Professional Documents
Culture Documents
Strategic External
Environment
The Strategic
Management
Inputs
Strategic Intent
Strategic Mission
Chapter 3
Internal
Environment
Process
Strategic
Competitiveness
Feedback Above Average
Returns
Ch2
Components of the General Environment
Economic
Demographic
Sociocultural
Industry
Environment
Competitive
Environment
Political/
Legal Global
Technological
Ch2
Components of the General Environment
Ch2
External Environmental Analysis
The external environmental analysis process should be
conducted on a continuous basis. This process includes
four activities:
Ch2
Porter’s Five Forces
Model of Competition
Threat of
Threat of
New
New
Entrants
Entrants
Ch2
Threat of New Entrants
Economies of Scale
Switching Costs
Access to Distribution Channels
Expected Retaliation(revenge)
Ch2
Porter’s Five Forces
Model of Competition
Threat of
Threat of
New
New
Entrants
Entrants
Bargaining
Power of
Suppliers
Ch2
Bargaining Power of Suppliers
Suppliers are likely to be powerful if:
Bargaining Bargaining
Power of Power of
Suppliers Buyers
Ch2-
Bargaining Power of Buyers
Buyer groups are likely to be powerful if:
Ch2-
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
Ch2-
Threat of Substitute Products
Keys to evaluate substitute products:
Threat of
Substitute
Products
Ch2-
Rivalry Among Existing Competitors
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
Ch2-
Rivalry Among Existing Competitors
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
Ch2-
Rivalry Among Existing Competitors
High exit barriers are economic, strategic and
emotional factors which cause companies to remain
in an industry even when future profitability is
questionable.
Specialized assets
Fixed cost of exit (e.g., labor agreements)
Strategic interrelationships
Emotional barriers
Government and social restrictions
Ch2-
Effects of Entry Barriers and Exit
Barriers on Industry Profits
Exit Barriers
Low High
Low
Entry
Barriers
High
Ch2-
Effects of Entry Barriers and Exit
Barriers on Industry Profits
Exit Barriers
Low High
Low, Stable
Low
Returns
Entry
Barriers
High
Ch2-
Effects of Entry Barriers and Exit
Barriers on Industry Profits
Exit Barriers
Low High
Low, Stable
Low
Returns
Entry
Barriers
High, Stable
High
Returns
Ch2-
Effects of Entry Barriers and Exit
Barriers on Industry Profits
Exit Barriers
Low High
High, Stable
High
Returns
Ch2-
Effects of Entry Barriers and Exit
Barriers on Industry Profits
Exit Barriers
Low High
Ch2-
Competitor Analysis
The follow-up to Industry Analysis is
effective analysis of a firm’s Competitors
Industry
Environment
Competitive
Environment
Ch2-
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?
Ch2-
Competitor Analysis
Future Objectives What Drives the
How do our goals competitor?
compare to our
competitors’
Where will emphasis
goals? be
placed in the future?
What is the attitude
toward risk?
Ch2-
Competitor Analysis
Future Objectives What is the competitor doing?
How do our goals What can the competitor do?
compare to our
Where Current
competitors’ goals?Strategy
will emphasis be
placed inHow
the future?
are we currently
What is the attitude
competing?
toward risk?
Does this strategy
support changes in the
competitive structure?
Ch2-
Competitor Analysis
Future Objectives What does the competitor believe
How do our goals about itself and the industry?
compare to our
Where Current
competitors’ goals?Strategy
will emphasis be
placed in the future?
How are we currently
What is the attitude
competing?
toward risk? Assumptions
Does thisDo
strategy
we assume the future
support changes in the
will be volatile?
competition
What structure?
assumptions do our
competitors hold about the
industry and themselves?
Are we assuming stable
competitive conditions?
Ch2-
Competitor Analysis
Future Objectives What are the competitor’s
How do our goals capabilities?
compare to our
Where Current
competitors’ goals?Strategy
will emphasis be
placed in the future?
How are we currently
What is the attitude
competing?
toward risk? Assumptions
Does this
Dostrategy
we assume the future
supportwill
changes in the
be volatile?
competition
Whatstructure?
assumptions do our
competitorsCapabilities
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? Ch2-
Competitor Analysis
Future Objectives Response
How do our goals What will our competitors
compare to our do in the future?
Where Current
competitors’ goals?Strategy
will emphasis be 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
Dostrategy
we assume the future competition?
supportwill
changes in the
be volatile?
competition
Whatstructure?
assumptions do our
competitors Capabilities
hold about the
industry and themselves?
What are my competitors’
Are we operating
strengths under
and weaknesses?
a status quo?
How do our capabilities
compare to our
competitors? Ch2-