Analysing the strategic Environment

Mark Holbourn & Laila Kasem

Common Elements in Successful Strategies

Successful Strategy

Simple, consistent, long-

term goals

Profound understanding of the competitive

environment

Objective appraisal of resources

Effective Implementation

Grant, (2013, p9) Contemporary Strategy Analysis

What is Strategy?

• Some elements / characteristics– Long term– Competitive advantage– Planning– Distinctiveness– “Big” decisions

• Significant resources• Important• Not easily reversible

What is Strategy?

• Where to compete?• How to compete?

• Where to compete?–Which businesses should we be in?–A corporate strategy decision

• How to compete?–How do we create / build / defend a

competitive advantage?–A competitive strategy / business strategy

decision

• Interlinked but, in principle, distinct

What is Strategy?

The Questions Raised by Reading

• How do you do strategy?

• What is it?

Strategy: some Working Assumptions

• Strategy is a complex concept!• Companies need strategies• We can devise and develop strategies• The intended strategy may change / have

to be adapted in implementation• Intended strategies still have value

• Theory is useful if it generates insights

Where to Start?• Analysis• Understand existing situation• Forecast likely / possible change

• Intended, deliberate, prescriptive model

Analysing the main elements of the environment

Environment

Resources

Purpose

Options

Options

Options

Choice Implement

This session

Lynch, (2012,p71)

Environmental Analysis

If you were starting your own business:

• What do you want to know about the environment ?

• In pairs you have one minute – how many things can you think of?

• Debrief

Analysing the strategic environment – 1 The nine basic analytical tools

Company or public sector organisation

Environment basics

Degree of turbulence

PESTEL analysis

Industry life cycle

Key factors for success

Five Forces

analysis

Four Links analysis

Competitor analysis

Customer analysis

Lynch, (2012,p72)

All the above tools ask questions!• Market size

– How big is a big company going to be in this industry?

• Growth– Is it fast growing, maturing, declining?– Are there one / several / many PLC’s

here?• What are the market shares of the

key competitors? Our market share?

The Basics• What is the market????

The Basics• For strategy:

– Often wider market or industry– Can’t neglect the details

• Raises questions– How many markets / segments do we / should we

compete in?– How do the markets / segments connect?– Does competing in one / some help us extend

into others?

Porter’s 5 Forces Model of Industry Competitiveness

Grant (2010)

PESTEL Analysis

• Political• Economic• Socio-cultural• Technological• Environmental• Legal

PESTEL

• What it is:– A reminder, checklist, Tool

• What it is NOT:– An injunction to cover everything

• If any element isn’t important, don’t include it– Eg University of Bedfordshire

And it is not A structure for your reports!!!!!!!!! You would not leave nutcrackers or shell buried in your cake – would you?

Scenario Planning• The future is uncertain• Your PESTEL might be wrong• It may be very hard• Why are these industries particularly

hard?

Scenario Planning – Process • Map the Future• Identify key uncertainties

– What really matters– What might be very different

• Create scenarios showing different futures

• Plan for most likely future• Have contingencies ready for futures

which would have big impact

From JISChttp://www.jiscinfonet.ac.uk/infokits/learning-space-design/imagination/techniques/scenario-planning

Scenario planning

http://www.youtube.com/watch?v=STnPHoPfFQE

Few customers, few competitors

Development

Growth Shakeout Maturity Decline

Industry Life Cycle

Entry of competitors, fighting for share, un-differentiated products. May be

many competitors, seeking volume, shakeout of weak players.

Rely on repeat purchase.

Hard to take share

Emphasis on efficiency (and maybe NPD)

Drop-off in usage

Exit of some competitors

Preparation for the Seminar

• Case Study Johnson et al. (9th ed) P. 79-81. Find it in BREO – Seminar Material.

• Key Note Report - Breweries & the Beer Update Market Report 2012 (Access through university). – Market Trends: P.3-8– Current Issues: P. 23-24– Market Growth + Future Trends p. 29-31

• Research 3 recent news articles which complement the case study.

Tasks• Consider the external environment using

relevant strategic models.

• You will be asked to write and present on these issues within the seminar.

• You will not be allowed to remain in the seminar unless we see evidence of your preparation, including a copy of the case study

• Review the guidance on case study in the folder on Breo.