Strategic management 8
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  • 1. Strategic ManagementBHRM 31124
    Lecturer (prob)
    Department of Human Resource Management
    Faculty of Commerce & Management Studies
    University of Kelaniya
  • 2. Environment Scanning - I(External Environment)
    2. Industries and Sectors
    • Industry is a group of firms producing the same principle of product or more broadly a group of firms producing products that are close substitutes for each other
    • It is useful for managers in any organization to understand the competitive forces acting on and between organizations in the same industry or sector since this determine the attractiveness of that industry
  • Cont…Industries and Sectors
    Boundaries of an industry may be changing by convergence
    Convergence is where previously separate industries being to overlap in terms of activities, technologies, products and customs
    Convergence are two type
    Supply led
    Demand side
  • 3. Cont…Industries and Sectors
    Supply led – where organizations start to behave as though there are linkages between the separate industries or sectors
    Demand side – where consumers start to behave as though industries have converged
  • 4. Sources of competition
    Five forces framework helps identify the sources of competition in an industry or sector
    It must be used at the level of strategic business units level of the whole organization
    Understand the connections between competitive forced and the key drivers in the macro environment is essential
    The five forces are not independent of each other
  • 5. Five forces
    Threat of entry – forces that need to be overcome by new entrants if they are to compete successfully
    Economic of scale
    The capital requirement of entry
    Access to supply or distribution channels
    Customer or supplier loyalty
    Expected retaliation
    Legislation or government actions
  • 6. Cont… Five forces
    Threat of substitute – Substitutes reduce demand for a particular “class” of products as customers switch to the alterations.
    Different forms of substitutions
    Product –for product substitutions
    Substitution of need
    Generic substitution
  • 7. Cont… Five forces
    Power of buyers
    Concentration of buyers
    Cost of switching
    Supplier being acquired by buyers (Backward integration)
  • 8. Cont… Five forces
    Power of suppliers
    Concentration of suppliers
    Switching cost
    Suppliers competing directly with the buyers (Forward integration)
  • 9. Cont… Five forces
    Competitive rivalry – Competitive rivals are organizations with similar products and services aimed at the same customer group
    Factor affect the degree of competitive rivalry in an industry or sector
    The extent to which competitors are in balance
    Industry growth rate
    High fixed costs in an industry
    High exit barrier to an industry
  • 10. Interpreting Industry Analyses
    Suppliers and buyers have strong positions
    Low entry barriers
    Strong threats from substitute products
    Intense rivalry among competitors
    Low profit potential
  • 11. Interpreting Industry Analyses
    High entry barriers
    Suppliers and buyers have weak positions
    Few threats from substitute products
    Moderate rivalry among competitors
    High profit potential
  • 12. 3. Competitors and markets
    An industry or sector may be a too general level to provide for a detailed understanding of competition
    Strategic groups – Organizations within an industry with similar strategic characteristics, following similar strategies or competing on similar base
    Market segmentation – group of customers who have similar need that are different from customer needs in other parts of the market
  • 13. Cont… Competitors and markets
    Strategic customers – the person/s at which the strategy is primarily addressed because they have the most influence over which goods or services are purchased
  • 14. Critical Success Factors
    Critical success factors are those product features that are particularly valued by a group of customers and therefore where the organization must excel to outperform competition
    Examples for CSF
    Threshold product features
    Reputation of a product
    After sales service
    Delivery reliability
    Technical quality
  • 15. External Factor Evaluation Matrix (EFM)
    EFM allows strategies to summarized and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological and competitive information.
    List key external; factors as identified in the external –audit process
    Assign to each factor a weight that ranges from 0.0 to 1.0
    Assign a 1 to 4 rating to each key external factor to indicate how effectively the firm’s current strategies respond to the factor,
  • 16. Cont… External Factor Evaluation Matrix
    4 = the response is superior
    3 = the response is above average
    2 = the response is average
    1 = the response is poor
    4. Multiply each factor’s weight by its rating to determine a weighted score
    5.Sum the weighted scores for each variable to determine the total weighted score for the organization
    The average total weighted score is 2.5
  • 17. Thanks for your participation!