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Mba case analysis pestel 5 forces 2015
This document provides an overview of methods for assessing the external business environment, including PESTEL analysis and Porter's Five Forces model. It discusses using these tools to discover threats and opportunities, understand industry competition, and make informed strategic choices. Porter's Five Forces model analyzes five competitive forces that shape industry competition: the threat of new entrants, power of suppliers and buyers, threat of substitutes, and industry rivalry. It also discusses a sixth force of complementors. The document provides examples and outlines factors that influence the competitive forces.
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Mba case analysis pestel 5 forces 2015
- 1. CASE ANALYSISCASE ANALYSIS METHOD:METHOD: ASSESSINGTHEASSESSING THE EXTERNAL BUSINESSEXTERNAL BUSINESS ENVIRONMENTENVIRONMENT Prof.Stephen OngProf.Stephen Ong BSc(Hons)Econs (LSE), MBABSc(Hons)Econs (LSE), MBA (Bradford)(Bradford) Visiting Professor, ShenzhenVisiting Professor, Shenzhen UniversityUniversity MBAMBA
- 2. Why External Analysis? Externalanalysis allows firms to: • discover threats and opportunities • see if above normal profits are likely in an industry • better understand the nature of competition in an industry • make more informed strategic choices
- 3. FirmFirm BuyersBuyers SuppliersSuppliers EntryEntry RivalryRivalry SubstitutesSubstitutes ComplementorsComplementors Technological Trends Ecological/ EthicsEcological/ Ethics Change Socio-Cultural/Socio-Cultural/ DemographicDemographic TrendsEconomicEconomic Climate PoliticalPolitical Conditions Legal/Regulatory/ Globalisation IndustryIndustry GeneralExternal EnvironmentGeneral External Environment
- 4.
- 5. PESTEL Local FactorsPESTELLocal Factors
- 6. PESTEL Global FactorsPESTELGlobal Factors
- 7. Porter’s 5 ForcesPorter’s5 Forces Industry AnalysisIndustry Analysis
- 8. Industry Analysis :IndustryAnalysis : Porter’s 5+1 ForcesPorter’s 5+1 Forces ModelModel
- 9. Porter’s Five ForcesModel 1. Threat of Entry1. Threat of Entry • if firms can easily enter the industry, any above normal profits will be bid away quickly • barriers to entry lower the threat of entry • barriers to entry make an industry more attractive • this is true whether the focal firm is already in the industry or thinking about entering
- 10. Porter’s Five ForcesModel 1. Threat of Entry1. Threat of Entry Barriers to Entry: • economies of scale—firm that can’t produce the minimum efficient scale will be at a disadvantage • product differentiation—entrants are forced to overcome customer loyalties to existing products • cost advantages independent of scale—incumbents may have learning advantages, etc. • government policies—governments may impose trade restrictions and/or grant monopolies
- 11. Economies of Scaleand the Cost of Production
- 12. Porter’s Five ForcesModel 2. Threat of Rivalry2. Threat of Rivalry • high rivalry means firms compete vigorously—and compete away above average profits Industry conditions that facilitate rivalry: • large numbers of competitors • slow or declining growth • high fixed costs and/or high storage costs • low product differentiation • industry capacity added in large increments
- 13. Porter’s Five ForcesModel 3. Threat of Substitutes3. Threat of Substitutes • substitutes fill the same need but in a different way - Coke and Pepsi are rivals, milk is a substitute for both • substitutes create a price ceiling because consumers switch to the substitute if prices rise • substitutes will likely come from outside the industry—be sure to look
- 14. Porter’s Five ForcesModel 4. Threat of Powerful Suppliers4. Threat of Powerful Suppliers • powerful suppliers can ‘squeeze’ (lower profits) the focal firm Industry conditions that facilitate supplier power: • small number of firms in supplier’s industry • highly differentiated product • lack of close substitutes for suppliers’ products • supplier could integrate forward • focal firm is an insignificant customer of supplier
- 15. Porter’s Five ForcesModel 5. Threat of Powerful Buyers5. Threat of Powerful Buyers • powerful buyers can ‘squeeze’ (lower profits) the focal firm by demanding lower prices and/or higher levels of quality and service Industry conditions that facilitate buyer power: • small number of buyers for focal firm’s output • lack of a differentiated product • the product is significant to the buyer
- 16. Porter’s Five ForcesModel 5. Threat of Powerful Buyers5. Threat of Powerful Buyers Industry conditions that facilitate buyer power: • buyers operate in a competitive market—they are not earning above normal profits • buyers can vertically integrate backwards • many small buyers can be united around an issue to act as a block Example: Monsanto’s Life Sciences Strategy
- 17. 6. Other Stakeholders:6. Other Stakeholders : Complementors As Another ForceComplementors As Another Force Complementors Increase the Value of the Firm’s Product • customers perceive more value in the focal firm’s product when it is combined with the complementor’s product • complementors may be found outside the focal firm’s industry Example: Goodyear Tires on Corvette
- 18. ReferencesReferences • Johnson, Gerry,Whittington, Richard & Scholes, Kevan (2011) Exploring Strategy, 9th edition, FT Prentice Hall/Pearson UK. • Barney, J.B. & Hesterley,W.S.(2012) Strategic Management and Competitive Advantage, 4th edition, Prentice Hall • Wheelen & Hunger (2011) Essentials of Strategic Management, 5th edition, Pearson • Porter, M.E., (2008) On Competition, Harvard Business Press.