnment #oli$y @i$ensing and #ermit@i$ensing and #ermit

reuirementsreuirements

'eregulation of industries'eregulation of industries

3!"#e$ted retaliation!"#e$ted retaliation Bes#onses (y e"istingBes#onses (y e"isting

$om#etitors may de#end$om#etitors may de#end

on a firm&s #resent stae inon a firm&s #resent stae in

the industry 1availa(lethe industry 1availa(le

(usiness o#tions(usiness o#tions

Bargaining *o)er o! SuliersBargaining *o)er o! Suliers

3 Su##lier #oer in$reases hen4Su##lier #oer in$reases hen4Su##liers are large and fe in num(er.Su##liers are large and fe in num(er.

Suita(le su(stitute #rodu$ts are not availa(le.Suita(le su(stitute #rodu$ts are not availa(le.

ndividual (uyers are not large $ustomers of su##liersndividual (uyers are not large $ustomers of su##liersand there are many of them.and there are many of them.

Su##liers& goods are $riti$al to the (uyers&Su##liers& goods are $riti$al to the (uyers&

maret#la$e su$$ess.maret#la$e su$$ess.

Su##liers& #rodu$ts $reate high sit$hing $osts.Su##liers& #rodu$ts $reate high sit$hing $osts.

Su##liers #ose a threat to integrate forard intoSu##liers #ose a threat to integrate forard into

(uyers& industry.(uyers& industry.

Bargaining *o)er o! BuyersBargaining *o)er o! Buyers

3 ?uyer #oer in$reases hen4?uyer #oer in$reases hen4?uyers are large and fe in num(er.?uyers are large and fe in num(er.

?uyers #ur$hase a large #ortion of an industry&s total?uyers #ur$hase a large #ortion of an industry&s total

out#ut.out#ut.

?uyers& #ur$hases are a signifi$ant #ortion of a?uyers& #ur$hases are a signifi$ant #ortion of a

su##lier&s annual revenues.su##lier&s annual revenues.

?uyers& sit$hing $osts are lo.?uyers& sit$hing $osts are lo.

?uyers $an #ose threat to integrate (a$ard into the?uyers $an #ose threat to integrate (a$ard into the

sellers& industry.sellers& industry.

Threat o! Su+stitute *rodu$ts Threat o! Su+stitute *rodu$ts

3 The threat of su(stitute #rodu$ts in$reasesThe threat of su(stitute #rodu$ts in$reaseshen4hen4

?uyers fa$e fe sit$hing $osts.?uyers fa$e fe sit$hing $osts.

The su(stitute #rodu$t&s #ri$e is loer.The su(stitute #rodu$t&s #ri$e is loer.

Su(stitute #rodu$t&s uality and #erforman$e areSu(stitute #rodu$t&s uality and #erforman$e are

eual to or greater than the e"isting #rodu$t.eual to or greater than the e"isting #rodu$t.

3 'ifferentiated industry #rodu$ts that are valued'ifferentiated industry #rodu$ts that are valued

(y $ustomers redu$e this threat.(y $ustomers redu$e this threat.

Intensity o! Rivalry Among CometitorsIntensity o! Rivalry Among Cometitors

3 ndustry rivalry in$reases hen4ndustry rivalry in$reases hen4 There are numerous or eually (alan$ed $om#etitors.There are numerous or eually (alan$ed $om#etitors.

ndustry groth slos or de$lines.ndustry groth slos or de$lines.

There are high fi"ed $osts or high storage $osts.There are high fi"ed $osts or high storage $osts.

There is a la$ of differentiation o##ortunities or loThere is a la$ of differentiation o##ortunities or lo

sit$hing $osts.sit$hing $osts.

When the strategi$ staes are high.When the strategi$ staes are high.

When high e"it (arriers #revent $om#etitors fromWhen high e"it (arriers #revent $om#etitors from

leaving the industry.leaving the industry.

Lo) entry +arriers

Interreting Industry AnalysesInterreting Industry Analyses

Unattra$tiveUnattra$tiveIndustryIndustry

Suliers and+uyers have strongositions

Strong threats!rom su+stituterodu$ts

Intense rivalryamong$ometitors

Low profit potential

Interreting Industry Analyses #$ont%d&Interreting Industry Analyses #$ont%d&

Attra$tiveAttra$tiveIndustryIndustry

,igh entry+arriers

Suliers and+uyers have )ea-

ositions

Fe) threats !romsu+stitute

rodu$ts'oderate rivalryamong$ometitors

High profit potential

Strategi$ GrousStrategi$ Grous

3 Strategi$ 6rou# 'efinedStrategi$ 6rou# 'efined A set of firms em#hasi%ing similar strategi$ A set of firms em#hasi%ing similar strategi$

dimensions and using similar strategiesdimensions and using similar strategies

3 nternal $om#etition (eteen strategi$ grou# firmsnternal $om#etition (eteen strategi$ grou# firms

is greater than (eteen firms outside that strategi$is greater than (eteen firms outside that strategi$grou#.grou#.

3 There is more heterogeneity in the #erforman$e ofThere is more heterogeneity in the #erforman$e of

firms ithin strategi$ grou#s.firms ithin strategi$ grou#s.

– Similar maret #ositionsSimilar maret #ositions – Similar #rodu$tsSimilar #rodu$ts

– Similar strategi$ a$tionsSimilar strategi$ a$tions

Strategi$ GrousStrategi$ Grous

3 Strategi$ 'imensionsStrategi$ 'imensions!"tent of te$hnologi$al leadershi#!"tent of te$hnologi$al leadershi#

5rodu$t uality5rodu$t uality

5ri$ing 5oli$ies5ri$ing 5oli$ies'istri(ution $hannels'istri(ution $hannels

;ustomer servi$e;ustomer servi$e

Cometitor AnalysisCometitor Analysis

3 ;om#etitor ntelligen$e;om#etitor ntelligen$e The ethi$al gathering of needed information and dataThe ethi$al gathering of needed information and data

that #rovides insight into4that #rovides insight into4

3 A $om#etitor&s dire$tion 1 A $om#etitor&s dire$tion 1future objectivesfuture objectives ) )

3 A $om#etitor&s $a#a(ilities and intentions 1 A $om#etitor&s $a#a(ilities and intentions 1currentcurrent

strategy strategy ) )

3 A $om#etitor&s (eliefs a(out the industry 1 A $om#etitor&s (eliefs a(out the industry 1itsits

assumptionsassumptions

3 A $om#etitor&s A $om#etitor&s capabilitiescapabilities

FIGUREFIGURE 2.2 2.2

CometitorCometitor

AnalysisAnalysis

ComonentsComonents

Cometitor Analysis #$ont%d&Cometitor Analysis #$ont%d&

3 Do do our goalsDo do our goals

$om#are ith our$om#are ith our

$om#etitors& goalsE$om#etitors& goalsE

3 Where ill the em#hasisWhere ill the em#hasis

(e #la$ed in the futureE(e #la$ed in the futureE3 What is the attitudeWhat is the attitude

toard risEtoard risE

&tre 'b(ectives&tre 'b(ectives

3 Do are e $urrentlyDo are e $urrently

$om#etingE$om#etingE

3'oes this strategy'oes this strategy

su##ort $hanges in thesu##ort $hanges in the

$om#etitive stru$tureE$om#etitive stru$tureE

Crrent $trate%yCrrent $trate%y

3 'o e assume the'o e assume the

future ill (e volatileEfuture ill (e volatileE3 Are e o#erating under Are e o#erating under

a status uoEa status uoE

3 What assum#tions doWhat assum#tions do

our $om#etitors holdour $om#etitors holda(out the industry anda(out the industry and

themselvesEthemselvesE

Assm)tionsAssm)tions

3 What are our strengthsWhat are our strengths

and eanessesEand eanessesE

3 Do do e rateDo do e rate

$om#ared to our$om#ared to our

$om#etitorsE$om#etitorsE

Ca)abilitiesCa)abilities

3 What ill ourWhat ill our

$om#etitors do in the$om#etitors do in thefutureEfutureE

3 Where do e hold anWhere do e hold an

advantage over ouradvantage over our

$om#etitorsE$om#etitorsE

3 Do ill this $hangeDo ill this $hange

our relationshi# ithour relationshi# ith

our $om#etitorsEour $om#etitorsE

Res)onseRes)onse&tre 'b(ectives&tre 'b(ectives

Ca)abilitiesCa)abilities

ComlementorsComlementors

3;om#lementors;om#lementors The netor of $om#anies that sell $om#lementaryThe netor of $om#anies that sell $om#lementary

#rodu$ts or servi$es or are $om#ati(le ith the fo$al#rodu$ts or servi$es or are $om#ati(le ith the fo$al

firm&s on #rodu$t or servi$e.firm&s on #rodu$t or servi$e.

3 f a $om#lementor&s #rodu$t or servi$e adds valuef a $om#lementor&s #rodu$t or servi$e adds valueto the sale of the fo$al firm&s #rodu$t or servi$e< itto the sale of the fo$al firm&s #rodu$t or servi$e< it

is liely to $reate value for the fo$al firm.is liely to $reate value for the fo$al firm.

3 Doever< if a $om#lementor&s #rodu$t or servi$e isDoever< if a $om#lementor&s #rodu$t or servi$e is

in a maret into hi$h the fo$al firm intends toin a maret into hi$h the fo$al firm intends toe"#and< the $om#lementor $an re#resent ae"#and< the $om#lementor $an re#resent a

formida(le $om#etitor.formida(le $om#etitor.

Ethi$al ConsiderationsEthi$al Considerations

35ra$ti$es $onsidered (oth legal and ethi$al45ra$ti$es $onsidered (oth legal and ethi$al4>(taining #u(li$ly availa(le information>(taining #u(li$ly availa(le information

Attending trade fairs and shos to o(tain $om#etitors& Attending trade fairs and shos to o(tain $om#etitors&

(ro$hures< vie their e"hi(its< and listen to(ro$hures< vie their e"hi(its< and listen to

dis$ussions a(out their #rodu$tsdis$ussions a(out their #rodu$ts

3 5ra$ti$es $onsidered (oth unethi$al and illegal45ra$ti$es $onsidered (oth unethi$al and illegal4

?la$mail?la$mail

Tres#assingTres#assing!avesdro##ing!avesdro##ing

Stealing draings< sam#les< or do$umentsStealing draings< sam#les< or do$uments

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