1. PGPM Sem III(Class of 2013) Business Strategy I (2012-2013) Enviornmental Scanning Part IMacroenviornment,Industry Analysis,Firm Analysis,CSF Shreeniwas V Bidwai Adjunct Professor
2. Understanding the Factors that Determine a Company‟s Situation• Diagnosing a company‟s situation has two facets – Assessing the company‟s external or macro-environment • Industry and competitive conditions • Forces acting to reshape this environment – Assessing the company‟s internal or micro-environment • Market position and competitiveness • Competencies, capabilities, resource strengths and weaknesses, and competitiveness
3. From Thinking Strategically about theCompany‟s Situation to Choosing a Strategy
4. Thinking Strategically about a Company‟s Macro-environment• A company‟s macro-environment includes all relevant factors and influences outside its boundaries Diagnosing a company‟s external situation involves assessing strategically important factors that have a bearing on the decisions a company‟s makes about its – Direction – Objectives – Strategy – Business model Requires that company managers scan the external environment to – Identify potentially important external developments – Assess their impact and influence – Adapt a company‟s direction and strategy as needed
5. The Components of a Company’s Macro-environment
6. Which are the factors and forces in acompany’s macro environment havingthe biggest strategy-shaping impact?
7. The company‟s immediate industry and competitive environment
8. What is COMPETITIVE STRATEGY ?„Competitive Strategy‟ encompasses:-• Dealing exclusively with a company‟s business approach and actions to compete successfully• Specific efforts to please customers• Offensive and defensive moves to counter maneuvers of rivals.• Responses to prevailing market conditions• Initiatives to strengthen market position.
9. “Competitive strategy is about beingdifferent. It means deliberately choosingto perform activities differently or toperform different activities than rivals todeliver a unique mix of value.” • Michael Porter, Harvard Business School
11. CSF(CRITICAL SUCCESS FACTORS)• Continuous upgrading of • Brand Equity. existing models and introduction of new models. • Large range of models.• Suzuki technology. • Timely market feedback as a result of continuous• High productivity research.• World class manufacturing • Quality Program ‘Kaizen’. and Quality. • Hire Purchase Scheme.• Economies of scale. • Design Expertise –• Strong dealer network. Introduction of new car• Extensive service network models to meet the changing all over the country with preference of the buyers. utmost customer • Planned relationship satisfaction. marketing to upgrade product• Excellent advertising and purchases. mass communication efforts.
12. STRATEGIC ANALYSISPorter’s five forces Model for Indian Passenger Car Industry
13. INDUSTRY LEVEL ANALYSIS• Porter‟s Industry Analysis: Five Forces Model The effective formulation of strategy needs a clear understanding of competition. Competition in an industry is determined not only by existing competitors but also by other market forces such as customers, suppliers, potential entrants, and the existence of substitute products. Understanding the level of competition is important because the level of profits depends to a large extent upon the level of competition. The strategist‟s goal then is to position the firm in such a way that it is not vulnerable to the attacks of competitors. The position should give the firm enough space to defend itself confidently.
14. Porters Five Forces Model Potential entrants Threat of new entrants Bargaining power Industry competitors Bargaining power of suppliers of buyers Suppliers Buyers Rivalry among existing firms Threat of substitutes Substitute productsSource: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)
17. Macro – environmental influences – the PESTEL framework1.What environmental factors are affecting the organization?2.Which of these are the most important at the present time?In next2/3 Years? • Political • Economic Factors Business cycles Government stability GNP trends Taxation policy Interest rates Foreign trade regulations Money supply Social welfare policies Inflation Unemployment • Sociocultural factors Disposable income Population demographics Income distribution • Technological Social mobility Government spending on research Lifestyle changes Government and industry focus on Attitudes to work and leisure technological effort Consumerism New discoveries / development Levels of education Speed of technology transfer Rates of obsolescence
18. Macro – environmental influences – the PESTEL framework1. What environmental factors are affecting the organization?2. Which of these are the most important at the present time? In the next few years?• Environmental • Legal Monopolies legislation Environmental protection laws Employment law Waste disposal Healthy and safety Energy consumption Product safety
19. Macro – environmental influences – the PESTEL framework• There are many factors in the macro-environment that will effect the decisions of the managers of any organization.• Tax changes, new laws, trade barriers, demographic change and government policy changes are all examples of macro change• It is particularly important that PESTEL is used to look at the future impact of environmental factors, which may be different from their past impact.
20. POLITICAL• Many developed countries have offered a mix of credits and tax subsidies as incentives for consumers to trade in old cars for newer and more fuel efficient and eco friendly cars.• Deregulation of petrol prices has happened.• There is proposal to levy additional excise duty of Rs 80,000 for diesel cars.• Additional duties on passenger cars in the offing in coming Budget for 2012-13.
21. ECONOMIC• Demographic Dividend -growing no. of young citizens with higher disposable incomes.• Rapidly growing Indian Automotive markets.• Demand for export of small cars from India to developed countries.• Raw Material cost is the key cost constituent in four wheeler industry.• Inflation, Fluctuations in Fuel Prices & Interest Rates hike by RBI.
22. SOCIAL• The rising awareness of social status and changing customer preference.• Some of the 50 million existing users of 2 wheeler will up grade to 4 wheelers.
23. TECHNOLOGY• Need for more R&D efforts to develop efficient compact and mid compact car engines and hybrid cars.• Tata Nano (1 lakh car) is a successful example for indigenous design with technological innovation.• Honda – Civic is the only imported car in India deploying hybrid technology. This may be followed by others.• Cars which can use alternate fuels like Diesel, CNG, LPG, Ethanol blended petrol are being manufactured in India now.
24. ENVIRONMENT• Environment - Indian and global emerging markets for various models of cars particularly small cars.• Reduction in CO2 emission.• All players will be under pressure to introduce Euro-IV and Euro-V compliant features in all their cars. In addition ELV regulations will have to be imposed by Govt. of India on the auto industry.
25. LEGAL• All players would be under pressure to give more attention to safety and environmental features and compliance(emission norms) of laws and regulations enacted time to time (eg. Bharat IV)
26. Macro – environmental influences – the PESTEL framework• There are many factors in the macro-environment that will effect the decisions of the managers of any organization.• Tax changes, new laws, trade barriers, demographic change and government policy changes are all examples of macro change• It is particularly important that PESTEL is used to look at the future impact of environmental factors, which may be different from their past impact.