EXTERNAL ENVIRONMENT PORTER’S FIVE FORCES MODEL STRATEGIC GROUPS COMPETITIVE CHANGES DURING INDUSTRY EVOLUTION GLOBALIZATION AND INDUSTRY STRUCTURE NATIONAL CONTEXT AND COMPETITIVE ADVANTAGE RESOURCES CAPABILITIES AND COMPETENCIES

1. UNIT II
COMPETITIVE ADVANTAGE

2. COMPETITIVE ADVANTAGE
• EXTERNAL ENVIRONMENT
• PORTER’S FIVE FORCES MODEL
• STRATEGIC GROUPS
COMPETITIVE CHANGES DURING
INDUSTRY EVOLUTION
• GLOBALIZATION AND INDUSTRY
STRUCTURE
• NATIONAL CONTEXT AND
COMPETITIVE ADVANTAGE
RESOURCES
• CAPABILITIES AND
COMPETENCIES
• CORE COMPETENCIES
• LOW COST AND
DIFFERENTITATION
• GENERIC BUILDING BLOCKS OF
COMPETITIVE ADVANTAGE
• DISTINCTIVE COMPETENCIES
• RESOURCES AND CAPABILITIES
DURABILITY OF COMPETITIVE
ADVANTAGE
• AVOIDING FAILURES AND
SUSTAINING COMPETITIVE
ADVANTAGE

3. THE EXTERNAL
ENVIRONMENT
REFERS TO
FACTORS, FORCES,
SITUATIONS, AND
EVENTS OUTSIDE
THE
ORGANIZATION
THAT AFFECTS ITS
PERFORMANCE

4. MEANING – EXTERNAL ENVIRONMENT
• An external environment is
composed of all the outside
factors or influences that impact
the operation of business.
• The external environment can be
broken down into two types: the
micro environment and the macro
environment
• The external environment of a
business involves all external forces
affecting the company over which it
has no direct control
• The business must act or react to
keep up its flow of operations.

5. 1.1. NATURE OF BUSINESS
ENVIRONMENT
• ENVIRONMENT IS INSEPARABLE FROM BUSINESS
• ENVIRONEMNT IS DYNAMIC
• BUSINESS LACKS CONTROL OVER ENVIRONMENT
• INTERNALAND EXTERNAL FACTORS
• ENVIRONMENT IS COMPLEX
• ENVIRONMENT IS MULTIFACETED
• OPPORTUNITIES AND OBSTACLES
• REGULATES THE SCOPE OF BUSINESS
• LONG LASTING IMPACT
• UNCERTAINTY

6. COMPONENTS OF BUSINESS
MICRO ENVIRONMENT
• CUSTOMERS
• SUPPLIERS
• MARKETING INTERMEDIARIES
• COMPETITORS
• GENERAL PUBLIC
MACRO ENVIRONMENT
• POLITICAL ENVIRONMENT
• ECONOMIC ENVIRONMENT
• SOCIAL ENVIRONMENT
• TECHNOLOGICAL ENVIRONMENT
• PHYSICAL ENVIRONMENT
• LEGAL ENVIRONMENT
• INTERNATIONAL BUSINESS ENVIRONMENT

7. INTERNAL ENVIRONMENT
• VALUE SYSTEM
• VISION, MISSION, GOALS & OBJECTIVES
• MANAGEMENT STRUCTURE AND NATURE
• INTERNAL POWER RELATIONSHIPS
• COMPANY IMAGE & BRAND EQUITY
• MISCELLANEOUS FACTORS
• MISCELLANEOUS ASSETS & FACILITIES
• RESEARCH & DEVELOPMENT
• MARKETING RESOURCES
• FINANCIAL FACTORS

9. EXTERNALANALYSIS
• INTRO
• PROCEDURE OF EXTERNALANALYSIS
• FACTORS AFFECTING EXTERNALANALYSIS
• LEVELS OF EXTERNALANALYSIS
• LEVELS OF EXTERNALANALYSIS
• SIGNIFICANCE OF EXTERNALANALYSIS
• TECHNIQUES OF EXTERNALANALYSIS

10. EXTERNALANALYSIS
• The process by which businesses objectively assess the changes in their
industry and the broader world that could affect their current business
operations
• Examining the industry environment of a company, including factors such as
competitive structure, competitive position, dynamics, and history
• External analysis helps businesses adjust to potential changes within their
industry that could save their business.
• For example,
A catering company changes the way they store their food products to comply
with new FDA regulations. This helps them maintain their status as a catering
service

11. PROCEDURE FOR EXTERNALANALYSIS
UNDERSTAND NATURE OF ENVIRONMENT
ANALYSE THE PAST INFLUENCE OF
ENVIRONMENTAL FACTORS
IDENTIFY CRITICAL COMPETITIVE FORCES
ANALYSE THE STATRETEGIC POSITION
ADENTIFY THE OPPORTUNITIES AND THREATS

12. FACTORS AFFECTING EXTERNAL
ANALYSIS
• CUSTOMER ENVIRONMENT
• COMPETITIVE ENVIRONMENT
• INDUSTRY ENVIRONMENT
• MACRO ENVIRONMENT

13. LEVELS OF EXTERNALANALYSIS
• ENVIRONMENTAL SCANNING
• INDUSTRY ANALYSIS
• COMPETITIVE ADVANTAGE

14. SIGNIFICANCE OF EXTERNAL
ANALYSIS
• WARNS AGAINST THREATS
• RECOGNISES ENVIRONMENTAL RISKS
• IDENTIFIES OPPORTUNITIES
• PROVIDES MORE TIME FOR ROUTINE ACTIVITIES
• IDENTIFIES NEW GROWTH AVENUES
• CONTINUOUS LEARNING
• BUILDS THE IMAGE OF ORGANIZATION
• ANALYSES THE COMPETITORS

15. EXTERNALANALYSIS –
METHODS & TECHNIQUES
• SWOT ANALYSIS
• PORTER’S FIVE FORCES MODEL
• ENVIRONMENTAL THREAT & OPPORTUNITY
• PROFILE ANALYSIS(ETOP)
• PESTLE ANALYSIS
• MARKET SURVEY
• FORECASTING
• QUEST ANALYSIS
• PEST ANALYSIS

16. •MAIN OBJECTIVE
• DEFINE AREA
• FOCUS ON THE
COMPETITORS
• IDENTIFY KEY
FACTORS FOR
SUCCESS

17. AN OVERVIEW OF TOOLS USED TO ANALYSE THE BUSINESS
ENVIRONMENT
• QUEST ANALYSIS
• ETOPANALYSIS

18. PEST ANALYSIS

19. PESTEL
ANALYSIS

20. SPEND ANALYSIS

21. INDUSTRY ANALYSIS
• INTRO
• COMPETITIVE CHANGES DURING INDUSTRIAL REVOLUTION
• PHASES IN INDUSTRIAL REVOLUTION
• GROWTH INDUSTRY
• SHAKEOUT
• MATURE INDUSTRY
• DECLINE

22. INDUSTRIAL LIFE CYCLE
STAGES

23. COMPONENTS OF PORTER’S
FIVE FORCES MODEL
1) RIVALRY INSIDE THE INDUSTRY
• NUMBER OF PLAYERS
• SLOW MARKET GROWTH
• HIGH FIXED COSTS
• HIGH STORAGE OR HIGHLY
PERISHABLE PRODUCTS
• LOW SWITCHING COST
• LOW LEVELS OF PRODUCT
DIFFERENTIATION
• MARKET SHARE
• HIGH EXIT BARRIERS
• DIVERSE COMPETITORS
• MARKET SATURATION
• 2) THREAT OF SUBSTITUTES
• LOW SWITCHING COSTS
• LOW SUBSTITUTE PRICE
• HIGH QUALITY OF SUBSTITUTE
• BETTER PERFORMANCE OF SUBSTITUTE
PRODUCTS
• AVAILABILITY OF SUBSTITUTES
• 3)BUYING BEHAVIOUR
• 4)SUPPLIER POWER
• 5)THREAT TO NEW ENTRANTS
• GOVERNMENT LAWS AND REGUALTIONS
• DYNAMICALANALYSIS
• ANALYSIS OF OPTIONS

25. PORTER’S DIAMOND ANALYSIS MODEL

26. STRATEGIC GROUP
• Companies, within the same industry, that employ similar strategies with similar
resources or have comparable business models, belong to one strategic group.
Strategic groups
• Have similar characteristics
• Have similar market shares
• Respond to market trends or competition (threats and opportunities) in similar
ways
• Offer similar customer service

27. STRATEGIC CANVA
• A strategy canvas is
basically a line
graph that plots
functions/factors
against importance
for a company or an
organisation and
then overlays
competitors or
industry
benchmarks.
• Information can be
built to help
formulate a
competitive strategy

28. ETOP - ENVIRONMENTAL THREAT
PROFILE OPPORTUNITIES

29. QUEST – QUICK ENVIRONMENTAL
SCANNING TECHNIQUE
• This technique is designed to analyze the environment quickly and inexpensively
so that businesses can focus on critical issues that have to be addressed in a short
span
• Pioneered by BURT NANUS & SELWYN ENZER

30. SWOT
ANALYSIS

31. VALUE CHAIN ANALYSIS

32. VRIO ANALYSIS

33. INTELLECTUAL
CAPITAL
ANALYSIS

35. ANALYSING INDUSTRY
• INTRO
• COMPETITIVE CHANGES DURING INDUSTRY EVOLUTION
• DOMINANT ECONOMIC FACTORS
• INDUSTRY LIFE CYCLE STAGES
• FACTORS ANALYSED IN INDUSTRY ANALYSIS
• PORTER’S FIVE FORCES MODEL
• COMPONENTS
• UTITLITY
• LIMITATIONS

36. DOMINANT ECONOMIC FACTORS
• MARKET SIZE & GROWTH RATE
• NUMBER OF RIVALS
• SCOPE OF COMPETITVERIVALRY
• BUYER REQUIREMENTS AND NEEDS
• DEGREE OF PRODUCT DIFFERENTITATION
• PRODUCT INNOVATION
• RATE OF TECHNOLOGICAL CHANGE
• VERTICAL INTEGRATION
• ECONOMIES FOR SALE

37. FACTORS ANALYSED IN
INDUTRIALANALYSIS
• BASIC FEATURES AND CONDITIONS OF THE INDUSTRY
• INDUSTRY ENVIRONMENT
• INDUSTRY STRUCTURE
• INDUSTRY ATTRACTIVENESS
• INDUSTRY PERFORMANCE
• INDUSTRY PRACTISES
• EMERGING TRENDS

38. LIMITATIONS
• EXISTENCE OF SEPARATE AND IDENTIFIABLE
• OVERLOOKS THE ABILITY OF LARGE FIRMS
• DISAGREEMENT BETWEEN THEORIES
• INFLEXIBLE INDUSTRY STRUCTURE
• WRONGFUL MARKET ASSUMPTIONS
• STATIC MARKET STRUCTURE
• FOCUSES ON COMPETITION