Top Banner
Assessing Opportunities and Threats: Doing an External Analysis Strategic Management in Action: Chapter 3
21

Assessing Opportunities and Threats: Doing an External Analysis

Feb 22, 2016

Download

Documents

blaze

Assessing Opportunities and Threats: Doing an External Analysis. Strategic Management in Action: Chapter 3. What is an external analysis?. Pet care spending has more than doubled to 3.2 billion over the last 5 yrs. Referred to as nonessential expenditures - PowerPoint PPT Presentation
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Page 1: Assessing Opportunities and Threats: Doing an External Analysis

Assessing Opportunities and Threats: Doing an

External AnalysisStrategic Management in Action: Chapter 3

Page 2: Assessing Opportunities and Threats: Doing an External Analysis

What is an external analysis?

• Pet care spending has more than doubled to 3.2 billion over the last 5 yrs. • Referred to as nonessential expenditures

• External analysis: process of scanning and evaluating an organizations external environment.

• Strategic managers determine the opportunities and threat facing their organizations.• Opportunities: positive external trends or changes • Threats: negative external trends or changes

Page 3: Assessing Opportunities and Threats: Doing an External Analysis

Organizations as Open Systems

• Open systems: interact with and respond to their environment.

• Example- inputs have to come from somewhere and outputs must be distributed somewhere.• The somewhere is the external environment.

• Organizations are interrelated and interdependent.• Chester Barnard, management theorist, first

suggested this in 1938.

Page 4: Assessing Opportunities and Threats: Doing an External Analysis

Organization as an Open System

Page 5: Assessing Opportunities and Threats: Doing an External Analysis

Perspectives on Organizational Environments

• Organizations interact with their environment in two ways:• The environment as a source of information• The environment as a source of resources

Page 6: Assessing Opportunities and Threats: Doing an External Analysis

Environment as Information Perspective

• Environmental uncertainty: the amount of change and complexity in an organization’s environment• Dynamic: changing rapidly; more uncertain

environment• Stable: minimal and slow;

• Strategic decisions made by doing an external analysis.

Page 7: Assessing Opportunities and Threats: Doing an External Analysis

Resources Perspective

• Environment viewed a source of scarce and valued sources.

• Organizations depend on the environment for these resources.

• Reducing dependency means controlling environment resources.• Means knowing about the environment and

attempting to change or influence it.• Example: Toyota hybrid vehicles.

Page 8: Assessing Opportunities and Threats: Doing an External Analysis

Determine What's Happening in the External Environment

• Environmental scanning and analysis.• Identify the opportunities and threats facing the

organization.

Page 9: Assessing Opportunities and Threats: Doing an External Analysis

How to Conduct an External Analysis

• Specific Environments- Customers, Competitors, Suppliers, other Industry-competitive Variables

-Whereas-

• General Environments- Economic, Demographic, Sociocultural, Political-legal, Technological Sectors

Page 10: Assessing Opportunities and Threats: Doing an External Analysis

An Organization’s External Environment

Page 11: Assessing Opportunities and Threats: Doing an External Analysis

Five-forces Model(Specific Environments)

Page 12: Assessing Opportunities and Threats: Doing an External Analysis

Conditions Contributing to Rivalries

• Numerous or Equally Balanced competitors• Slow Industry Growth• High Fixed or Storage Costs• Lack of Differentiation or Switching Costs• Addition of capacity in large increments• Diverse competitors• High Strategic stakes• High Exit Barriers

Page 13: Assessing Opportunities and Threats: Doing an External Analysis

Barriers to Potential Entrants

• Economies of Scale• Cost Disadvantages• Product differentiation• Capital Requirements• Switching costs• Access to Distribution Channels• Government Policies

Page 14: Assessing Opportunities and Threats: Doing an External Analysis

Bargaining Power

• Power Struggle between Buyers vs. Suppliers

• Factors That Contribute to either side• Differentiates between industries and

markets• Examples• Wal-mart as a buyer• UPS holds a “supplier” advantage for their

service• Buyers of their service have few choices, and are

therefore forced to pay UPS’s price.

Page 15: Assessing Opportunities and Threats: Doing an External Analysis

Substitute Products

• An alternative product that can satisfy the consumer’s need that our industry is satisfying• Examples• Soft Drink industry

Page 16: Assessing Opportunities and Threats: Doing an External Analysis

General Environment

• Economics• Demographic• Sociocultural• Political-Legal• Technological

Page 17: Assessing Opportunities and Threats: Doing an External Analysis

Finding and Evaluating Information

• Informal approach vs. Formal Approach• External Information System- formal

approach that provides managers with needed external information on a regular basis

• Having too much information

Page 18: Assessing Opportunities and Threats: Doing an External Analysis

Responsibilities at Different Managerial Levels

• Small to medium-sized organization• Large organizations• Lower level supervisors• Middle management• Top Level Management

Page 19: Assessing Opportunities and Threats: Doing an External Analysis

Benefits of Doing an External Analysis

• Proactive Manager- a manager who anticipates changes and plans for those changes, instead of reacting to them.

• “Environment as source of resources”• Ability to acquire and control needed

resources depends on having strategies that take advantage of environment’s abundant resources and the limited resources.

Page 20: Assessing Opportunities and Threats: Doing an External Analysis

Benefits Continued

• Depending on the industry, today’s external environment is increasingly dynamic.

• Does an external analysis make a difference?• Research studies have shown that in

organizations in which strategic decision makers did external analyses, performance was higher.

• Evaluated using a financial measure such as return on assets or growth in profitability.

Page 21: Assessing Opportunities and Threats: Doing an External Analysis

Challenges of Doing an External Analysis

• The environment might be changing more rapidly than realistically can be kept up with.

• Amount of time it can consume.• Forecasts and trend analyses are a

significant part of the external analysis, they are not perfect.