Chapter 3  The External Assessment <ul><li>Strategic Management:  Concepts & Cases </li></ul><ul><li>10 th  Edition </li><...
Chapter Outline The Nature of the External Audit The Industrial Organization (I/O) View Social, Cultural, Demographic &  E...
Chapter Outline ( cont’d ) Political, Governmental, and Legal Forces Technological Forces Competitive Forces
Chapter Outline ( cont’d ) Porter’s Five-Forces Model Sources of External Information Forecasting Tools & Techniques
Chapter Outline ( cont’d ) Global Challenge The External Factor Evaluation (EFE) Matrix Competitive Profile Matrix (CPM)
<ul><li>It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to chan...
<ul><li>-- Environmental Scanning </li></ul><ul><li>-- Industry Analysis </li></ul>External Strategic Management Audit
<ul><li>Identify & Evaluate factors beyond the control of a single firm </li></ul><ul><ul><li>Increased foreign competitio...
<ul><li>Purpose of External Audit </li></ul><ul><ul><li>Identify </li></ul></ul><ul><ul><ul><li>Opportunities </li></ul></...
Key External Forces <ul><li>Economic forces </li></ul><ul><li>Social, cultural, demographic & environmental forces </li></...
Competitors Suppliers Distributors Creditors Customers Employees Communities Managers Stockholders Labor Unions Special In...
<ul><li>Gather competitive intelligence – </li></ul><ul><ul><ul><li>Social </li></ul></ul></ul><ul><ul><ul><li>Cultural </...
External Audit – Sources of Information <ul><li>Internet </li></ul><ul><li>Libraries </li></ul><ul><li>Suppliers </li></ul...
<ul><li>-- Key Factors </li></ul><ul><ul><ul><li>Vary over time </li></ul></ul></ul><ul><ul><ul><li>Vary by industry </li>...
Performing External Audit -- Variables <ul><li>Market share </li></ul><ul><li>Breadth of competing products </li></ul><ul>...
Performing External Audit -- Variables <ul><li>Price competitiveness </li></ul><ul><li>Technological advancements </li></u...
Performing External Audit External  Factors Measurable Long-term orientation Applicable to  competing firms Hierarchical
Industrial Organization (I/O) View <ul><li>-- Industry factors more important than internal factors </li></ul><ul><ul><ul>...
Economies of Scale Industry Properties Barriers to market entry Product differentiation Level of competitiveness I/O Persp...
Economic Forces <ul><li>Availability of credit </li></ul><ul><li>Level of disposable income </li></ul><ul><li>Interest rte...
Economic Forces <ul><li>Money market rates </li></ul><ul><li>Fed Gov’t deficits </li></ul><ul><li>GDP trend </li></ul><ul>...
Key Economic Variables Value of the dollar in world markets Worker productivity levels Stock market trends Foreign economi...
Key Economic Variables Income differences by region/customer Demand shifts for goods/services Price fluctuations Exportati...
Key Economic Variables Tax rates Fiscal policies OPEC policies ECC policies Monetary policies
Social, Cultural, Demographic & Environmental Forces <ul><li>Major Impact – </li></ul><ul><ul><li>Products </li></ul></ul>...
Social, Cultural, Demographic & Environmental Forces <ul><li>U.S. Facts </li></ul><ul><ul><li>Aging population </li></ul><...
Social, Cultural, Demographic & Environmental Forces <ul><li>Facts </li></ul><ul><ul><li>World population > 6 billion </li...
Social, Cultural, Demographic & Environmental Forces Population characteristics require global strategies
Social, Cultural, Demographic & Environmental Forces <ul><li>Global trends </li></ul><ul><ul><li>2003 – China largest expo...
<ul><li>Global trends </li></ul><ul><ul><li>China’s labor rates less than Mexico </li></ul></ul><ul><ul><li>China provides...
<ul><li>Export Trends </li></ul><ul><ul><li>Mexico-exports to U.S. 1.2% growth (2002) </li></ul></ul><ul><ul><li>China-exp...
<ul><li>Export Trends </li></ul><ul><ul><li>Mexico-corporate income tax rate 34% </li></ul></ul><ul><ul><li>China-corporat...
Social, Cultural, Demographic & Environmental Forces <ul><li>More educated consumers </li></ul><ul><li>Aging population </...
Social, Cultural, Demographic & Environmental Forces (cont’d) <ul><li>Fixation with youth decreasing </li></ul><ul><li>His...
Key Social, Cultural, Demographic & Environmental Variables Number of marriages & divorces Number of special interest grou...
Actuarial rates Monitor Key Variables Per capita income Attitudes toward business Avg. disposable income Social, Cultural,...
Consumer behavior Monitor Key Variables Ethical concerns Attitudes toward saving Racial equality Social, Cultural, Demogra...
Avg. educational level Monitor Key Variables Governmental regulation Attitudes toward customer service Attitudes toward qu...
Energy conservation Monitor Key Variables Social responsibility Leisure time values Recycling Social, Cultural, Demographi...
Waste management Monitor Key Variables Air & water pollution Ozone depletion Endangered species Social, Cultural, Demograp...
Political, Government & Legal Forces <ul><li>Key opportunities & threats </li></ul><ul><ul><ul><li>Antitrust legislation <...
Political, Government & Legal Forces <ul><li>Political variables impact – </li></ul><ul><ul><li>Formulation of strategies ...
Political, Government & Legal Forces <ul><li>Strategists in a global economy -- </li></ul><ul><ul><li>Forecast political c...
Political, Government & Legal Forces <ul><li>Worldwide trend toward similar  consumption patterns </li></ul><ul><li>Global...
Key Political, Governmental, & Legal Variables Special tariffs Tax law changes PAC’s Voter participation rates Regulation/...
Key Political, Governmental, & Legal Variables (cont’d) Environmental protection laws Changes in patent laws Equal employm...
Key Political, Governmental, & Legal Variables (cont’d) Import/export regulations Global relationships Political condition...
Technological Forces <ul><li>Major Impact – </li></ul><ul><ul><li>Internet </li></ul></ul><ul><ul><li>Communications </li>...
Technological Forces <ul><li>Significance of IT </li></ul><ul><ul><li>Chief Information Officer (CIO) </li></ul></ul><ul><...
Technological Forces Essential for nearly every strategic decision Technology-based issues
Competitive Forces Collection & evaluation of data on competitors is essential for successful strategy formulation
Competitive Forces Competition on virtually all industries can be described as intense.
Competitive Forces <ul><li>Strengths </li></ul><ul><li>Weaknesses </li></ul><ul><li>Capabilities </li></ul><ul><li>Opportu...
Key Questions Concerning Competitors Their objectives and strategies Their weaknesses Their responses to external variable...
Key Questions Concerning Competitors (cont’d) Entry and exit of firms in the industry Our product/service positioning Key ...
Key Questions Concerning Competitors (cont’d) The threat of substitute products/services Nature of supplier & distributor ...
Competitive Forces <ul><li>Moody’s Manuals </li></ul><ul><li>Standard Corporation Descriptions </li></ul><ul><li>Value Lin...
Competitive Forces <ul><li>Market share matters </li></ul><ul><li>Understand what business you are in </li></ul><ul><li>Br...
Competitive Forces <ul><li>Acquisition is essential to growth </li></ul><ul><li>People make a difference </li></ul><ul><li...
The Five-Forces Model of Competition Potential development  of substitute products Rivalry among  competing firms Bargaini...
The Five-Forces Model <ul><li>Most powerful of the five forces </li></ul><ul><li>Focus on competitive advantage of strateg...
The Five-Forces Model <ul><li>Barriers to entry are important </li></ul><ul><li>Quality, pricing, and marketing can overco...
The Five-Forces Model <ul><li>Pressures increase when consumer’s switching costs decrease </li></ul><ul><li>Firm’s plans f...
The Five-Forces Model <ul><li>Large number of suppliers & few substitutes affects intensity of competition </li></ul><ul><...
The Five-Forces Model <ul><li>Customers concentrated or buy in volume affects intensity of competition </li></ul><ul><li>C...
The Global Challenge <ul><li>Faced by U.S. Firms -- </li></ul><ul><ul><li>Gain & maintain exports to other nations </li></...
The Global Challenge Simultaneously globally competitive & nationally responsive Multinational Corporations (MNC’s)
The Global Challenge <ul><li>Worldwide integration of: </li></ul><ul><ul><li>Strategy formulation </li></ul></ul><ul><ul><...
The Global Challenge <ul><li>Similar consumption patterns </li></ul><ul><li>Global buyers and sellers </li></ul><ul><li>E-...
Industry Analysis: The External Factor Evaluation (EFE) Matrix Summarize & Evaluate Competitive Political Cultural Technol...
0.15 3 0.05 5.  The average income for PC worker has declined from $40K/yr to $30k/yr 0.10 1 0.10 4.  China entered WTO; l...
0.05 1 0.10 1.  Intense rivalry in industry 0.10 1 0.10 Threats 0.05 1 0.05 8.  30% of Chinese population can afford a PC;...
0.15 3 0.05 6.  Birth rate in U.S. declining annually 0.20 4 0.05 5.  Demand exceeds supply of experienced PC workers 0.15...
2.40 1.00 Total 0.15 3 0.05 8.  PC firms diversifying into consumer electronics 0.10 2 0.05 7.  U.s. consumers and busines...
<ul><li>Total weighted score of 4.0 </li></ul><ul><ul><ul><li>Organization response is outstanding to threats and weakness...
Industry Analysis EFE Understanding the factors used in the EFE Matrix is more important than the actual weights and ratin...
Industry Analysis: Competitive Profile Matrix (CPM) Identifies firm’s major competitors and their strengths & weaknesses i...
0.15 3 0.15 3 0.15 3 0.05 Org. Structure 0.60 4 0.30 2 0.45 3 0.15 Global Exp. 0.30 3 0.20 2 0.30 3 0.10 Sales Distr 0.08 ...
3.49 2.47 2.83 1.00 Total 0.02 2 0.04 4 0.02 2 0.01 Mgt. experience 0.06 3 0.02 1 0.08 4 0.02 Price competitive 0.40 4 0.2...
Industry Analysis CPM Just because one firm receives a 3.2 rating and another receives a 2.8 rating, it does not follow th...
<ul><li>Key Terms & Concepts </li></ul>For Review (Chapter 3) AOL Competitive Analysis Chief Information Officer  (CIO) Co...
<ul><li>Key Terms & Concepts </li></ul>For Review (Chapter 3) Director of Competitive Analysis External Factor Evaluation ...
<ul><li>Key Terms & Concepts </li></ul>For Review (Chapter 3) Information Technology (IT) Lifecare Facilities Internet Por...
<ul><li>Key Terms & Concepts </li></ul>For Review (Chapter 3) Tax Harmonization Foreign Direct Investment
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The External Assessment

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The External Assessment

  1. 1. Chapter 3 The External Assessment <ul><li>Strategic Management: Concepts & Cases </li></ul><ul><li>10 th Edition </li></ul><ul><li>Fred David PowerPoint Slides by </li></ul><ul><li>Anthony F. Chelte </li></ul><ul><li>Western New England College </li></ul>
  2. 2. Chapter Outline The Nature of the External Audit The Industrial Organization (I/O) View Social, Cultural, Demographic & Environmental Forces
  3. 3. Chapter Outline ( cont’d ) Political, Governmental, and Legal Forces Technological Forces Competitive Forces
  4. 4. Chapter Outline ( cont’d ) Porter’s Five-Forces Model Sources of External Information Forecasting Tools & Techniques
  5. 5. Chapter Outline ( cont’d ) Global Challenge The External Factor Evaluation (EFE) Matrix Competitive Profile Matrix (CPM)
  6. 6. <ul><li>It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change. – Charles Darwin </li></ul>External Assessment Nothing focuses the mind better than the constant sight of a competitor who wants to wipe you off the map. – Wayne Calloway, Former CEO, PepsiCo
  7. 7. <ul><li>-- Environmental Scanning </li></ul><ul><li>-- Industry Analysis </li></ul>External Strategic Management Audit
  8. 8. <ul><li>Identify & Evaluate factors beyond the control of a single firm </li></ul><ul><ul><li>Increased foreign competition </li></ul></ul><ul><ul><li>Population shifts </li></ul></ul><ul><ul><li>Information technology </li></ul></ul>External Strategic Management Audit
  9. 9. <ul><li>Purpose of External Audit </li></ul><ul><ul><li>Identify </li></ul></ul><ul><ul><ul><li>Opportunities </li></ul></ul></ul><ul><ul><ul><li>Threats </li></ul></ul></ul>External Strategic Management Audit
  10. 10. Key External Forces <ul><li>Economic forces </li></ul><ul><li>Social, cultural, demographic & environmental forces </li></ul><ul><li>Political, governmental & legal forces </li></ul><ul><li>Technological forces </li></ul><ul><li>Competitive forces </li></ul>
  11. 11. Competitors Suppliers Distributors Creditors Customers Employees Communities Managers Stockholders Labor Unions Special Interest Groups Products Services Key External Forces Opportunities & Threats Key External Forces & the Organization
  12. 12. <ul><li>Gather competitive intelligence – </li></ul><ul><ul><ul><li>Social </li></ul></ul></ul><ul><ul><ul><li>Cultural </li></ul></ul></ul><ul><ul><ul><li>Demographic </li></ul></ul></ul><ul><ul><ul><li>Environmental </li></ul></ul></ul><ul><ul><ul><li>Economic </li></ul></ul></ul><ul><ul><ul><li>Political, legal governmental </li></ul></ul></ul><ul><ul><ul><li>Technological </li></ul></ul></ul>External Audit
  13. 13. External Audit – Sources of Information <ul><li>Internet </li></ul><ul><li>Libraries </li></ul><ul><li>Suppliers </li></ul><ul><li>Distributors </li></ul><ul><li>Customers </li></ul><ul><li>Competition </li></ul>
  14. 14. <ul><li>-- Key Factors </li></ul><ul><ul><ul><li>Vary over time </li></ul></ul></ul><ul><ul><ul><li>Vary by industry </li></ul></ul></ul>Performing External Audit
  15. 15. Performing External Audit -- Variables <ul><li>Market share </li></ul><ul><li>Breadth of competing products </li></ul><ul><li>World economies </li></ul><ul><li>Foreign affiliates </li></ul><ul><li>Proprietary account advantages </li></ul>
  16. 16. Performing External Audit -- Variables <ul><li>Price competitiveness </li></ul><ul><li>Technological advancements </li></ul><ul><li>Interest rates </li></ul><ul><li>Pollution abatement </li></ul>
  17. 17. Performing External Audit External Factors Measurable Long-term orientation Applicable to competing firms Hierarchical
  18. 18. Industrial Organization (I/O) View <ul><li>-- Industry factors more important than internal factors </li></ul><ul><ul><ul><li>Performance determined by industry forces </li></ul></ul></ul>
  19. 19. Economies of Scale Industry Properties Barriers to market entry Product differentiation Level of competitiveness I/O Perspective Firm Performance
  20. 20. Economic Forces <ul><li>Availability of credit </li></ul><ul><li>Level of disposable income </li></ul><ul><li>Interest rtes </li></ul><ul><li>Inflation rates </li></ul>
  21. 21. Economic Forces <ul><li>Money market rates </li></ul><ul><li>Fed Gov’t deficits </li></ul><ul><li>GDP trend </li></ul><ul><li>Consumption patterns </li></ul>
  22. 22. Key Economic Variables Value of the dollar in world markets Worker productivity levels Stock market trends Foreign economic conditions Unemployment trends
  23. 23. Key Economic Variables Income differences by region/customer Demand shifts for goods/services Price fluctuations Exportation of labor and capital Import/Export factors
  24. 24. Key Economic Variables Tax rates Fiscal policies OPEC policies ECC policies Monetary policies
  25. 25. Social, Cultural, Demographic & Environmental Forces <ul><li>Major Impact – </li></ul><ul><ul><li>Products </li></ul></ul><ul><ul><li>Services </li></ul></ul><ul><ul><li>Markets </li></ul></ul><ul><ul><li>Customers </li></ul></ul>
  26. 26. Social, Cultural, Demographic & Environmental Forces <ul><li>U.S. Facts </li></ul><ul><ul><li>Aging population </li></ul></ul><ul><ul><li>Less Caucasian </li></ul></ul><ul><ul><li>Widening gap between rich & poor </li></ul></ul><ul><ul><li>2025 = 18.5% population >65 years </li></ul></ul><ul><ul><li>2075 = no ethnic or racial majority </li></ul></ul>
  27. 27. Social, Cultural, Demographic & Environmental Forces <ul><li>Facts </li></ul><ul><ul><li>World population > 6 billion </li></ul></ul><ul><ul><li>U.S. population < 300 million </li></ul></ul>
  28. 28. Social, Cultural, Demographic & Environmental Forces Population characteristics require global strategies
  29. 29. Social, Cultural, Demographic & Environmental Forces <ul><li>Global trends </li></ul><ul><ul><li>2003 – China largest exporter to U.S. </li></ul></ul><ul><ul><li>2003 Asia receives highest foreign direct investment </li></ul></ul>
  30. 30. <ul><li>Global trends </li></ul><ul><ul><li>China’s labor rates less than Mexico </li></ul></ul><ul><ul><li>China provides more site location incentives than Mexico </li></ul></ul>Social, Cultural, Demographic & Environmental Forces
  31. 31. <ul><li>Export Trends </li></ul><ul><ul><li>Mexico-exports to U.S. 1.2% growth (2002) </li></ul></ul><ul><ul><li>China-exports to U.S. 19% growth (2002) </li></ul></ul>Social, Cultural, Demographic & Environmental Forces
  32. 32. <ul><li>Export Trends </li></ul><ul><ul><li>Mexico-corporate income tax rate 34% </li></ul></ul><ul><ul><li>China-corporate income tax rate 17% </li></ul></ul>Social, Cultural, Demographic & Environmental Forces
  33. 33. Social, Cultural, Demographic & Environmental Forces <ul><li>More educated consumers </li></ul><ul><li>Aging population </li></ul><ul><li>Minorities more influential </li></ul><ul><li>Local rather than federal solutions </li></ul>21 st Century Trends
  34. 34. Social, Cultural, Demographic & Environmental Forces (cont’d) <ul><li>Fixation with youth decreasing </li></ul><ul><li>Hispanics increase to 15% by 2021 </li></ul><ul><li>African American increase to 14% by 2021 </li></ul>21 st Century Trends
  35. 35. Key Social, Cultural, Demographic & Environmental Variables Number of marriages & divorces Number of special interest groups Number of births & deaths Immigration & emigration rates Childbearing rates
  36. 36. Actuarial rates Monitor Key Variables Per capita income Attitudes toward business Avg. disposable income Social, Cultural, Demographic & Environmental Forces
  37. 37. Consumer behavior Monitor Key Variables Ethical concerns Attitudes toward saving Racial equality Social, Cultural, Demographic & Environmental Forces
  38. 38. Avg. educational level Monitor Key Variables Governmental regulation Attitudes toward customer service Attitudes toward quality Social, Cultural, Demographic & Environmental Forces
  39. 39. Energy conservation Monitor Key Variables Social responsibility Leisure time values Recycling Social, Cultural, Demographic & Environmental Forces
  40. 40. Waste management Monitor Key Variables Air & water pollution Ozone depletion Endangered species Social, Cultural, Demographic & Environmental Forces
  41. 41. Political, Government & Legal Forces <ul><li>Key opportunities & threats </li></ul><ul><ul><ul><li>Antitrust legislation </li></ul></ul></ul><ul><ul><ul><li>Tax rates </li></ul></ul></ul><ul><ul><ul><li>Lobbying efforts </li></ul></ul></ul><ul><ul><ul><li>Patent laws </li></ul></ul></ul>Government Regulation
  42. 42. Political, Government & Legal Forces <ul><li>Political variables impact – </li></ul><ul><ul><li>Formulation of strategies </li></ul></ul><ul><ul><li>Implementation of strategies </li></ul></ul>Increasing Global Interdependence
  43. 43. Political, Government & Legal Forces <ul><li>Strategists in a global economy -- </li></ul><ul><ul><li>Forecast political climates </li></ul></ul><ul><ul><li>Legalistic skills </li></ul></ul><ul><ul><li>Diverse world cultures </li></ul></ul>Increasing Global Interdependence
  44. 44. Political, Government & Legal Forces <ul><li>Worldwide trend toward similar consumption patterns </li></ul><ul><li>Global buyers and sellers </li></ul><ul><li>E-commerce </li></ul><ul><li>Technology for instant currency transfers </li></ul>Globalization of Industry
  45. 45. Key Political, Governmental, & Legal Variables Special tariffs Tax law changes PAC’s Voter participation rates Regulation/deregulation
  46. 46. Key Political, Governmental, & Legal Variables (cont’d) Environmental protection laws Changes in patent laws Equal employment legislation Government subsidies Number of patents
  47. 47. Key Political, Governmental, & Legal Variables (cont’d) Import/export regulations Global relationships Political conditions Location and severity of terrorist activity Anti-trust enforcement
  48. 48. Technological Forces <ul><li>Major Impact – </li></ul><ul><ul><li>Internet </li></ul></ul><ul><ul><li>Communications </li></ul></ul><ul><ul><li>Semiconductors </li></ul></ul>
  49. 49. Technological Forces <ul><li>Significance of IT </li></ul><ul><ul><li>Chief Information Officer (CIO) </li></ul></ul><ul><ul><li>Chief Technology Officer (CTO) </li></ul></ul>
  50. 50. Technological Forces Essential for nearly every strategic decision Technology-based issues
  51. 51. Competitive Forces Collection & evaluation of data on competitors is essential for successful strategy formulation
  52. 52. Competitive Forces Competition on virtually all industries can be described as intense.
  53. 53. Competitive Forces <ul><li>Strengths </li></ul><ul><li>Weaknesses </li></ul><ul><li>Capabilities </li></ul><ul><li>Opportunities </li></ul><ul><li>Threats </li></ul><ul><li>Objectives </li></ul><ul><li>Strategies </li></ul>Identifying Rival Firms
  54. 54. Key Questions Concerning Competitors Their objectives and strategies Their weaknesses Their responses to external variables Their vulnerability to our alternative strategies Their strengths
  55. 55. Key Questions Concerning Competitors (cont’d) Entry and exit of firms in the industry Our product/service positioning Key factors for our current position in industry Sales/profit rankings of competitors over time Our vulnerability to strategic counterattack
  56. 56. Key Questions Concerning Competitors (cont’d) The threat of substitute products/services Nature of supplier & distributor relationships Should we keep our strategies secret from employees and stakeholders?
  57. 57. Competitive Forces <ul><li>Moody’s Manuals </li></ul><ul><li>Standard Corporation Descriptions </li></ul><ul><li>Value Line Investment Surveys </li></ul><ul><li>Dun’s Business Rankings </li></ul><ul><li>Standard & Poor’s Industry Surveys </li></ul><ul><li>Industry Week </li></ul><ul><li>Forbes, Fortune, Business Week </li></ul>Sources of Corporate Information
  58. 58. Competitive Forces <ul><li>Market share matters </li></ul><ul><li>Understand what business you are in </li></ul><ul><li>Broke or not, fix it </li></ul><ul><li>Innovate or evaporate </li></ul>7 Characteristics of most Competitive U.S. Firms:
  59. 59. Competitive Forces <ul><li>Acquisition is essential to growth </li></ul><ul><li>People make a difference </li></ul><ul><li>No substitute for quality </li></ul>7 Characteristics of most Competitive U.S. Firms:
  60. 60. The Five-Forces Model of Competition Potential development of substitute products Rivalry among competing firms Bargaining power of suppliers Potential entry of new competitors Bargaining power of consumers
  61. 61. The Five-Forces Model <ul><li>Most powerful of the five forces </li></ul><ul><li>Focus on competitive advantage of strategies </li></ul>Rivalry Among Competing Firms
  62. 62. The Five-Forces Model <ul><li>Barriers to entry are important </li></ul><ul><li>Quality, pricing, and marketing can overcome barriers </li></ul>Potential Entry of New Competitors
  63. 63. The Five-Forces Model <ul><li>Pressures increase when consumer’s switching costs decrease </li></ul><ul><li>Firm’s plans for increased capacity & market penetration </li></ul>Potential Development of Substitute Products
  64. 64. The Five-Forces Model <ul><li>Large number of suppliers & few substitutes affects intensity of competition </li></ul><ul><li>Backward integration can gain control or ownership of suppliers </li></ul>Bargaining Power of Suppliers
  65. 65. The Five-Forces Model <ul><li>Customers concentrated or buy in volume affects intensity of competition </li></ul><ul><li>Consumer power is higher where products are standard or undifferentiated </li></ul>Bargaining Power of Consumers
  66. 66. The Global Challenge <ul><li>Faced by U.S. Firms -- </li></ul><ul><ul><li>Gain & maintain exports to other nations </li></ul></ul><ul><ul><li>Defend domestic markets against imported goods </li></ul></ul>
  67. 67. The Global Challenge Simultaneously globally competitive & nationally responsive Multinational Corporations (MNC’s)
  68. 68. The Global Challenge <ul><li>Worldwide integration of: </li></ul><ul><ul><li>Strategy formulation </li></ul></ul><ul><ul><li>Strategy implementation </li></ul></ul><ul><ul><li>Strategy evaluation </li></ul></ul>Globalization
  69. 69. The Global Challenge <ul><li>Similar consumption patterns </li></ul><ul><li>Global buyers and sellers </li></ul><ul><li>E-commerce </li></ul><ul><li>Instant transmission of money & information </li></ul>Globalization of Industries
  70. 70. Industry Analysis: The External Factor Evaluation (EFE) Matrix Summarize & Evaluate Competitive Political Cultural Technological Environmental Social Governmental Demographic Economic
  71. 71. 0.15 3 0.05 5. The average income for PC worker has declined from $40K/yr to $30k/yr 0.10 1 0.10 4. China entered WTO; lowered taxes for importing PC’s 0.10 2 0.05 3. Internet use growing rapidly 0.30 3 0.10 2. Cost of PC component parts expected to decrease 10% - 2004 0.30 3 0.10 1. Global PC market expected to grow 20% in 2004 Opportunities Wtd Score Rating Weight Key External Factors EFE – Gateway Computers (2003)
  72. 72. 0.05 1 0.10 1. Intense rivalry in industry 0.10 1 0.10 Threats 0.05 1 0.05 8. 30% of Chinese population can afford a PC; only 10% of homes have a PC 0.15 3 0.05 7. U.S. (& world) economies recovering 0.10 2 0.05 6. Modernization of business firms and government agencies Opportunities (cont’d) Wtd Score Rating Weight Key External Factors EFE – Gateway Computers (2003) (cont’d)
  73. 73. 0.15 3 0.05 6. Birth rate in U.S. declining annually 0.20 4 0.05 5. Demand exceeds supply of experienced PC workers 0.15 3 0.05 4. Palm & PDA becoming substitutes 0.05 1 0.05 3. Different countries have different reg’s and infrastructure for PC’s 0.20 2 0.10 2. Severe price cutting in PC industry Threats (cont’d) Wtd Score Rating Weight Key External Factors EFE – Gateway Computers (2003) (cont’d)
  74. 74. 2.40 1.00 Total 0.15 3 0.05 8. PC firms diversifying into consumer electronics 0.10 2 0.05 7. U.s. consumers and businesses delaying purchase of PC’s Threats (cont’d) Wtd Score Rating Weight Key External Factors EFE – Gateway Computers (2003) (cont’d)
  75. 75. <ul><li>Total weighted score of 4.0 </li></ul><ul><ul><ul><li>Organization response is outstanding to threats and weaknesses </li></ul></ul></ul>Industry Analysis EFE <ul><li>Total weighted score of 1.0 </li></ul><ul><ul><ul><li>Firm’s strategies not capitalizing on opportunities or avoiding threats </li></ul></ul></ul>
  76. 76. Industry Analysis EFE Understanding the factors used in the EFE Matrix is more important than the actual weights and ratings assigned. Important --
  77. 77. Industry Analysis: Competitive Profile Matrix (CPM) Identifies firm’s major competitors and their strengths & weaknesses in relation to a sample firm’s strategic positions
  78. 78. 0.15 3 0.15 3 0.15 3 0.05 Org. Structure 0.60 4 0.30 2 0.45 3 0.15 Global Exp. 0.30 3 0.20 2 0.30 3 0.10 Sales Distr 0.08 4 0.06 3 0.06 3 0.02 Cons. Loyalty 0.24 3 0.32 4 0.24 3 0.08 Prod. Quality 0.30 3 0.30 3 0.20 2 0.10 Fin position 0.32 4 0.16 2 0.16 2 0.08 Inventory sys 0.60 4 0.30 2 0.45 3 0.15 Market share Wt’d Score Rating Wt’d Score Rating Wt’d Score Rating Wt CSF’s Dell Apple Gateway
  79. 79. 3.49 2.47 2.83 1.00 Total 0.02 2 0.04 4 0.02 2 0.01 Mgt. experience 0.06 3 0.02 1 0.08 4 0.02 Price competitive 0.40 4 0.20 2 0.30 3 0.10 Customer Serv 0.30 3 0.30 3 0.30 3 0.10 E-commerce 0.12 3 0.12 3 0.12 3 0.04 Prod. Capacity Wt’d Score Rating Wt’d Score Rating Wt’d Score Rating Wt CSF’s (cont’d) Dell Apple Gateway
  80. 80. Industry Analysis CPM Just because one firm receives a 3.2 rating and another receives a 2.8 rating, it does not follow that the first firm is 20 percent better than the second. Important --
  81. 81. <ul><li>Key Terms & Concepts </li></ul>For Review (Chapter 3) AOL Competitive Analysis Chief Information Officer (CIO) Competitive Intelligence (CI) Chief Technology Officer (CTO) Competitive Profile Matrix (CPM) Competitive Advantage Decruiting
  82. 82. <ul><li>Key Terms & Concepts </li></ul>For Review (Chapter 3) Director of Competitive Analysis External Factor Evaluation Matrix (EFE) Downsizing External Forces Environmental Scanning Industry Analysis External Audit Industrial Organizational (I/O)
  83. 83. <ul><li>Key Terms & Concepts </li></ul>For Review (Chapter 3) Information Technology (IT) Lifecare Facilities Internet Porter’s Five-Forces Model Learning from the Partner Rightsizing Linear Regression World Wide Web
  84. 84. <ul><li>Key Terms & Concepts </li></ul>For Review (Chapter 3) Tax Harmonization Foreign Direct Investment
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