Transcript
Prentice Hall, Inc. © 2008 4-1
STRATEGIC MANAGEMENT & BUSINESS POLICY11TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER
CHAPTER 4 Environmental Scanning and Industry Analysis
2
Defined:
The degree of complexitydegree of complexity plus the degree of changedegree of change existing in an organization’s external environment.
Environmental uncertainty
Defined:
The monitoring, evaluating, and disseminating of information from the external and internal environments to key people within the corporation to avoid strategic surprise and ensure the long-term health of the firm.
Prentice Hall, Inc. © 2008 4-3
Environmental Scanning
4
Societal environment:Societal environment:
General forces that do not directly touch on the short-run activities but often influence its long-run decisions.
Environmental Scanning
Prentice Hall, Inc. © 2008 4-5
Environmental Scanning
Societal environment --
–Economic forces–Technological forces–Political-legal forces–Sociocultural forces
Prentice Hall, Inc. © 2008 4-6
Societal Environment
Economic Forces --
–Regulate exchange of materials, money, energy and information
Prentice Hall, Inc. © 2008 4-7
Societal Environment
Technological Forces --
–Generate problem-solving inventions
Prentice Hall, Inc. © 2008 4-8
Societal Environment
Political-legal Forces --
–Allocate power; provide laws and regulations
Prentice Hall, Inc. © 2008 4-9
Societal Environment
Sociocultural Forces --
–Regulate values, mores, and customs of society
Prentice Hall, Inc. © 2008 4-10
Variables in Societal Environment
Prentice Hall, Inc. © 2008 4-11
Demographic Trends
Prentice Hall, Inc. © 2008 4-12
Transformational Sociocultural Trends
8 Current Trends –
–Increasing environmental awareness–Growing health consciousness–Expanding seniors market–Impact of the Generation Y boomlet–Declining mass market–Changing pace and location of life–Changing household composition–Increasing diversity of workforce & market
Prentice Hall, Inc. © 2008 4-13
International Societal Environments
• Each country or group of countries in which a company operates presents a unique societal environment with a different set of economic, technological, political-legal, and sociocultural variables for the company to face.
Prentice Hall, Inc. © 2008 4-14
International Societal Environments
Prentice Hall, Inc. © 2008 4-15
Task Environment
Task environment --
–Elements or groups that directly affect a corporation and are affected by it
Prentice Hall, Inc. © 2008 4-16
Task Environment
Industry Analysis --
–In-depth examination of key factors within a corporation’s task environment
Prentice Hall, Inc. © 2008 4-17
Scanning the Task Environment
Prentice Hall, Inc. © 2008 4-18
External Strategic Factors
Strategic myopia --
–Willingness to reject unfamiliar as well as negative information
Prentice Hall, Inc. © 2008 4-19
Issues Priority Matrix
Prentice Hall, Inc. © 2008 4-20
Issues Priority Matrix
1. Identify likely trends:• Societal and task environments
• Strategic environmental issues
2. Assess probability of trends occurring• Low to High
3. Ascertain likely impact of trends on the corporation• Low to High
21
Defined:
Key environmental trends that are judged to have both a medium to high probability of occurrence and a medium to high probability of impact on the corporation.
External Strategic Factors
22
IndustryA group of firms producing a similar product or service, such as soft drinks or financial services.
Industry analysis: Analyzing the Task Environment
23
Porter’s approach:Porter’s approach:
Assess the six forces --1. Threat of new entrants
2. Rivalry among existing firms
3. Threat of substitute products
4. Bargaining power of buyers
5. Bargaining power of suppliers
6. Relative power of other stakeholders
Industry analysis: Analyzing the Task Environment
Prentice Hall, Inc. © 2008 4-24
Industry analysis: Analyzing the Task Environment
Prentice Hall, Inc. © 2008 4-25
Porter’s Approach to Industry Analysis
Threat of New Entrants –Possible barriers to entry
–Economies of scale–Product differentiation–Capital requirements (Boeing and Airbus)
–Switching costs (software programs)
–Access to distribution channels–Cost disadvantages (operating system (MS-DOS)
–Government policy
Prentice Hall, Inc. © 2008 4-26
Porter’s Approach to Industry Analysis
Rivalry Among Existing Firms –Rivalry is related to several factors including:
–Number of competitors–Rate of industry growth–Product or service characteristics–Amount of fixed costs (airlines)–Capacity–Height of exit barriers–Diversity of rivals
27
Substitute Products:Those products that appear to be different but can satisfy the same need as another product. To the extent that switching costs are low, substitutes can have a strong effect on an industry.
Examples– Email & fax– Internet &video stores– Bottled water & cola
Porter’s Approach to Industry Analysis
28
Bargaining Power of Buyers
Buyer is powerful when:• Buyer purchases large proportion of seller’s products• Buyer has the potential to integrate backward• Alternative suppliers are plentiful• Changing suppliers costs very little• Purchased product represents a high percentage of a buyer’s costs• Buyer earns low profits• Purchased product is unimportant to the final quality or price of a
buyer’s products
Porter’s Approach to Industry Analysis
29
Bargaining Power of Suppliers
Supplier is powerful when:• Supplier industry is dominated by a few companies but
sells to many• Its product is unique and/or has high switching costs• Substitutes are not readily available• Suppliers are able to integrate forward and compete
directly with present customers• Purchasing industry buys only a small portion of the
supplier’s goods.
Porter’s Approach to Industry Analysis
Prentice Hall, Inc. © 2008 4-30
Porter’s Approach to Industry Analysis
Relative Power of Other StakeholdersA six force should be added to Porter’s list• government• local communities• creditors (if not included with suppliers)• trade associations• special-interest groups• unions• complementora company or industry which whose product works well with a firm’s product and without which the product would lose much of its value such as:• Intel and Microsoft• the tire and automobile industries
Prentice Hall, Inc. © 2008 4-31
Industry Evolution
Fragmented Industry –
No firm has large market share and each firm serves only a small piece of the total market in competition with others.
Prentice Hall, Inc. © 2008 4-32
Industry Evolution
Consolidated Industry –
Dominated by a few large firms, each of which struggles to differentiate its products from the competition.
Prentice Hall, Inc. © 2008 4-33
International Risk Assessment
Continuum of International Industries
The factors that tend to determine whether an industry will be multidomestic or primary global are:1.Pressure for coordination within the MNCs operating in that industry2.Pressure for local responsiveness on the part of individual country markets
34
Defined:
A set of business units or firms that pursue similar strategies with similar resources.
Strategic Groups
Prentice Hall, Inc. © 2008 4-35
Strategic Groups
36
Identifying strategic groups
price
low
HighHigh
Product line breadthLimited menu Full menu
Strategic Groups
37
Defined:– Category of firms based on a common strategic
orientation and a combination of structure, culture, and processes consistent with that strategy.
– General types are: 1.Defenders2.Prospectors3.Analyzers4.Reactors
Strategic Types
Prentice Hall, Inc. © 2008 4-38
Strategic Types
1. Defenders• efficiency
2. Prospectors • product innovation and market opportunities
3. Analyzers• Works in at least two different product-market
areas, one stable (efficiency) and one variable (innovation). such as multidivisional firms (e.g. IBM and P&G)
4. Reactors• Lack a consistent strategy-structure-culture
relationship such as major US airlines
39
External Factor Analysis Summary (EFAS)
ExternalFactors
Weight of importance
Firm’s response Rating
Weighted Score Comments
1 2 3 4 5
1.00
Opportunities
Threats
Total Weighted Score
Notes: 1. List opportunities and threats (5–10) in column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2 based on that factor’s probable impact on the company’s strategic position. The total weights must sum to 1.00. 3. Rate each factor from 5 (Outstanding) to 1 (Poor) in Column 3 based on the company’s response to that factor. 4. Multiply each factor’s weight times its rating to obtain each factor’s weighted score in Column 4. 5. Use Column 5 (comments) for rationale used for each factor. 6. Add the weighted scores to obtain the total weighted score for the company in Column 4. This tells how well the company is responding to the strategic factors in its external environment.Source: T. L. Wheelen and J. D. Hunger, “External Strategic Factors Analysis Summary (EFAS).” Copyright © 1991 by Wheelen and Hunger Associates. Reprinted by permission.
Using key success factors to create an industry matrix-- EFAS
40
Maytag Example
External Factors Weight RatingWeighted Score Comments
1.00
Opportunities• Economic integration of
European Community
• Demographics favor quality appliances
• Economic development of Asia
• Opening of Eastern Europe
• Trend to “Super Stores”
Threats• Increasing government regulations
• Strong U.S. competition
• Whirlpool and Electrolux strong globally
• New product advances
• Japanese appliance companies
Total Scores
.20
.10
.05
.05
.10
.10
.10
.15
.05
.10
4
5
1
2
2
4
4
3
1
2
.80
.50
.05
.10
.20
.40
.40
.45
.05
.20
Acquisition of Hoover
Maytag quality
Low Maytag presence
Will take time
Maytag weak in this channel
Well positioned
Well positioned
Hoover weak globally
Questionable
Only Asian presence is Australia
3.15
1 2 3 4 5
Using key success factors to create an industry matrix-- EFAS
41
Key Success Factors Weight
Company ARating
Company AWeighted Score
Company BRating
Company BWeighted Score
1 2 3 4 5 6
Total 1.00
Source: T. L. Wheelen and J. D. Hunger, “Industry Matrix.” Copyright © 2001 by Wheelen and Hunger Associates. Reprinted by permission.
Using key success factors to create an industry matrix-- EFAS
Industry Matrix
42
• Using EFAS, choose a local organization and analyse its external environment.
–Group work–Written assignment–Presentation–Deadline: The first lecture of the next
week
Exercise
top related