Strategic Management Course
ENVIROMENTAL ANALYSIS - COMPLETION
• A firm operates in an industry
• Need to compare a company’s operations with
– Especially “the best-in-class” rivals
• Current level of competition
– Competitors’ Key Success Factors, among other key
• Industrial trends
– In line with your industry’s life cycle
– In line your goals and objectives, your strategy
• Who are they in terms of characteristics and
• How manageable are their needs, wants,
expectations, tastes and preferences?
• Why do they buy/what they value most?
• When/how do they buy?
Where do they buy?, etc
Do all these trends/factors/developments
favor/benefit us (opportunities) or really
scare/are against us (threats)?
• Do we have alternative sources of
• Can we rely on these suppliers to
provide our needed inputs in the
right quantities ,quality, at the right
time and place?
• If the answer is yes , those are
opportunities. While no shows a
• What are their costs?
• What are their terms of delivery and/or
• How powerful are they?
• What is their rate of entry and exit?
• Which supplier is the best?
Which supplier (s) will give us competitive
advantages (opportunities) or not/scare
• How many competitors of our size
and competence are we facing? Few-
• What market share do they
hold/how strong are they?
• Cost of the available substitutes?
• What are their competitive behavior?
Friendly/cooperative- Opportunity, Un
• What are the entry and exit barriers for
these competitors? Easy for new rivals to
join but difficult for the current ones to leave
the industry-threat, Difficult to enter but
easy to exit-favorable/opportunity
• Before joining an industry, a firm
Industry size, structure,
profitability, long term
attractiveness, life cycle
Competitive situation analysis
Level of technology in the
Competitive position of the
Ease of entry in the industry
Michael Porter’s model
• Michael E. Porter of the Harvard
• Suggested five competitive forces
– Rivalry within the industry
– Threat of new entrants
– Threat of substitute products
– Power of buyers
– Power of suppliers
• Mutual dependence
• Concentration of competitors
• Number of competitors
• Industry growth rate
• Cost structure
• Diversification by competitors
• Differentiation and switching costs
• Exit barriers
• Capacity utilisation
• Economies of scale
• Product differentiation
• Capital requirements
• Switching costs
• Distribution channels access
• Government policies
• Expected retaliation
• Importance to supplier
• Knowledge of product value to buyer
• Standardisation and differentiation
• Switching costs
• Threat of forward integration
• Helps managers to identify the
opportunities and threats
confronting their company (ies).
• The stronger the 5 competitive
forces, the more serious the threat
and vise versa.
• Through strategic change you can
alter the strengths of such forces
Porter’s Model – Cont.
• Need to understand the forces in the
industry, their impact/seriousness, how
and when they benefit or be against
you, and their sources.
• Confirm which forces favour your
business success (opportunities) or
scare your business success (threats)
• Limited availability of the required
information i.e high level of secrecy in
government bodies and some business
• The available information may not be
up-to-date, or be irrelevant or even
• The model ignores other trends like
changes in demand, technology used in
production, and the market