Ch03 Discussion Light

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Strategy Management
Robert E. Hoskisson; Michael A. Hitt; R. Duane Ireland

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Ch03 Discussion Light

  1. 1. The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis Robert E. Hoskisson Michael A. Hitt R. Duane Ireland Chapter 3
  2. 2. Chapter 2 Strategic Leadership Chapter 1 Introduction to Strategic Management Strategic Thinking The Strategic Management Process Chapter 6 Competitive Rivalry and Competitive Dynamics Chapter 9 International Strategy Chapter 3 The External Environment Chapter 5 Business-Level Strategy Chapter 8 Acquisition and Restructuring Strategies Chapter 11 Corporate Governance Chapter 7 Corporate-Level Strategy Chapter 10 Cooperative Strategy Chapter 12 Strategic Entrepreneurship Strategic Analysis Creating Competitive Advantage Monitoring And Creating Entrepreneurial Opportunities
  3. 3. Discussion Questions <ul><li>What are the components of the general environment? How does each affect the strategy of a firm? </li></ul><ul><li>What are the five competitive forces in an industry environment? </li></ul><ul><li>What attributes make each of the five competitive forces intense? </li></ul><ul><li>What is a strategic group and why is it an important concept? </li></ul>Click Here Click Here Click Here More discussion questions Click Here Click Here
  4. 4. Discussion Questions (cont.) <ul><li>How do you conduct a competitor analysis? </li></ul>Click Here
  5. 5. Discussion Question 1 <ul><li>What are the components of the general environment? How does each affect the strategy of a firm? </li></ul>
  6. 6. The External Environment General Environment General Environment General Environment Industry Environment Threat of new entrants Power of suppliers Power of buyers Product substitutes Intensity of rivalry Competitor Environment Economic Political/Legal Technological Global Demographic Sociocultural
  7. 7. External Environmental Analysis <ul><li>A continuous process which includes </li></ul><ul><ul><li>Scanning: Identifying early signals of environmental changes and trends </li></ul></ul><ul><ul><li>Monitoring: Detecting meaning through ongoing observations of environmental changes and trends </li></ul></ul><ul><ul><li>Forecasting: Developing projections of anticipated outcomes based on monitored changes and trends </li></ul></ul><ul><ul><li>Assessing: Determining the timing and importance of environmental changes and trends for firms’ strategies and their management </li></ul></ul>
  8. 8. External Environmental Analysis Strategic Intent Strategic Mission The External Environment Analysis of general environment Analysis of industry environment Analysis of competitor environment The External Environment
  9. 9. General Environment <ul><li>Sociocultural segment </li></ul><ul><li>Women in the workplace </li></ul><ul><li>Workforce diversity </li></ul><ul><li>Attitudes about quality of worklife </li></ul><ul><li>Concerns about environment </li></ul><ul><li>Shifts in work and career preferences </li></ul><ul><li>Shifts in product and service preferences </li></ul>
  10. 10. General Environment <ul><li>Economic segment </li></ul><ul><li>Inflation rates </li></ul><ul><li>Interest rates </li></ul><ul><li>Trade deficits or surpluses </li></ul><ul><li>Budget deficits or surpluses </li></ul><ul><li>Personal savings rate </li></ul><ul><li>Business savings rates </li></ul><ul><li>Gross domestic product </li></ul>
  11. 11. General Environment <ul><li>Political/Legal Segment </li></ul><ul><li>Antitrust laws </li></ul><ul><li>Taxation laws </li></ul><ul><li>Deregulation philosophies </li></ul><ul><li>Labor training laws </li></ul><ul><li>Educational philosophies and policies </li></ul>
  12. 12. General Environment <ul><li>Technological Segment </li></ul><ul><li>Product innovations </li></ul><ul><li>Applications of knowledge </li></ul><ul><li>Focus of private and government-supported R&D expenditures </li></ul><ul><li>New communication technologies </li></ul>
  13. 13. General Environment <ul><li>Global Segment </li></ul><ul><li>Important political events </li></ul><ul><li>Critical global markets </li></ul><ul><li>Newly industrialize countries </li></ul><ul><li>Different cultural and institutional attributes </li></ul>
  14. 14. General Environment <ul><li>Demographic Segment </li></ul><ul><li>Population size </li></ul><ul><li>Age structure </li></ul><ul><li>Geographic distribution </li></ul><ul><li>Ethnic mix </li></ul><ul><li>Income distribution </li></ul>Click Here Return to Discussion Questions
  15. 15. Discussion Question 2 <ul><li>What are the five competitive forces in an industry environment? </li></ul>
  16. 16. Industry Environment <ul><li>A set of factors that directly influences a company and its competitive actions and responses </li></ul><ul><li>Interaction among these factors determine an industry’s profit potential </li></ul><ul><li>Threat of new entrants </li></ul><ul><li>Power of suppliers </li></ul><ul><li>Power of buyers </li></ul><ul><li>Product substitutes </li></ul><ul><li>Intensity of rivalry </li></ul>
  17. 17. Five Forces Model of Competition <ul><li>Identify current and potential competitors and determine which firms serve them </li></ul><ul><li>Conduct competitive analysis </li></ul><ul><li>Recognize that suppliers and buyers can become competitors </li></ul><ul><li>Recognize that producers of potential substitutes may become competitors </li></ul>
  18. 18. Five Forces Model of Competition Threat of New Entrants Bargaining Power of Suppliers Bargaining Power of Buyers Threat of Substitute Products Rivalry Among Competing Firms Five Forces of Competition Click Here Return to Discussion Questions
  19. 19. Discussion Question 3 <ul><li>What attributes make each of the five competitive forces intense? </li></ul>
  20. 20. Threat of New Entrants <ul><li>Barriers to entry </li></ul><ul><li>Economies of scale </li></ul><ul><li>Product differentiation </li></ul><ul><li>Capital requirements </li></ul><ul><li>Switching costs </li></ul><ul><li>Access to distribution channels </li></ul><ul><li>Cost disadvantages independent of scale </li></ul><ul><li>Government policy </li></ul><ul><li>Expected retaliation </li></ul>
  21. 21. Bargaining Power of Suppliers <ul><li>A supplier group is powerful when: </li></ul><ul><li>it is dominated by a few large companies </li></ul><ul><li>satisfactory substitute products are not available to industry firms </li></ul><ul><li>industry firms are not a significant customer for the supplier group </li></ul><ul><li>suppliers’ goods are critical to buyers’ marketplace success </li></ul><ul><li>effectiveness of suppliers’ products has created high switching costs </li></ul><ul><li>suppliers are a credible threat to integrate forward into the buyers’ industry </li></ul>
  22. 22. Bargaining Power of Buyers <ul><li>Buyers (customers) are powerful when: </li></ul><ul><li>they purchase a large portion of an industry’s total output </li></ul><ul><li>the sales of the product being purchased account for a significant portion of the seller’s annual revenues </li></ul><ul><li>they could easily switch to another product </li></ul><ul><li>the industry’s products are undifferentiated or standardized, and buyers pose a credible threat if they were to integrate backward into the seller’s industry </li></ul>
  23. 23. Threat of Substitute Products <ul><li>Product substitutes are strong threat when: </li></ul><ul><li>customers face few switching costs </li></ul><ul><li>substitute product’s price is lower </li></ul><ul><li>substitute product’s quality and performance capabilities are equal to or greater than those of the competing product </li></ul>
  24. 24. Intensity of Rivalry <ul><li>Intensity of rivalry is stronger when competitors: </li></ul><ul><li>are numerous or equally balanced </li></ul><ul><li>experience slow industry growth </li></ul><ul><li>have high fixed costs or high storage costs </li></ul><ul><li>lack differentiation or low switching costs </li></ul><ul><li>experience high strategic stakes </li></ul><ul><li>have high exit barriers </li></ul>
  25. 25. High Exit Barriers <ul><li>Common exit barriers include: </li></ul><ul><li>specialized assets (assets with values linked to a particular business or location) </li></ul><ul><li>fixed costs of exit such as labor agreements </li></ul><ul><li>strategic interrelationships (relationships of mutual dependence between one business and other parts of a company’s operation, such as shared facilities and access to financial markets) </li></ul><ul><li>emotional barriers (career concerns, loyalty to employees, etc.) </li></ul><ul><li>government and social restrictions </li></ul>Click Here Return to Discussion Questions
  26. 26. Discussion Question 4 <ul><li>What is a strategic group and why is it an important concept? </li></ul>
  27. 27. Strategic Groups <ul><li>Strategic group: a group of firms in an industry following the same or similar strategy along the same strategic dimensions </li></ul><ul><li>The strategy followed by a strategic group differs from strategies being implemented by other companies in the industry </li></ul>Click Here Return to Discussion Questions
  28. 28. Discussion Question 5 <ul><li>How do you conduct a competitor analysis? </li></ul>
  29. 29. Competitor Environment <ul><li>Competitor intelligence is the ethical gathering of needed information and data about competitors’ objectives, strategies, assumptions, and capabilities </li></ul><ul><li>what drives the competitor as shown by its future objectives </li></ul><ul><li>what the competitor is doing and can do as revealed by its current strategy </li></ul><ul><li>What the competitor believes about itself and the industry, as shown by its assumptions </li></ul><ul><li>What the the competitor may be able to do, as shown by its capabilities </li></ul>
  30. 30. Competitor Analysis <ul><li>Future Objectives: </li></ul><ul><li>How do our goals compare with our competitors’ goals? </li></ul><ul><li>Where will the emphasis be placed in the future? </li></ul><ul><li>What is the attitude toward risk? </li></ul>Future objectives
  31. 31. Competitor Analysis <ul><li>Current Strategy: </li></ul><ul><li>How are we currently competing? </li></ul><ul><li>Does this strategy support changes in the competitive structure? </li></ul>Current strategy Future objectives
  32. 32. Competitor Analysis <ul><li>Assumptions: </li></ul><ul><li>Do we assume the future will be volatile? </li></ul><ul><li>Are we operating under a status quo? </li></ul><ul><li>What assumptions do our competitors hold about the industry and themselves? </li></ul>Assumptions Current strategy Future objectives
  33. 33. Competitor Analysis <ul><li>Capabilities: </li></ul><ul><li>What are our strengths and weaknesses? </li></ul><ul><li>How do we rate compared to our competitors? </li></ul>Capabilities Assumptions Current strategy Future objectives
  34. 34. Competitor Analysis Response: <ul><li>What will our competitors do in the future? </li></ul><ul><li>Where do we hold an advantage over our competitors? </li></ul><ul><li>How will this change our relationship with our competitors? </li></ul>Response Capabilities Assumptions Current strategy Future objectives

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