The document discusses the strategic environment and factors that must be considered when developing a strategic plan. It outlines five stages in developing a strategic plan: setting context and objectives, developing and refining options, appraising effects, consulting, and monitoring implementation. Key issues that must be addressed include competitors, competitiveness, resources, threats, and information flows both upstream from suppliers and downstream to customers using Porter's five forces model. Information is valuable to both current and future strategy.

1. The Strategic Environment Block 1 : Lecture 4

2. Overview of Lecture The strategic environment Value of Information to the strategic environment Porters’ five forces view Upstream and Downstream information flows

3. The Strategic Environment (1) First stage: Setting the context and objectives, establish the baseline and deciding the scope Second stage: Develop and refine options Third stage: Appraise the effects of the plan Scoping report Fifth stage: Monitor implementation of plan Fourth stage: Consult on the strategic plan Initial Strategic report Final Strategic report

4. Major issues in the strategic environment Who are the main competitors How competitive are we What enhances or detracts our long term competiveness Do we understand the long term resource problems How can we deal with long term obstacles What are the threats to long term survival The Strategic Environment (2)

5. Value of Information to the Strategic Environment Low High High Low Value of information to current strategy Value of Information to future strategy STRATEGIC HIGH POTENTIAL Critical to business and of greatest potential value Potential value to business may be high, but not confirmed Essential for core processes and value enhanced by horizontal integration Needed for supporting business, but little strategic value KEY OPERATIONAL SUPPORT

6. Porters Five Forces Model

7. The threat of substitute products The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases (high elasticity of demand). The threat of the entry of new competitors Profitable markets that yield high returns will draw firms. This results in many new entrants, which will effectively decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level (perfect competition). The bargaining power of customers ( Upstream information ) The ability of customers to put the firm under pressure and it also affects the customer's sensitivity to price changes The bargaining power of suppliers ( Downstream information ) Suppliers of raw materials, components, labour, and services (such as expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work with the firm, or e.g. charge excessively high prices for unique resources. Porter Five forces

8. Upstream and Downstream (Supplier / Buyer) information flows Company value chain Supplier Buyer Upstream return flows Downstream information flows Upstream information flows Downstream return flows

9. Vital market information essential for strategy development, monitoring and interpretation Upstream information Customer personal information Customer aggregate information Buyer trend information Population movements Downstream information Supplier company information Supplier alternatives information Supplier value information Supplier growth information Upstream and Downstream information

10. Next Week Block 2 : Lecture 1 Understanding Consensus