Mba case analysis pestel 5 forces 2015
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Transcript of Mba case analysis pestel 5 forces 2015
CASE ANALYSIS CASE ANALYSIS METHOD: METHOD:
ASSESSING THE ASSESSING THE EXTERNAL BUSINESS EXTERNAL BUSINESS
ENVIRONMENTENVIRONMENT
Prof.Stephen OngProf.Stephen OngBSc(Hons)Econs (LSE), MBA BSc(Hons)Econs (LSE), MBA
(Bradford)(Bradford)Visiting Professor, Shenzhen Visiting Professor, Shenzhen
UniversityUniversity
MBA MBA
Why External Analysis?
External analysis allows firms to:
• discover threats and opportunities
• see if above normal profits are likely in an industry
• better understand the nature of competition inan industry
• make more informed strategic choices
FirmFirm
BuyersBuyers
SuppliersSuppliers
EntryEntry
RivalryRivalry
SubstitutesSubstitutes
ComplementorsComplementors
TechnologicalTrends
Ecological/ EthicsEcological/ EthicsChange
Socio-Cultural/ Socio-Cultural/ DemographicDemographic
TrendsEconomicEconomicClimate
PoliticalPoliticalConditions
Legal/Regulatory/Globalisation
IndustryIndustry
General External EnvironmentGeneral External Environment
PESTEL PESTEL AnalysisAnalysis
PESTEL Local FactorsPESTEL Local Factors
PESTEL Global FactorsPESTEL Global Factors
Porter’s 5 ForcesPorter’s 5 ForcesIndustry AnalysisIndustry Analysis
Industry Analysis :Industry Analysis :Porter’s 5+1 Forces Porter’s 5+1 Forces ModelModel
Porter’s Five Forces Model
1. Threat of Entry1. Threat of Entry• if firms can easily enter the industry, any above
normal profits will be bid away quickly
• barriers to entry lower the threat of entry
• barriers to entry make an industry more attractive
• this is true whether the focal firm isalready in the industry or thinking aboutentering
Porter’s Five Forces Model
1. Threat of Entry1. Threat of EntryBarriers to Entry:
• economies of scale—firm that can’t producethe minimum efficient scale will be at a disadvantage
• product differentiation—entrants are forced toovercome customer loyalties to existing products
• cost advantages independent of scale—incumbentsmay have learning advantages, etc.
• government policies—governments may imposetrade restrictions and/or grant monopolies
Economies of Scale and the Cost of Production
Porter’s Five Forces Model
2. Threat of Rivalry2. Threat of Rivalry• high rivalry means firms compete vigorously—and
compete away above average profits
Industry conditions that facilitate rivalry:
• large numbers of competitors
• slow or declining growth
• high fixed costs and/or high storage costs
• low product differentiation
• industry capacity added in large increments
Porter’s Five Forces Model
3. Threat of Substitutes3. Threat of Substitutes• substitutes fill the same need but in a different way
- Coke and Pepsi are rivals, milk is asubstitute for both
• substitutes create a price ceiling because consumersswitch to the substitute if prices rise
• substitutes will likely come from outside theindustry—be sure to look
Porter’s Five Forces Model
4. Threat of Powerful Suppliers4. Threat of Powerful Suppliers• powerful suppliers can ‘squeeze’ (lower profits)
the focal firm
Industry conditions that facilitate supplier power:
• small number of firms in supplier’s industry
• highly differentiated product
• lack of close substitutes for suppliers’ products
• supplier could integrate forward
• focal firm is an insignificant customer of supplier
Porter’s Five Forces Model
5. Threat of Powerful Buyers5. Threat of Powerful Buyers• powerful buyers can ‘squeeze’ (lower profits)
the focal firm by demanding lower prices and/orhigher levels of quality and service
Industry conditions that facilitate buyer power:
• small number of buyers for focal firm’s output
• lack of a differentiated product
• the product is significant to the buyer
Porter’s Five Forces Model
5. Threat of Powerful Buyers5. Threat of Powerful BuyersIndustry conditions that facilitate buyer power:
• buyers operate in a competitive market—they arenot earning above normal profits
• buyers can vertically integrate backwards
• many small buyers can be united around an issueto act as a block
Example: Monsanto’s Life Sciences Strategy
6. Other Stakeholders :6. Other Stakeholders :Complementors As Another ForceComplementors As Another Force
Complementors Increase the Value of the Firm’s Product
• customers perceive more value in the focal firm’sproduct when it is combined with the complementor’sproduct
• complementors may be found outside the focal firm’sindustry
Example: Goodyear Tires on Corvette
ReferencesReferences
• Johnson, Gerry, Whittington, Richard & Scholes, Kevan (2011) Exploring Strategy, 9th edition, FT Prentice Hall/Pearson UK.
• Barney, J.B. & Hesterley,W.S.(2012) Strategic Management and Competitive Advantage, 4th edition, Prentice Hall
• Wheelen & Hunger (2011) Essentials of Strategic Management, 5th edition, Pearson
• Porter, M.E., (2008) On Competition, Harvard Business Press.