[PPT]Chapter 3 The External Assessment - University of...
Transcript of [PPT]Chapter 3 The External Assessment - University of...
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Chapter 3 The External Assessment
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Identify & Evaluate factors beyond the control of a single firm– Increased foreign competition– Population shifts– Information technology
External Strategic Management Audit
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CompetitorsSuppliers
DistributorsCreditors
CustomersEmployees
CommunitiesManagers
StockholdersLabor Unions
Special Interest GroupsProductsServices
Key External Forces
Opportunities&
Threats
Key External Forces & the Organization
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Performing External Audit
External Factors
Measurable
Long-term orientation
Applicable to competing firms
Hierarchical
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Economies of Scale
Industry Properties
Barriers to market entry
Product differentiation
Level of competitiveness
I/O Perspective Firm Performance
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Social, Cultural, Demographic & Environmental Forces
U.S. Facts
•Aging population
•Less Caucasian
•Widening gap between rich & poor
•2025 = 18.5% population >65 years
•2075 = no ethnic or racial majority
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Key Social, Cultural, Demographic & Environmental Variables
Number of marriages & divorces
Number of special interest groups
Number of births & deaths
Immigration & emigration rates
Childbearing rates
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Political, Government & Legal Forces
• Worldwide trend toward similar consumption patterns
• Global buyers and sellers• E-commerce• Technology for instant currency transfers
Globalization of Industry
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Competitive Forces
Strengths
•Weaknesses
•Capabilities
•Opportunities
•Threats
•Objectives
•Strategies
Identifying Rival Firms
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Competitive Forces
1. Market share matters
2. Understand what business you are in
3. Broke or not, fix it
4. Innovate or evaporate
7 Characteristics of most Competitive U.S. Firms:
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Competitive Forces
5. Acquisition is essential to growth
6. People make a difference
7. No substitute for quality
7 Characteristics of most Competitive U.S. Firms:
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The Five-Forces Model of CompetitionPotential development of substitute products
Rivalry among competing firms
Bargaining power of suppliers
Potential entry of new competitors
Bargaining power of consumers
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The Global Challenge
Faced by U.S. Firms --
•Gain & maintain exports to other nations
•Defend domestic markets against imported goods
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Industry Analysis: The External Factor Evaluation (EFE) Matrix
CompetitivePoliticalCultural
TechnologicalEnvironmentalSocial
GovernmentalDemographicEconomic
Summarize & Evaluate
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EFE – Gateway Computers (2003)Key External Factors Weight Rating Wtd
Score
Opportunities1. Global PC market expected to grow 20% in 2004 0.10 3 0.30
2. Cost of PC component parts expected to decrease 10% - 2004 0.10 3 0.30
3. Internet use growing rapidly 0.05 2 0.104. China entered WTO; lowered taxes for importing PC’s 0.10 1 0.10
5. The average income for PC worker has declined from $40K/yr to $30k/yr 0.05 3 0.15
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EFE – Gateway Computers (2003) (cont’d)
Key External Factors Weight Rating Wtd Score
Opportunities (cont’d)6. Modernization of business firms and government agencies 0.05 2 0.10
7. U.S. (& world) economies recovering 0.05 3 0.15
8. 30% of Chinese population can afford a PC; only 10% of homes have a PC
0.05 1 0.05
Threats 0.10 1 0.10
1. Intense rivalry in industry 0.10 1 0.05
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EFE – Gateway Computers (2003) (cont’d)
Key External Factors Weight Rating Wtd Score
Threats (cont’d)2. Severe price cutting in PC industry 0.10 2 0.20
3. Different countries have different reg’s and infrastructure for PC’s 0.05 1 0.05
4. Palm & PDA becoming substitutes 0.05 3 0.15
5. Demand exceeds supply of experienced PC workers 0.05 4 0.20
6. Birth rate in U.S. declining annually 0.05 3 0.15
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EFE – Gateway Computers (2003) (cont’d)Key External Factors Weight Rating Wtd
Score
Threats (cont’d)7. U.s. consumers and businesses delaying purchase of PC’s 0.05 2 0.10
8. PC firms diversifying into consumer electronics 0.05 3 0.15
Total 1.00 2.40
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Total weighted score of 4.0• Organization response is outstanding to threats
and weaknesses
Industry Analysis EFE
Total weighted score of 1.0• Firm’s strategies not capitalizing on opportunities
or avoiding threats
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Industry Analysis: Competitive Profile Matrix (CPM)
Identifies firm’s major competitors and their strengths & weaknesses in relation to a sample firm’s strategic positions
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Gateway Apple DellCSF’s Wt Rating Wt’d
ScoreRatin
gWt’d
ScoreRating Wt’d
Score
Market share 0.15 3 0.45 2 0.30 4 0.60Inventory sys 0.08 2 0.16 2 0.16 4 0.32Fin position 0.10 2 0.20 3 0.30 3 0.30Prod. Quality 0.08 3 0.24 4 0.32 3 0.24Cons. Loyalty 0.02 3 0.06 3 0.06 4 0.08Sales Distr 0.10 3 0.30 2 0.20 3 0.30Global Exp. 0.15 3 0.45 2 0.30 4 0.60Org. Structure 0.05 3 0.15 3 0.15 3 0.15
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Gateway Apple DellCSF’s (cont’d) Wt Rating Wt’d
ScoreRatin
gWt’d
ScoreRating Wt’d
Score
Prod. Capacity 0.04 3 0.12 3 0.12 3 0.12E-commerce 0.10 3 0.30 3 0.30 3 0.30Customer Serv 0.10 3 0.30 2 0.20 4 0.40Price competitive 0.02 4 0.08 1 0.02 3 0.06
Mgt. experience
0.01 2 0.02 4 0.04 2 0.02
Total 1.00 2.83 2.47 3.49