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CHAPTER 3, Challenges and Opportunities

• Figure 3.1 The Planning Model

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what do we have, what do we need?

Figure 3.2 , Matching the Profile to the Environment

Examining the environment

  

Matching what needs to

be done

With what can be done

 

In all aspects of the

business

Examining the organizational profile

What do we need to succeed?

What do we have to offer?

 What makes the industry work?

What strengths do I have, and what weakness must I

overcome?

 

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Examining the Environment

• Figure 3.3,

• The three levels

• of the environment

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Examining the Remote Environment

• To understand the remote environment we must gather information about a variety of issues, such as:

• Economic Issues

• Social Issues

• Political Issues

• Technological Issues

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Sources of information

• government publications

• university research papers

• trade association articles

• economic and social forecasts

• publications by consulting firms and financial institutions

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Figure 3.4 the remote environment for a ski area

Remote Environment for a Ski Area

Type of Issue

Description Possible Impact

EconomicThe amount of disposable income available for recreation, in the hands of customers.

As available income increases, demand for expensive holidays will improve.

Social

The perception of people regarding health and wellness and the use of recreation to achieve those ends.

As the personal need for exercise increases, demand for skiing should also increase.

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Figure 3.4 the remote environment for a ski area

Political

Government regulations regarding development of park land and the environmental impact of the development of recreation areas.

If we already have a ski area, government could protect our competitive position by not allowing development permits, or it could harm our competitive advantage by opening opportunities for new ski areas to join the market.

TechnologicalInternet based advertising systems and reservation systems.

We could attract a more diversified market from global sources.

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Examining the Industry Environment

• From the definition described previously, the Industry Environment:– Contains issues that directly impact the entire

industry and all of the competitors in the industry. Those issues could be influenced by the collective efforts of all organizations in the industry.

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Figure 3.5 The Five forces That Impact Competition in an Industry.

Rivalries among existing organizations as they compete with

each other

Buyers and customers

wanting lower prices

Suppliers wanting higher

prices and more business

New entrants to the industry wanting to join and share the

market

Substitute products from

other industries wanting to take away the market

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Figure 3.6 What makes the forces powerful?

  Characteristics That Make The Forces Powerful

Threat of Substitute Products

Demand is high for the total industry relative to supply

Customers are not product sensitive

Threat of New

Entrants

Profits are high

Small capital investment is required

Customers are not brand sensitive

Demand exceeds supply in the industry for the product or service

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Figure 3.7 What makes the forces powerful?

Power of Buyers

Buying groups are formed  

The product doesn’t add value  

The buyers are not brand sensitive  

They could integrate backward  

Power of Suppliers

A small number of suppliers  

The product supplied is important to the quality of the buyer’s product

 

Low profits are earned by suppliers  

They could integrate forward  

Rivalries Among Existing Organizations

Industry profits are low

Customer growth rate is low

Customers are not brand sensitive

Switching costs are high

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Examining the Local Environment

From the definition described previously,

the Local Environment:

• Contains issues that impact each individual organization in the industry in terms of how the organizations deal with each other. Those issues could be influenced by the direct efforts of a particular organization.

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Figure 3.10, Characteristics of the local environment.Analyzing the local Environment

Issue Question to be answered

Customers

Geographic

Demographic

Psychographic

Competitive Position

Market Share

Breadth of the product line

Product Quality

Advertising effectiveness

Production Efficiencies

Financial Efficiencies

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Characteristics of the local environment.

Creditors Financial Claims

Employees

Quality

Availability

Cost

Suppliers

Quality

Quantity

Timeliness

Cost

Ecological issues

Impact

Predictability

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Examining the Organizational Profile• As a starting point, identify the “Major

areas” of the organization where strengths and weaknesses might be found.

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Figure 3.12, Step 1, in profiling an organization.

Identify the “Major Areas”Major areas  

Strategic planning  

Marketing  

Financial and accounting  

Production, operations and technical

 

Human resource management  

Organization and management  

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Figure 3.13, Step 2, in profiling an organization., develop a complete list of potential issues.

Major areas Potential issues

Strategic planning

Quality of long and short range objectives

Degree of buy in from employees

Degree of buy in from directors and senior management

Can the organization act on the objectives?

Marketing

Breadth of the product line

Ability to gather and use information about the market

Brand loyalty

Customer service, before and after sale

Product image

Market share

Channels of distribution

Effectiveness of promotions

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Closing Remarks

Where to from here?• At this point in the strategic planning process the

organization has defined its industry and has defined itself in the industry.

• The next step is to organize these issues in to opportunities and challenges (threats) in the industry and strengths and weaknesses in the organization, and then match them all together in one process that will point the way to the best possible decision.