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Ch. 3 Assessing Opportunities and Threats Marsha Swink Jonathan McLaurin Paul Shirley

Dec 31, 2015

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Ch. 3 Strategic Management Assessing Opportunities and Threats

Ch. 3 Assessing Opportunities and ThreatsMarsha SwinkJonathan McLaurinPaul ShirleyExternal AnalysisWhat is External Analysis?

Opportunities

ThreatsOpen Systems-Two PerspectivesEnvironment as a source of InformationAmount of change- dynamic vs. stableAmount of complexity- complex vs. simple

Environment as a source of ResourcesScarce and necessary resourcesHostile= greater uncertaintyExternal Environmental SectorsSpecific Environment-Customers, competitors, suppliers and other competitive factors.

General Environment-Economic, Demographic, Sociocultural, Political-Legal, and Technological.4Specific EnvironmentPorters Five-Forces ModelRivalryEntrantsBuyersSuppliersSubstitutions

5Rivalry Among Existing FirmsCompetitors- Few or Many?

Sales Growth- Slowing or Progressing

Diversity Among Competitors.How similar is your competition to you?6Potential Entrants to the IndustryEconomies of Scale- High or Low?

Capital Requirements- Large or Small?

Government Policies- In Place to Help or Harm?7Bargaining Power of BuyersPurchases Large or Small Volumes?

Products Purchased are Standard or Unique?

Buyers Profits- High or Low?8Bargaining Power of SuppliersAre Suppliers Concentrated or Fragmented?

Importance of the Industry Being SuppliedIs our company important

Product is an Important Input to Industry.9Substitute ProductsAre There any Good Substitutes?10Specific EnvironmentIndustry ProfitabilityWhat does the company have to achieve profitability?What can it develop or create to progress?

11General EnvironmentIncludes:EconomicDemographicSocioculturalPolitical-LegalTechnological Trends positive(opportunity)/negative(threats)Some Changes have no effect on organization

EconomicRising cost of energy and fuelsRetailers- consumers lose appetite of spendingException: Wal-MartCostCos greatest struggleMacroeconomic dataInterest rates, GDP, Unemployment levelsGlobal Business analysis wont change muchBiggest challenge is reliable statisticsDemographicsAgeGenderIncomeEthnicityEducationGeographic LocationEmploymentBirth RatesCross Examine

Understand current and potential customers

Hourglass PhenomenonPeaceBaby BoomersTodayDemographicsU.S.24.7 million small businesses24.6 million people married w/childrenAvg Inc. $48,201 per personCostCoSmall BusinessesUpper/Middle Class Families Avg. Inc. Target Market100,000

Sociocultural Understand CurrentCultureLifestylesKrafts healthier food productsTraditionsTastesAttitudesWhats inApples iPods/Phones/Pads

CostCos Sociocultural ForcesU.SShopping convenient, Deliverer organic optionsAwareness of food allergensCanadaMany ethnic groupsJapanFreshnessPortabilityPolitical-LegalTaxationMinimum wageProduct labeling/safety lawsInternational businessTradingTechnologicalLook ForScientific InnovationTechnological InnovationMost AffectedProduct R&DOrganizational Work Processes Computerization

CostCos Technological FactsTrack purchases of membersKnow which products sell moreRestocking inventoryMemberships connected w/credit cards

Finding Info on External EnvironmentCustomer surveysTrade journalsGeneral newsExternal informational systemsProblemsToo much information

Responsibility for External AnalysisSmall to Mid-size organizationsAll should monitor changes

Large organizations Managers

Everyone is involved

What's the point?Align the organization with the environment

Understand what the environment has to offer

Ever increasing dynamic environment

Makes a difference in performance results

Promotion and raises

ChallengesChanges are too rapid to evaluate

Time consuming

Forecast aren't perfectTake Aways External EnvironmentIndustry profitability

Stay in line with environment

Continually Assess opportunity and threats