Prentice Hall, Inc. © 2006 4-1

STRATEGIC MANAGEMENT & BUSINESS POLICY10TH EDITION

THOMAS L. WHEELEN J. DAVID HUNGER

CHAPTER 4 Environmental Scanning and Industry Analysis

Prentice Hall, Inc. © 2006 4-2

Environmental Scanning

Societal environment --

–Economic forces–Technological forces–Political-legal forces–Sociocultural forces

Prentice Hall, Inc. © 2006 4-3

Societal Environment

Economic Forces --

–Regulate exchange of materials, money, energy and information

Prentice Hall, Inc. © 2006 4-4

Societal Environment

Technological Forces --

–Generate problem-solving inventions

Prentice Hall, Inc. © 2006 4-5

Societal Environment

Political-legal Forces --

–Allocate power; provide laws and regulations

Prentice Hall, Inc. © 2006 4-6

Societal Environment

Sociocultural Forces --

–Regulate values, mores, and customs of society

Prentice Hall, Inc. © 2006 4-7

Task Environment

Task environment --

–Elements or groups that directly affect a corporation and are affected by it

Prentice Hall, Inc. © 2006 4-8

Task Environment

Industry Analysis --

–In-depth examination of key factors within a corporation’s task environment

Prentice Hall, Inc. © 2006 4-9

Variables in Societal Environment

Prentice Hall, Inc. © 2006 4-10

Demographic Trends

Prentice Hall, Inc. © 2006 4-11

Transformational Sociocultural Trends

8 Current Trends –

–Increasing environmental awareness–Growing health consciousness–Expanding seniors market–Impact of the Generation Y boomlet–Declining mass market–Changing pace and location of life–Changing household composition–Increasing diversity of workforce & market

Prentice Hall, Inc. © 2006 4-12

International Societal Environments

Prentice Hall, Inc. © 2006 4-13

Scanning the Task Environment

Prentice Hall, Inc. © 2006 4-14

Ethical Behavior

“business ethics”

–Argument that there is no such thing … it is an oxymoron

Prentice Hall, Inc. © 2006 4-15

Ethical Decision Making

Corporate practices --

–Massive write-downs and restatements of profit–Misclassification of expenses as capital expenditures–Pirating corporate assets for personal gain

Prentice Hall, Inc. © 2006 4-16

External Strategic Factors

Strategic myopia --

–Willingness to reject unfamiliar as well as negative information

Prentice Hall, Inc. © 2006 4-17

Issues Priority Matrix

Prentice Hall, Inc. © 2006 4-18

Analyzing the Task Environment

Prentice Hall, Inc. © 2006 4-19

Porter’s Approach to Industry Analysis

Threat of New Entrants –

–Economies of scale–Product differentiation–Capital requirements–Switching costs–Access to distribution channels–Cost disadvantages–Government policy

Prentice Hall, Inc. © 2006 4-20

Porter’s Approach to Industry Analysis

Rivalry Among Existing Firms –

–Number of competitors–Rate of industry growth–Product or service characteristics–Amount of fixed costs–Capacity–Height of exit barriers–Diversity of rivals

Prentice Hall, Inc. © 2006 4-21

Porter’s Approach to Industry Analysis

•Threat of Substitute Products or Services

•Bargaining Power of Buyers

•Bargaining Power of Suppliers

•Relative Power of Other Stakeholders

Prentice Hall, Inc. © 2006 4-22

Industry Evolution

Fragmented Industry –

–No dominant industry

Prentice Hall, Inc. © 2006 4-23

Industry Evolution

Consolidated Industry –

–Dominated by a few large firms

Prentice Hall, Inc. © 2006 4-24

International Risk Assessment

Continuum of International Industries

Prentice Hall, Inc. © 2006 4-25

Strategic Groups

Prentice Hall, Inc. © 2006 4-26

Strategic Types

•Defenders•Prospectors•Analyzers•Reactors

General Types –

Prentice Hall, Inc. © 2006 4-27

Competitive Intelligence

Called business intelligence

Gathering information on a company’s competitors

Prentice Hall, Inc. © 2006 4-28

Forecasting

Forecasting Techniques --

–Extrapolation–Brainstorming–Expert opinion–Delphi technique–Statistical modeling–Scenario writing

Prentice Hall, Inc. © 2006 4-29

Synthesis of External Factors -- EFAS