The document discusses various concepts related to environmental scanning and industry analysis for strategic planning purposes. It defines environmental scanning as monitoring external factors to avoid surprises and ensure long-term success. Industry analysis techniques discussed include Porter's Five Forces model and PEST analysis. Porter's model assesses rivalry, barriers to entry, supplier and buyer power, and substitution threats. PEST analyzes political, economic, social and technological factors. The document also covers strategic groups which identify competitors pursuing similar strategies, and strategic types like defenders, prospectors and analyzers.

1. Environmental Scanning and
Opportunity Analysis

2. Environmental scanning
 The monitoring, evaluating, and disseminating
of information from the external and internal
environments to key people within the
corporation to avoid strategic surprise and
ensure the long-term health of the firm.

3. Environmental scanning
 Environmental scanning is a concept from
business management by which businesses
gather information from the environment, to
better achieve a sustainable competitive
advantage.
 To sustain competitive advantage the company
must also respond to the information gathered
from environmental scanning by altering its
strategies and plans when the need arises.

4. External Environmental Variables:
Societal / community environmentSocietal / community environment:
General forces that do not directly touch
on the short-run activities but often
influence its long-run decisions.

5. External Environmental Variables
Task environmentTask environment:
Those elements or groups that directly
affect the corporation and, in turn, are
affected by it. The task environment is
the industry within which that firm
operates.

6. 3–6
The External EnvironmentThe External Environment

7. External Environmental Variables
Industry analysisIndustry analysis:
An in-depth examination of key factors
within a corporation’s task environment.

8. External Environmental Variables
Societal environment forcesSocietal environment forces:
 Economic forces
 Regulate the exchange of materials,
money, energy, and information
 Technological forces
 Generate problem-solving inventions

9.  Political-legal forces
 Allocate power, provide laws and
regulations
 Socio-cultural forces
 Regulate values,
morestraditions, and customs
Societal environment forcesSocietal environment forces:

10. Societal Environment
Important Variables
Economic
GDP trends
Interest rates
Money supply
Inflation rates
Unemployment levels
Wage/price controls
Devaluation/revaluation
Energy availability and
cost
Disposable and
discretionary income
Technological
Total government
spending for R&D
Total industry
spending for R&D
Focus of technological
efforts
Patent protection
New products
New developments in
technology transfer
from lab to
marketplace
Productivity
improvements
through automation
Political-Legal
Antitrust regulations
Environmental
protection laws
Tax laws
Special incentives
Foreign trade
regulations
Attitudes toward
foreign companies
Laws on hiring and
promotion
Stability of
government
Sociocultural
Lifestyle changes
Career expectations
Consumer activism
Rate of family
formation
Growth rate of
population
Age distribution of
population
Regional shifts in
population
Life expectancies
Birth rates

11. Prentice Hall, 2000 Chapter 3 11
Scanning the External Environment
Analysis of Societal Environment
Economic, Sociocultural, Technological, Political-Legal Factors
Selection of
Strategic Factors
• Opportunities
• Threats
Market
Analysis
Competitor
Analysis
Supplier
Analysis
Governmental
Analysis
Interest Group
Analysis
Community
Analysis

12. Environmental Scanning & Monitoring
Techniques
SWOT
Industry Analysis
Techniques
Competitor Analysis
PEST

13. Industry Analysis
Industry
A group of firms producing a similar
product or service, such as soft drinks,
health services or financial services.

14. Industry Analysis – Porter’s Model

15. Threat of New Entry
Rivalry Among
Existing Competitors
Bargaining Power
of Customers
Threat of Substitutes
Bargaining Power
of Suppliers
• Economies of scale
• Product differences
• Brand identity
• Switching costs
• Capital requirements
• Access to distribution
• Absolute cost advantages
• Government policy
• Relative price, performance of substitutes
• Switching costs
• Buyer propensity to substitute
• Industry growth
• Fixed costs / value
added
• Over capacity
• Product differences
• Brand identity
• Switching costs
• Concentration and
balance
• Informational complexity
• Diversity of competitors
• Corporate stakes
• Exit barriers
• Differentiation of
inputs
• Switching costs
• Presence of substitute
inputs
• Supplier
concentration
• Importance of volume
to supplier
• Cost relative to total
purchases
• Impact of inputs on
cost or differentiation
• Threat of forward
integration
• Buyer concentration
• Buyer volume
• Buyer switching costs
• Buyer information
• Ability to integrate
backward
• Price / total purchases
• Product differences
• Brand identity
• Impact of quality /
performance
• Buyer profits
Porter’s Five Forces Analysis

16. Industry Analysis
Porter’s approach:Porter’s approach:
Assess the five forces --
 Threat of new entrants
 Rivalry among existing firms
 Threat of substitute products
 Bargaining power of buyers
 Bargaining power of suppliers

17. Barriers to entry:
 Previous experience with retaliation to new entry.
 Economies of Scale
 Product Differentiation
 Capital Requirements
 Switching Costs to another suppler
 Access to Distribution Channels
 Cost Disadvantages Independent of Size:
established firms may have, proprietary product
technology, favorable access to raw material, learning
curve.
 Government Policy
Threat of New EntrantsThreat of New Entrants

18. The threat of new entry
(competitors).
 New entries expand industry’s productive
capacity.
 “Unless the market grows, new entries
intensifies the fight for market share”.
 The result is prices go down which, lowering
industry profitability.

19. Rivalry Among Existing FirmsRivalry Among Existing Firms
 Signs of strong rivalry
 Rivalry is intense when:
 The industry is growing slowly and/or has
excess capacity
 The industry has a high fixed-costs structure
(economies of scale are necessary and market
share an absolute must)
 The products or services are undifferentiated

20. Rivalry Among Existing FirmsRivalry Among Existing Firms
 More intense when:
 There is a large number of competitors
(note: fragmented and consolidated
industries)
 The barriers to exit the industry are high
(e.g. assets that do not have other uses)

21. Threat of Substitute Products/ServicesThreat of Substitute Products/Services
Substitute Products:
 Those products that appear to be different
but can satisfy the same need as another
product.
 To the extent that switching costs are low,
substitutes can have a strong effect on an
industry.

22. Threat of Substitute Products/ServicesThreat of Substitute Products/Services
 Substitutes are Powerful when:
 price of substitute product is competitive /
comparable
 performance of substitute product is
similar
 there are availability/delivery problems
among firms in the industry
 the substitute is more technologically
advanced

23. Bargaining Power of BuyersBargaining Power of Buyers
Buyer is powerful when:
 Buyer purchases large proportion of seller’s
products
 Buyer has the potential to integrate backward
 Alternative suppliers are plentiful
 Changing suppliers costs very little
 Purchased product represents a high
percentage of a buyer’s costs
 Buyer earns low profits
 Purchased product is unimportant to the final
quality or price of a buyer’s products

24. Bargaining Power of SuppliersBargaining Power of Suppliers
Supplier is powerful when:
 Supplier industry is dominated by a few
companies but sells to many
 Its product is unique and/or has high switching
costs
 Substitutes are not readily available
 Suppliers are able to integrate forward and
compete directly with present customer
 The buyer purchases in small quantities

25. Level of attraction of competitive
environment
 The competitive environment is
relatively unattractive when:
 Rivalry is strong
 Entry barriers are low and entry is likely
 Competition from substitutes is strong
 Suppliers and customers have
considerable bargaining power

26. Industry Analysis of Indian
Telephone Industry.

27. Telecommunication in India.
 Indian Telecommunication industry, with
about 565.82 million phone connections (June
2010).
 In 2008 it was about 325.2 millions.
 The growth is expected to continue and the
total projected subscribers in 2010 will cross
650 million.

28. The breakup of wireless subscriber base in India as of May 2010 is given below.]
Operator
Subscriber
base
Bharti Airtel 99,549,208
Vodafone Essar 74,080,707
BSNL 53,598,591
Idea Cellular 41,243,253
Aircel 20,685,711
MTNL 4,568,269
BPL 2,256,862
Spice Telecom 4,235,023
Reliance
Communications
77,223,264
HFCL Infotel 382,602
Sistema Shyam 936,189
Tata Teleservices 36,486,763

29. Threat of entrants
 High cost for setting up infrastructure.
 Brand name of existing players.
 Spectrum license cost.
 Minimum requirement of number of
towers demanded by the govt. of India.

30. Bargaining power of Buyers.
 Price sensitive customers.
 High competition.
 Low switching costs (MNP Services).

31. Bargaining Power of the suppliers.
 Large number of suppliers.
 Shared infrastructure.
 Low govt. influence on the
industry.

32. Rivalry among Competitors
 High Fixed cost.
 Exit barriers.
 Price wars.
 Less time to get advantages of
innovation.

33. Availability of substitutes
 A lot of substitutes are available;
like postage, internet etc. But they are
not the perfect substitutes.

34. SWOT Analysis

35. SWOT
Analysis
Strengths
Weaknesses
Opportunities
Threats
Mission
An organization’s fundamental purpose
Best Strategies
SWOT Analysis
To formulate strategies that support the mission
Those that support the mission and
• exploit opportunities and strengths
• neutralize threats
• avoid (or correct) weaknesses
Internal Analysis
Strengths
(distinctive
competencies)
Weaknesses Threats
External Analysis
Opportunities

36. SWOT analysis of strengths, weaknesses,
opportunities,and threats.

37. SWOT Analysis

38. TOWS Matrix

39. Internal Factors
External Factors
Internal Strengths (S) Internal Weaknesses (W)
External Opportunities
(o)
External Threats (T)
SO Strategy : Maxi-
Maxi Strategy
Utilizing strengths to
take the advantage of
opportunities
ST Strategy: Maxi- Mini
Strategy
Use the existing
strengths to avoid
external threats.
WT Strategy: Mini- Mini
Strategy
Strategy for minimizing
threats as well as
Weaknesses.
WO Strategy: Mini-Maxi
Strategy
Develop strategies for
overcoming
weaknesses in order to
take opportunities.

40. PEST analysis
 Political factors
 Economic factors
 Socio-cultural factors
 Technological factors

41. Political/legal
 Monopolies
 Environmental protection laws
 Taxation policy
 Employment laws
 Government policy
 Legislation

42. Economic Factors
 Inflation
 Employment
 Disposable income
 Business cycles
 Energy availability and cost

43. Socio cultural factors
 Demographics
 Distribution of income
 Social mobility
 Lifestyle changes
 Consumerism
 Levels of education

44. Technological
 New discoveries and innovations
 Speed of technology transfer
 Rates of obsolescence
 Internet
 Information technology

45. Industry Analysis
Strategic GroupsStrategic Groups
 Defined:
A set of business units or firms that
pursue similar strategies with similar
resources.

46. Strategic group analysis
 “Aims to identify organizations with
similar strategic characteristics,
following similar strategies or
competing on similar bases”.

47. Why strategic group analysis is
important?
 Identify most direct competitor.
 On what basis the competitors are
competing on.
 It raises the question of how possible
to move from one group to another.

48. Strategic TypesStrategic Types
 It is used to analyze the level of competitive
intensity within a particular industry.
 Defined:
Category of firms based on a common
strategic orientation and a combination of
structure, culture, and processes consistent
with that strategy.

49.  Categorized by one of four general strategic
orientations
 Defenders
Companies with a limited product line; focus on
improving efficiency of current operations
Strategic TypesStrategic Types

50. Strategic TypesStrategic Types
 Prospectors:
 Companies with fairly broad product lines; focus on
product innovation and market opportunities.
 Analyzers:
 Corporations that operate in at least two different
product-market areas – one stable and one variable.
 Reactors:
 Corporations that lack a consistent strategy-structure-
culture relationship.

51. The Adaptation
Model of
Business
Strategy