EVALUATING A COMPANY’S EXTERNAL ENVIRONMENT

EVALUATING A COMPANY’S EXTERNAL ENVIRONMENT www.phwiki.com

EVALUATING A COMPANY’S EXTERNAL ENVIRONMENT

Blazeman,, Host has reference to this Academic Journal, PHwiki organized this Journal CHAPTER 3EVALUATING A COMPANY’S EXTERNAL ENVIRONMENTBecome aware of factors in a company’s broad macro-environment that may have strategic significance.Gain comm in addition to of the basic concepts in addition to analytical tools widely used to diagnose the competitive conditions in a company’s industry.Become adept at mapping the market positions of key groups of industry rivals.Learn how to use multiple frameworks to determine whether an industry’s outlook presents a company with sufficiently attractive opportunities as long as growth in addition to profitability.3.1From Thinking Strategically about the Company’s Situation to Choosing a StrategyChapter 3Chapter 4Quiz – p 19

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The External EnvironmentThe Macro-EnvironmentIs the broad environmental context in which a firm’s industry is situated.Includes strategically relevant components over which the firm has no direct control.General economic conditionsImmediate industry in addition to competitive environmentQuiz – p 20 – 22 QUESTION 1: WHAT ARE THE STRATEGICALLY RELEVANT FACTORS IN THE MACRO-ENVIRONMENTPESTEL AnalysisFocuses on principal components of strategic significance in the macro-environment:Political factorsEconomic conditions (local to worldwide)Sociocultural as long as cesTechnological factorsEnvironmental factors (the natural environment)Legal/regulatory conditions3–5p. 223.2The Components of a Company’s Macro-EnvironmentQuiz – p 22 – 25

3.1The Components of the Macro-EnvironmentQuiz – p 22

QUESTION 2: HOW STRONG ARE THE INDUSTRY’S COMPETITIVE FORCESThe Five Competitive Forces:Competition from rival sellersCompetition from potential new entrantsCompetition from substitute products producersSupplier bargaining powerCustomer bargaining powerQuiz – p 23 – 38 3.3The Five-Forces Model of Competition: A Key Analytical ToolQuiz – p 24 3.2Common “Weapons” as long as Competing with RivalsQuiz – p 27

Competitive Pressures That Act to Increase the Rivalry among Competing SellersBuyer dem in addition to is growing slowly or declining.Switching Costs – It is becoming less costly as long as buyers to switch br in addition to s.Industry products are becoming more alike.There is unused production capacity, in addition to or products have high fixed costs or high storage costs.The number of competitors is increasing in addition to or they are becoming more equal in size in addition to competitive strength.The diversity of competitors is increasing.High exit barriers stop firms from exiting the industry.Quiz – p 25 – 27 3.4Factors Affecting the Strength of RivalryQuiz – p 25 Wall Street Journal, July 25, 2012, 6:41 p.m. ET “Apple-Amazon War Heats Up” – http://professional.wsj.com/article/SB10000872396390443295404577547070376968192.html

Competitive Pressures Associated with the Threat of New EntrantsEntry Threat Considerations: e.g. Fiat in U.S. New Google Motorola PhoneStrength of barriers to entryExpected reaction of incumbent firmsAttractiveness of a particular market’s growth in dem in addition to in addition to profit potentialCapabilities in addition to resources of potential entrantsEntry of existing competitors into market segments in which they have no current presenceQuiz – p 28 – 30 Market Entry Barriers Facing New EntrantsEconomies of scale in production, distribution, advertising, or other areas of operationExperience in addition to learning curve effectsUnique cost advantages of industry incumbentsStrong br in addition to preferences in addition to customer loyaltyStrong “network effects” in customer dem in addition to High capital requirementsBuilding a network of distributors or dealers in addition to securing adequate space on retailers’ shelvesRestrictive government policiesQuiz – p 28 – 30 Barnes in addition to Noble Nook3.5Factors Affecting the Threat of EntryQuiz – p 30

Substitutes vs. AlternativesSubstitute Products or Services – Same utility Different Technology:Aspertame (Equal) as long as Sugar. Contact lenses as long as Glasses. Aluminum vs. plastic containersNOT directly competing products – NOT Big Mac vs. WhopperBuying fast foods instead of cooking at homeAlternative Products or Services – Provides similar outcome – but different concept:Going to beach instead of to Disneyl in addition to No hat vs. wearing hatInstructor Material Competitive Pressures from the Sellers of Substitute ProductsQuiz – p 31 Substitute Products Considerations:Readily available in addition to attractively pricedComparable or better in terms of quality, per as long as mance, in addition to other relevant attributesOffer lower switching costs to buyersIndicators of Substitutes’ Competitive Strength:Increasing rate of growth in sales of substitutesSubstitute producers adding new output capacityIncreasing profitability of substitute producersQuiz p 313.6Factors Affecting Competition from Substitute ProductsQuiz – p 31

Competitive Pressures Stemming from Supplier Bargaining PowerSupplier Bargaining Power Depends On:Strength of dem in addition to as long as in addition to availability of suppliers’ products.Whether suppliers provide a differentiated input that enhances the per as long as mance of the industry’s product.Industry members’ costs as long as switching among suppliersSize of suppliers relative to size of industry membersFraction of the cost of the supplier’s product relative to the total cost of the industry’s productNumber of suppliers relative to the number of industry membersPossibility of backward integration into suppliers’ industryAvailability of good substitutes as long as suppliers’ productsWhether industry members are major customers of suppliers.Quiz – p 32 – 34 3.7Factors Affecting the Bargaining Power of SuppliersQuiz – p 33 Competitive Pressures Stemming from Buyer Bargaining Power in addition to Price SensitivityBuyer Bargaining Power Considerations: First decide “who is buyer in addition to who is seller”Buyer costs as long as switching to competing sellersDegree to which industry products are commoditizedNumber in addition to size of buyers relative to sellersStrength of buyer dem in addition to as long as sellers’ productsBuyer knowledge of products, costs in addition to pricingBackward integration of buyers into sellers’ industryBuyer discretion in delaying purchasesBuyer price sensitivity due to low profits, size of purchase, in addition to consequences of purchase Try NOT to put yourself into this analysis – YOU are NOT a buyer here!!! Ever!!!Quiz – p 35 – 37

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3.8Factors Affecting the Bargaining Power of BuyersQuiz – p 35 – 37 Is the Collective Strength of the Five Competitive Forces Conducive to Good Profitability Should we CompeteIs the state of competition in the industry stronger than “normal”Can industry firms expect to earn decent profits given prevailing competitive as long as cesAre some of the competitive as long as ces sufficiently powerful to undermine industry profitabilityKohl’s in retailing – Revival of JCPennyQuiz – p 37 Matching Strategy to Competitive ConditionsPursuing avenues that shield the firm from as many competitive pressures as possible.Initiating actions calculated to shift competitive as long as ces in the firm’s favor by altering underlying factors driving the five as long as ces.Spotting attractive arenas as long as expansion, where competitive pressures in the industry are somewhat weaker.Quiz – p 38

QUESTION 3: WHAT FACTORS ARE DRIVING INDUSTRY CHANGE, AND WHAT IMPACTS WILL THEY HAVEStrategic Analysis of Industry Dynamics:Identifying the external drivers of change.Assessing whether the drivers of change are, individually or collectively, acting to make the industry more or less attractive.Determining what strategy changes are needed to prepare as long as the impacts of the anticipated change.Quiz – p 38 – 42 several questions3.3The Most Common Principal Industry Drivers of ChangeQuiz – p 41 several questionsAssessing the Impact of the Factors Driving Industry ChangeOverall, are the factors driving change causing dem in addition to as long as the industry’s product to increase or decreaseIs the collective impact of the drivers of change making competition more or less intenseWill the combined impacts of the change drivers lead to higher or lower industry profitabilityQuiz – p 42 several questions

Identification of Key Success FactorsWhat product attributes in addition to service features buyers strongly affect buyers when choosing between the competing br in addition to s of sellersWhat resources in addition to competitive capabilities are required as long as a firm to execute a successful strategy in the marketplaceWhat shortcomings will put a firm at a significant competitive disadvantageQuiz – p 50 – 57 QUESTION 7: DOES THE INDUSTRY OFFER GOOD PROSPECTS FOR ATTRACTIVE PROFITSIndustry Profitability Considerations:The industry’s overall growth potentialEffects of strong competitive as long as cesEffects of prevailing drivers of change in the industryCompetitive strength of the firm: its market position relative to its rivals, its capability to withst in addition to competitive as long as ces, in addition to whether its position will change in the course of competitive interactionsThe success of the firm’s strategy in delivering on the industry’s key success factorsQuiz – p 56 – 57

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