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STRATEGIC MANAGEMENT & BUSINESS POLICY11TH EDITION

THOMAS L. WHEELEN J. DAVID HUNGER

CHAPTER 4 Environmental Scanning and Industry Analysis

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Environmental Scanning

Societal environment --

–Economic forces - Regulate exchange of materials, money, energy and information

–Technological forces - Generate problem-solving inventions

–Political-legal forces - Allocate power; provide laws and regulations

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

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Variables in Societal Environment

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Task Environment

Task environment --

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

Industry Analysis --

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

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Demographic Trends

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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

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International Societal Environments

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Scanning the Task Environment

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External Strategic Factors

Strategic myopia --

–Willingness to reject unfamiliar as well as negative information

WARNING!

Concept of “Receptors” for information in an organization.

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Issues Priority Matrix

A “Portfolio” of Issues

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Analyzing the Task Environment

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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

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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

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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

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Industry Evolution

Fragmented Industry –

–No dominant industry

Consolidated Industry –

–Dominated by a few large firms (3 +/-)

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International Risk Assessment

Continuum of International Industries

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Strategic Groups

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Competitive Product Matrix

Network Service Customer

Large(>$100M)

Medium($10M-$100M)

Small(<$10M)

Service Quality Monitoring Viewpoint

Co

mp

any

Siz

e

Arantechtouchpoint™

Agilent + TeradataCustomer ExperienceManagement System

IBMTivoli Netcool

Customer ExperienceManagement SW

TTINetrac™

EricssonNetwork IQ™

NexusNetview

OSI (SRIT)Service

Assurance

NokiaMobile Quality

Analyzer

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Strategic Types

•Defenders•Prospectors•Analyzers•Reactors

General Company Approaches to Strategy

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Competitive Intelligence

Called business intelligence

Gathering information on a company’s competitors• Product/offering – features, functionality, pricing, targets, etc.•Company – size, profitability, margins, target markets, apparent strategy, etc.

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Forecasting

Forecasting Techniques --

–Extrapolation – “If things keep going the way they are going now…”–Brainstorming – Free-flowing ideas followed by triage–Expert opinion – Hire a consultant!–Delphi technique – Ask a lot of people.–Statistical modeling – Trending, curve-fitting, etc.–Scenario writing – Map out 3-5 scenarios

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Synthesis of External Factors -- EFAS