Dimension of environmental analysis Technology Government Economics Culture Demographics Dealing with strategic uncertainties Impact analysis—assessing the impact of strategic uncertainties Impact of a Strategic Uncertainties Immediacy of Strategic Uncertainties Managing Strategic Uncertainties Scenario analysis Identify Scenario Relate Scenarios to strategies Estimate Scenario Probabilities
DIMENSIONS OF ENVIRONMENTAL ANALYSIS Technologies One dimension of environmental analysis is technological trends or technological events occurring outside the market of industry that have the potential to impact strategies.
DIMENSIONS OF ENVIRONMENTAL ANALYSIS Government The addition and removal of legislative or regulatory constrains can pose major strategic threats and opportunities.
DIMENSIONS OF ENVIRONMENTAL ANALYSIS EconomicsThe evaluation of some strategies willbe affected by judgement madeabout the economy, particularlyabout inflation and generaleconomic health as measured byunemployed and economic growth.
DIMENSIONS OF ENVIRONMENTAL ANALYSIS Culture Cultural trends can present both threats and opportunities for a wide variety of firms
DIMENSIONS OF ENVIRONMENTAL ANALYSIS Demographics Demographic trends can be a powerful underlying force in a market and it can be predictable.
DEALING WITH THE STRATEGIC UNCERTAINTY Strategic uncertainty - uncertainty that has strategic implications, is a key construct in external analysis. Scenario analysis basically accepts the uncertainty as given and uses it to drive a description of two or more future scenarios.
DEALING WITH THE STRATEGIC UNCERTAINTY Information gathering and additional analysis will not be able to reduce the uncertainty. Scenario analysis basically accepts the uncertainty as given and uses it to drive a description of two or more future scenarios.
DEALING WITH THE STRATEGIC UNCERTAINTY Scenario Analysis Identify Scenarios Relate Scenarios to Existing or Proposed Strategies Estimate Scenario Probabilities
IMPACT ANALYSIS—ASSESSING THE IMPACT OF STRATEGIC UNCERTAINTIES »An important objective of external analysis is to rank the strategic uncertainties and decide how they are to be managed over time. »The problem is the dozens of strategic uncertainties and many second-level strategic uncertainties are often generated.
IMPACT ANALYSIS—ASSESSING THE IMPACT OF STRATEGIC UNCERTAINTIES »These strategic uncertainties can lead to an endless process of information gathering and analysis that can absorb resources indefinitely. »distinct priorities are established, external analysis can become descriptive, ill-focused and inefficient.
IMPACT ANALYSIS—ASSESSING THE IMPACT OF STRATEGIC UNCERTAINTIES The extent to which a strategic uncertainty should be monitored and analyzed depends on its impact and immediacy. 1. The impact of strategic uncertainty is related to: The extent to which it involves trends or events The importance of the involved businesses The number of involved businesses
IMPACT ANALYSIS—ASSESSING THE IMPACT OF STRATEGIC UNCERTAINTIES 2. The immediacy of a strategic uncertainties is related to: The probability that the involved trends or events will occur The time frame of the trends or events The reaction time
IMPACT ANALYSIS—ASSESSING THE IMPACT OF STRATEGIC UNCERTAINTIESIMPACT OF STRATEGICUNCERTAINT Each strategy uncertainty involves potential trends or events that could have an impact on present, proposed, and even potential businesses. The impact of strategic uncertainty will depend on the importance of the impacted businesses to a firm.
IMPACT ANALYSIS—ASSESSING THE IMPACT OF STRATEGIC UNCERTAINTIESIMPACT OF STRATEGICUNCERTAINT Some business is more important than others. Such measures might need to be supplemented for proposed or growth businesses for which present sales, profits or costs may not reflect the true value to a firm.
IMPACT ANALYSIS—ASSESSING THE IMPACT OF STRATEGIC UNCERTAINTIESIMMEDIACY OF STRATEGICUNCERTAINTY Events or trends associated with strategic uncertainties may have a high impact but such a low probability of occurrence that it is not worth actively expending resources to gather or analyze information. The harnessing of tide energy may be unlikely or may occur so far in the future that it is of no concern to the utility.
IMPACT ANALYSIS—ASSESSING THE IMPACT OF STRATEGIC UNCERTAINTIESIMMEDIACY OF STRATEGICUNCERTAINTY There is the reaction time available to a firm After a trend or event crystallizes If the available reaction time is inadequate, it becomes important to anticipate emerging trends and events better.
IMPACT ANALYSIS—ASSESSING THE IMPACT OF STRATEGIC UNCERTAINTIESMANAGING STRATEGICUNCERTANTIESSuggests a categorization of strategic uncertaintiesfor a given business. If both the immediacy andimpact are lowIf the impact is thought to be low but theimmediacy is high.If the immediacy is low and the impact is high
IMPACT ANALYSIS—ASSESSING THE IMPACT OF STRATEGIC UNCERTAINTIESMANAGING STRATEGICUNCERTANTIES And contingent strategies may be consider but not necessarily developed and implemented. When both the immediacy and potential impact underlying trends and events are high An active task force may provide initiative.
SCENARIO ANALYSISIt is a vehicle to explore differentassumptions about the future,involves the creation of two tothree plansible scenarios, thedevelopment of strategiesappropriate to each, theassessment of scenarioprobabilities, and the evaluation ofthe resulting strategies across thescenarios.
SCENARIO ANALYSISTwo Types Of Scenario AnalysisStrategy- Developing Scenarios- is to provide insights intofuture competitive context then use these insights to evaluateexisting business strategies and stimulated the creation of newones. Decision-Driven Scenarios- is proposed and tested against several scenarios that are developed. The goal is to challenge the strategies, thereby helping to make the go/no-go decision and suggesting ways to make the strategy more robust in withstanding competitive forces.
SCENARIO ANALYSIS RELATE SCENARIOS TO ESTIMATE IDENTIFY EXISTING OR SCENARIOSCENARIOS PROPOSED PROBABILITIES STRATEGIES
SCENARIO ANALYSISIdentifying Scenarios The impact analysis will identify the strategic uncertainty with the highest priority for a firm. A competitor scenario analysis can be driven by the uncertainty surrounding a competitor’s strategy. An inflation stimulated recession scenario would be expected to generate a host of conditions for the appliance industry, such as price increases and retail failures.
SCENARIO ANALYSISRelate Scenarios toStrategies The next step is to relate them to strategy and to know what new options or strategies will be applicable to the scenarios. Even if the scenario analysis is not motivated by a desire to generate new strategy options, it is always useful to consider what strategies would be optimal for each scenario.
SCENARIO ANALYSISEstimate ScenarioProbabilities To evaluate alternatives strategies it is useful to determine the scenario probabilities. The task is actually one of environmental forecasting, except that the total scenario may be a rich combination of several variables.