Strategic Position

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External Analysis Broad Environment: which constitutes the general environmental influences that all firms must cope with. Competitive environment: comprises the specific features of the industry – or task – environment within with the firm operates.

Broad Environment:

which constitutes the general environmental influences that all firms must cope with.

Competitive environment:

comprises the specific features of the industry – or task – environment within with the firm operates.

Broad Environment Economic Forces The underlying rate of economics cycle – recession, depression, recovery or boom – will affect the level of demand facing the firm. The level and composition of unemployment may affect both demand for the firm’s products and the availability of labor input. Government control – economic policies.

Economic Forces

The underlying rate of economics cycle – recession, depression, recovery or boom – will affect the level of demand facing the firm.

The level and composition of unemployment may affect both demand for the firm’s products and the availability of labor input.

Government control – economic policies.

Broad Environment Socio-cultural Forces: Socio cultural shape the way people live, work and consume. A change in lifestyles towards ‘healthy’ living associated with people taking more exercise and reducing the consumption of certain types of food.

Socio-cultural Forces:

Socio cultural shape the way people live, work and consume.

A change in lifestyles towards ‘healthy’ living associated with people taking more exercise and reducing the consumption of certain types of food.

Broad Environment Demographic Factors: The absolute size of the population as well as its growth rate and composition are central issues to strategists. Political and Governmental: Employment laws, environmental regulations, trade restrictions and tariffs, political stability. Technological Factors: Technological developments can create new markets, change the relative cost position of competitors in an industry.

Demographic Factors:

The absolute size of the population as well as its growth rate and composition are central issues to strategists.

Political and Governmental:

Employment laws, environmental regulations, trade restrictions and tariffs, political stability.

Technological Factors:

Technological developments can create new markets, change the relative cost position of competitors in an industry.

Competitive Environment Porter’s Five Forces

The Threats of New Entrants A number of factors give rise to entry barriers including the following: Economies of scale: the lower cost position of the established firms will thus deter entry. Absolute capital cost requirements: the greater the level of capital expenditure required to enter an industry the fewer the number of firms likely to enter. Product differentiation: This creates unique features for the goods of established firms and leads to brand loyalty on the part of consumers which new firms may find difficult to overcome.

A number of factors give rise to entry barriers including the following:

Economies of scale: the lower cost position of the established firms will thus deter entry.

Absolute capital cost requirements: the greater the level of capital expenditure required to enter an industry the fewer the number of firms likely to enter.

Product differentiation: This creates unique features for the goods of established firms and leads to brand loyalty on the part of consumers which new firms may find difficult to overcome.

The Bargaining Power of Buyers In general the more powerful are buyers the greater is their ability to hold down prices, so reducing industry profitability. The concentration and size of buyers The importance of purchases to the buyer in cost terms The costs of switching between suppliers The degree of standardization of products

In general the more powerful are buyers the greater is their ability to hold down prices, so reducing industry profitability.

The concentration and size of buyers

The importance of purchases to the buyer in cost terms

The costs of switching between suppliers

The degree of standardization of products

The Bargaining Power of Suppliers Suppliers by increasing their prices to firms in the industry also have the ability to squeeze industry profits. Suppliers domination – a few suppliers No substitute products for sale to the industry The industry is not an important customer for the supplier group The supplier’s product is an important input for the buyer’s business

Suppliers by increasing their prices to firms in the industry also have the ability to squeeze industry profits.

Suppliers domination – a few suppliers

No substitute products for sale to the industry

The industry is not an important customer for the supplier group

The supplier’s product is an important input for the buyer’s business

The Threats of Substitutes The availability of substitute products will affect the demand for the products of the industry.

The availability of substitute products will affect the demand for the products of the industry.

The Threats of Competitive Rivalry The numbers of competitors and their relative size The rate of industry growth The degree of product differentiation The height of exit barriers – when firms find it difficult to leave the industry, for example because they have specialized assets with low liquidation values, they may remain in the industry, thus leading to an intensification of competition

The numbers of competitors and their relative size

The rate of industry growth

The degree of product differentiation

The height of exit barriers – when firms find it difficult to leave the industry, for example because they have specialized assets with low liquidation values, they may remain in the industry, thus leading to an intensification of competition

Internal Analysis The basic idea behind is to undertake an objective assessment of the organization’s current status.

The basic idea behind is to undertake an objective assessment of the organization’s current status.

Corporate Resources Corporate resources are those assets that form the input for the production of an organization’s goods or services. These resources include: The personnel and managers talent Financial assets and physical plant and facilities Skills, ability and expertise of the workforce and management within the functional areas are also important assets of the company.

Corporate resources are those assets that form the input for the production of an organization’s goods or services. These resources include:

The personnel and managers talent

Financial assets and physical plant and facilities

Skills, ability and expertise of the workforce and management within the functional areas are also important assets of the company.

Corporate Resources Production what is the nature of the manufacturing process and is it appropriate for meeting current competition? what is the quality of the manufacturing management? an so on. R&D what is the nature and depth of the R&D capability? have enough new products been generated by the R&D process? an so on. Marketing what is the extent of the marketing effort? to what degree is the firm marketing oriented.

Production

what is the nature of the manufacturing process and is it appropriate for meeting current competition? what is the quality of the manufacturing management? an so on.

R&D

what is the nature and depth of the R&D capability? have enough new products been generated by the R&D process? an so on.

Marketing

what is the extent of the marketing effort? to what degree is the firm marketing oriented.

Corporate Resources Finance what is the financial standing of the firm and what is the quality of financial management? the firm’s financial position is an extremely important indicators of its competitive position. Personnel does the company have the right people with the right skills in the right place? does the firm offer competitive rates of pay and conditions of employment? what is the industrial relations record of the firm?

Finance

what is the financial standing of the firm and what is the quality of financial management? the firm’s financial position is an extremely important indicators of its competitive position.

Personnel

does the company have the right people with the right skills in the right place? does the firm offer competitive rates of pay and conditions of employment? what is the industrial relations record of the firm?

Corporate Structure The way a firm is organized in terms of authority, communication and work flow. Production R&D Finance Marketing Personnel Distribution Corporate Headquarters SBU 1 SBU 2 SBU 3 Corporate Strategy Business Strategy Functional Strategy Corporate top management SBU top management Functional management

The way a firm is organized in terms of authority, communication and work flow.

Corporate Culture Corporate cultures is the pattern of beliefs, expectations and values shared by the organization’s members. In an firm norms of behavior will emerge which are expected to be followed by the managerial hierarchy and the employees.

Corporate cultures is the pattern of beliefs, expectations and values shared by the organization’s members. In an firm norms of behavior will emerge which are expected to be followed by the managerial hierarchy and the employees.

The next stage is to bring the external analysis and the internal analysis together in a SWOT matrix.

The next stage is to bring the external analysis and the internal analysis together in a SWOT matrix.

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