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Sm ii
The document discusses analyzing a firm's environment and competitors. It covers analyzing a firm's mega, micro, and relevant environments. It also discusses SWOT analysis, Porter's five forces model, and competitor analysis. The purpose is to understand opportunities/threats in the external environment, industry competition, and competitors' strategies to develop an effective strategy.
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Sm ii
- 1. Chapter 2 The Environment analysis: Opportunities, Threats, Industry Competition, and Competitor Analysis
- 2. • Significance of liberalization • Objective of business – survival • Change is the mantra • Environmental scanning is essential
- 3. Taxonomy of Firm’sEnvironment • Mega environment • Micro environment • Relevant environment
- 5. Mega Environment • Legal • Political • Economic • Technological • Socio-cultural
- 6. Components of theGeneral Environment Economic Demographic Sociocultural Industry Environment Competitive Environment Political/ Legal Global Technological
- 7. Micro environment • Suppliers • Intermediaries • Competitions • Financial institutions • Regulatory provisions • E commerce • Skill level of work force • Industrial relation climate • markets
- 8. SWOT Analysis • Strengths • Weaknesses • Opportunities • Threats
- 9. The purpose ofSWOT Analysis • It is an easy-to-use tool for developing an overview of a company’s strategic situation – It forms a basis for matching your company’s strategy to its situation
- 10. SWOT is thestarting point • It provides an overview of the strategic situation. • It provides the “raw material” to do more extensive internal and external analysis.
- 11. Opportunities • An OPPORTUNITYis a chance for firm growth or progress due to a favorable juncture of circumstances in the business environment. • Possible Opportunities: – Emerging customer needs – Quality Improvements – Expanding global markets – Vertical Integration
- 12. Threats • A THREATis a factor in your company’s external environment that poses a danger to its well-being. • Possible Threats: – New entry by competitors – Changing demographics/shifting demand – Emergence of cheaper technologies – Regulatory requirements
- 13. Opportunities and Threatsform a basis for EXTERNAL analysis • By examining opportunities, you can discover untapped markets, and new products or technologies, or identify potential avenues for diversification. • By examining threats, you can identify unfavorable market shifts or changes in technology, and create a defensive posture aimed at preserving your competitive position.
- 14. The purpose of Five-Forces Analysis • The five forces are environmental forces that impact on a company’s ability to compete in a given market. • The purpose of five-forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is.
- 15. Porter’s Five Forces Modelof Competition Threat of Threat of New New Entrants Entrants
- 16. Threat of NewEntrants Economies of Scale Barriers to Product Differentiation Entry Capital Requirements Switching Costs Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy Expected Retaliation
- 17. Porter’s Five Forces Model of Competition Threat of Threat of New New Entrants Entrants Bargaining Power of Suppliers
- 18. Bargaining Power ofSuppliers Suppliers are likely to be powerful if: Supplier industry is dominated by a Suppliers exert power few firms in the industry by: Suppliers’ products have few substitutes * Threatening to raise prices or to reduce quality Buyer is not an important customer to supplier Powerful suppliers can squeeze industry Suppliers’ product is an important profitability if firms input to buyers’ product are unable to recover cost increases Suppliers’ products are differentiated Suppliers’ products have high switching costs Supplier poses credible threat of forward integration
- 19. Porter’s Five Forces Model of Competition Threat of Threat of New New Entrants Entrants Bargaining Bargaining Power of Power of Suppliers Buyers
- 20. Bargaining Power ofBuyers Buyer groups are likely to be powerful if: Buyers are concentrated or purchases are large relative to seller’s sales Buyers compete Purchase accounts for a significant with the supplying fraction of supplier’s sales industry by: Products are undifferentiated * Bargaining down prices Buyers face few switching costs * Forcing higher quality * Playing firms off of Buyers’ industry earns low profits each other Buyer presents a credible threat of backward integration Product unimportant to quality Buyer has full information
- 21. Porter’s Five Forces Model of Competition Threat of Threat of New New Entrants Entrants Bargaining Bargaining Power of Power of Suppliers Buyers Threat of Substitute Products
- 22. Threat of SubstituteProducts Keys to evaluate substitute products: Products Products with improving with similar price/performance tradeoffs function relative to present industry limit the products prices firms can charge Example: Electronic security systems in place of security guards Fax machines in place of overnight mail delivery
- 23. Porter’s Five Forces Model of Competition Threat of Threat of New New Entrants Entrants Bargaining Rivalry Among Bargaining Power of Competing Firms Power of Suppliers in Industry Buyers Threat of Substitute Products
- 24. Rivalry Among ExistingCompetitors Intense rivalry often plays out in the following ways: Jockeying for strategic position Using price competition Staging advertising battles Increasing consumer warranties or service Making new product introductions Occurs when a firm is pressured or sees an opportunity Price competition often leaves the entire industry worse off Advertising battles may increase total industry demand, but may be costly to smaller competitors
- 25. Rivalry Among ExistingCompetitors Cutthroat competition is more likely to occur when: Numerous or equally balanced competitors Slow growth industry High fixed costs High storage costs Lack of differentiation or switching costs Capacity added in large increments Diverse competitors High strategic stakes High exit barriers
- 26. The Five Forcesare Unique to Your Industry • Five-Forces Analysis is a framework for analyzing a particular industry. – Yet, the five forces affect all the other businesses in that industry.
- 27. Competitor Analysis The follow-up to Industry Analysis is effective analysis of a firm’s Competitors Industry Environment Competitive Environment
- 28. Competitor Analysis Assumptions What assumptions do our competitors hold about the future Response of industry and themselves? What will our Current Strategy competitors do in the Does our current strategy support future? changes in the competitive Where do we have a environment? competitive Future Objectives advantage? How do our goals compare to our How will this change competitors’ goals? our relationship with our competition? Capabilities How do our capabilities compare to our competitors?
- 29. Competitor Analysis Future Objectives What Drives the How do our goals competitor? compare to our Where will emphasis competitors’ goals? be placed in the future? What is the attitude toward risk?
- 30. Competitor Analysis Future Objectives What is the competitor doing? How do our goals What can the competitor do? compare to our Where Current be competitors’ goals?Strategy will emphasis placed in the future? currently How are we What is the attitude competing? toward risk? Does this strategy support changes in the competitive structure?
- 31. Competitor Analysis Future Objectives What does the competitor believe How do our goals about itself and the industry? compare to our Where Current be competitors’ goals?Strategy will emphasis placed in the future? How are we currently What is the attitude competing? toward risk? Assumptions Does this strategy Do we assume the future support changes in the will be volatile? competition structure? What assumptions do our competitors hold about the industry and themselves? Are we assuming stable competitive conditions?
- 32. Competitor Analysis Future Objectives What are the competitor’s How do our goals capabilities? compare to our Where Current be competitors’ goals?Strategy will emphasis placed in the future? How are we currently What is the attitude competing? toward risk? Assumptions Does this strategy Do we assume the future supportwill be volatile? changes in the competition structure? What assumptions do our Capabilities competitors hold about the industry and themselves? What are my competitors’ Are we operating under strengths and weaknesses? a status quo? How do our capabilities compare to our competitors?
- 33. Competitor Analysis Future Objectives Response How do our goals What will our competitors compare to our do in the future? Where Current be competitors’ goals?Strategy will emphasis Where do we have a placed in the future? competitive advantage? How are we currently What is the attitude competing? How will this change our toward risk? Assumptions relationship with our Does this strategy Do we assume the future competition? supportwill be volatile? changes in the competition structure? What assumptions do our Capabilities competitors hold about the industry and themselves? What are my competitors’ Are we operating under strengths and weaknesses? a status quo? How do our capabilities compare to our competitors?