Strategic Awareness: 1 Business Environment
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Transcript of Strategic Awareness: 1 Business Environment
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STRATEGIC AWARENESS
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WHAT IS SA? You are manufacturing and selling a car Put these factors in order: product, style,
emotion, delight What car is it? In this country 60% of cars are
domestically purchased What company is it? Do you think it’s successful and why?
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WHAT IS SA? Sue is 18, her holiday wardrobe is sorted It’s all been done in one hit She looks chic and up to the minute
when she baby sits for a friend e.g. furry gilet, military style jacket, gypsy skirt
She says “why buy a Mark Jacobs jacket if you can get a lookalike for less”
What’s the name of the company? Is it successful and why?
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WHAT IS SA? It’s made from sugar, tastes like sugar, is
600 time sweeter than sugar, but it’s not sugar
It can be baked, it has a long shelf life and is easily mixed with other ingredients
What’s its name? Who makes it? Why is it so successful?
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WHAT IS SA? Example 1 – Renault Example 2 – Primark Example 3 - Sucralose or Splenda – Tate
and Lyle
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WHAT IS SA? Other examples: Adidas – merged with Reebok (Aug 05) Rimmel, Chanel, H & M, H Stern,
Burberry, Roberto Cavalli…….. What’s the link?
McDonalds – new clown, Serena and Venus Williams, Destiny’s Child, Justin Timberlake – why?
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WHAT IS SA? – more examples
Disney Sony Tesco BP Ryanair
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BUSINESS ENVIRONMENT DEEPER EXAMINATION OF THE FORCES
CAUSING CHANGE INSIDE FIRMS FORCES THAT ACT AS CATALYSTS FOR
CHANGE TRADITIONAL – “PEST”, “NEDSLEPT”,
industry life cycle
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BUSINESS ENVIRONMENT
ORG
NAT TECH POLIT
ECON
DEMO SOCIAL
ENVIRO
LEGAL
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NEDSLEPT NATURAL – climate/weather factors ECONOMIC – state of the economy,
competition, demand and supply etc DEMOGRAPHIC – population change -
age, sex, immigration, geographical distribution, number of marriages, birth and death rate
SOCIAL – attitudes, tastes, fashions, habits
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NEDSLEPT LEGAL – UK government law, EU law and
international law ENVIRONMENTAL – impact of tourism on
the environment, pressure groups, media POLITICAL – attitude to tourism, pro/anti,
actions of government – domestic and international – particularly the increasing relevance of the EU
TECHNOLOGICAL – research and development, delivering tourism
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INDUSTRY LIFE CYCLE Illustrates the stages that an industry
moves through Enables a business to identify where it is
in the cycle and what its future strategy should be
Similar to the product life cycle, but not the same!
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INDUSTRY LIFE CYCLE
Sales maturity
growth decline
intro 0 Time
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INDUSTRY LIFE CYCLE Intro - lead users Early growth -early adopters Late growth -early majority Maturity/Decline - late majority Decline - laggards
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INDUSTRY LIFE CYCLE Intro – industry is “up for grabs” often
based on innovation - is it really an industry at all - who wants the product? how can it be sold? what is the right price?
Growth - firms worry about volume, quality and price e.g. can we sell 2 million laptops this year – there is a focus on improvements
Maturity/Decline - squeezing the profit out – margins often get thin - economies of scale typically important
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OTHER MODELS PEARCE & ROBINSON – looks at 3
environments1. REMOTE ENVIRONMENT - global and
domestic - comprises five factors that are not influenced by a single firm i.e. economic, social, political, technological, and ecological. These factors must be considered by the firm when working with the market.
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OTHER MODELS2. INDUSTRY ENVIRONMENT – competitive
forces - made up of the entry barriers, supplier power, buyer power, substitute availability, and competitive rivalry
These contending forces are of the greatest importance to the firm in strategy formulation.
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OTHER MODELS3. OPERATING ENVIRONMENT - also called
competitive or task environment - it deals closely with competitors, creditors, customers, labour, suppliers
In assessing the competitive position of the firm, the following criteria are:
Market share, Breadth of product line Effectiveness of sales distribution Price competitiveness
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OTHER MODELS Advertising promotion effectiveness Location and age of facility Capacity and productivity Experience, Raw material costs,
Financial position Relative product quality, R&D
advantages calibre of personnel, customers, suppliers, other stakeholders
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OTHER MODELS DILL – TASK ENVIRONMENT – This focuses on
forces affecting the industry and its structure e.g. competitors, customers, suppliers, and substitutes
ROBINS – Looks at the PRIME FORCES influencing a business e.g. NATURE OF WORKFORCE
TECHNOLOGY ECONOMIC SHOCKS SOCIAL TRENDS WORLD POLITICS COMPETITION
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BUSINESS ENVIRONMENTKEY FACTORS FOR SUCCESS ANALYSIS
FOCUS ON THE KEY FACTORS FOR SUCCESS IN AN INDUSTRY
THEN FOCUS ON THE KEY ENVIRONMENTAL FORCES
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KEY FACTORS FOR SUCCESS ANANLYSIS
EXAMPLE - Car industry KEY FACTORS1. low unit wage costs2. technological innovation3. innovative design
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KEY FACTORS FOR SUCCESS ANALYSIS KEY ENVIRONMENTAL FORCES1. general wage levels 2. regulations and employment law3. strength of trade unions4. government policy on industrial
relations5. support for research and
development
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PORTER’S FIVE FORCES LOOKS AT THE FACTORS SPECIFIC
TO THE COMPETITIVE BALANCE OF POWER IN AN INDUSTY
CAN BE USED BY A FIRM TO:1. identify opportunities in its
environment 2. protect itself against competition
and other threats
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PORTER’S FIVE FORCES
INDUSTRY COMPETITORS
RIVALRY
POTENTIALENTRANTS
BUYERS
SUBSTITUTES
SUPPLIERS
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FIVE FORCES THREAT OF POTENTIAL ENTRANTS
DEPENDS ON BARRIERS TO ENTRY e.g. technical knowledge
THREAT OF SUBSTITUTES e.g. SEGA v SONY v NINTENDO
SUPPLIER POWER e.g. power of Microsoft over PC makers
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FIVE FORCES BUYER POWER e.g. the power of
Tescos or Asda in buying from farmers and other suppliers
ALL OF THE ABOVE INFLUENCE THE EXTENT OF RIVALRY BETWEEN FIRMS
OTHER FACTORS: the number of firms in the market, their relative market share, how independent they are
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FOUR LINKS ANALYSIS LOOKS AT THE FACTORS SPECIFIC TO
CO-OPERATION IN AN INDUSTRY FIRMS HAVE FORMAL & INFORMAL
LINKS WITH OTHERS COLLUSION – illegal OPPORTUNITIES & THREATS ARISE
AS A RESULT OF THE LINKS
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FOUR LINKS ANALYSIS
THE FIRM
GOV LINKS & NETWORKS
INFORMAL COOP LINKS& NETWORKS
FORMALCOOP LINKSCOMPLEMENTORS
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FOUR LINKS ANALYSIS GOV LINKS & NETWORKSe.g. government may be a customer,
local Business Link INFORMAL COOP LINKS & NETWORKS i.e. no legal connection, local
Chamber of Trade and Commerce, Trade Association
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FOUR LINKS ANALYSIS FORMAL COOP LINKS – a legal contract e.g. a joint venture, joint shareholding,
contract to supply COMPLEMENTORS Firms whose products add value to the
base firm e.g. Hewlett Packard and Microsoft
HP products are complemented by Microsoft software