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Part I: Strategic Management Inputs Chapter 2: The External Environment: Opportunities, Threats, Industry Competition and Competitor Analysis
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Chapter 2: The External Environment: Opportunities, Threats, Industry Competition and Competitor Analysis
Overview: Seven content areas
The firms external environment General and industry environment External environment analysis process activities (N=4) General environmental segments (N=6) Porters 5 Competitive Forces Strategic groups: Definition and influence Competitors and intelligence collection methods
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Chapter 2: The External Environment: Opportunities, Threats, Industry Competition and Competitor Analysis
Overview: Seven content areas
The firms external environment General and industry environment External environment analysis process activities (N=4) General environmental segments (N=6) Porters 5 Competitive Forces Strategic groups: Definition and influence Competitors and intelligence collection methods
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(Contd)
The broader society dimensions that influence an industry and the firms within it Grouped into 6 dimensions OR environmental segments Each segment composed of elements
(Contd)
A firms competitive actions/responses Relates to Porters 5 Forces see upcoming slides Competitor analysis: gather and interpret competitor information
A firms direct and indirect competitors The competitive dynamics expected to impact a firm's efforts to generate above-average returns
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Chapter 2: The External Environment: Opportunities, Threats, Industry Competition and Competitor Analysis
Overview: Seven content areas
The firms external environment General and industry environment External environment analysis process activities (N=4) General environmental segments (N=6) Porters 5 Competitive Forces Strategic groups: Definition and influence Competitors and intelligence collection methods
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Threat General environment condition that may hinder a company's efforts to achieve strategic competitiveness
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(Contd)
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Chapter 2: The External Environment: Opportunities, Threats, Industry Competition and Competitor Analysis
Overview: Seven content areas
The firms external environment General and industry environment External environment analysis process activities (N=4) General environmental segments (N=6) Porters 5 Competitive Forces Strategic groups: Definition and influence Competitors and intelligence collection methods
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Chapter 2: The External Environment: Opportunities, Threats, Industry Competition and Competitor Analysis
Overview: Seven content areas
The firms external environment General and industry environment External environment analysis process activities (N=4) General environmental segments (N=6) Porters 5 Competitive Forces Strategic groups: Definition and influence Competitors and intelligence collection methods
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Intensity of industry competition and industrys profit potential are a function of 5 forces (See next slide)
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(Contd)
1/5: New entrants Can threaten market share of existing competitors May bring additional production capacity Function of two factors
1: Barriers to entry Economies of scale Product differentiation Capital requirements Switching costs Access to distribution channels Cost disadvantages independent of scale Govt policy 2: Expected retaliation
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(Contd)
(Contd)
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(Contd)
Goods or services outside of given industry perform same or similar functions (I.e., sugar vs. sugar substitute such as NutraSweet) Numerous or equally balanced competitors Slow industry growth High fixed costs or high storage costs Lack of differentiation or low switching costs High strategic stakes High exit barriers
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(Contd)
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Chapter 2: The External Environment: Opportunities, Threats, Industry Competition and Competitor Analysis
Overview: Seven content areas
The firms external environment General and industry environment External environment analysis process activities (N=4) General environmental segments (N=6) Porters 5 Competitive Forces Strategic groups: Definition and influence Competitors and intelligence collection methods
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Strategic Groups
Strategic Groups Set of firms emphasizing similar strategic dimensions to use a similar strategy Implications
Because firms within a group compete (offer similar products) rivalry can be intense the greater the rivalry the greater the threat to each firms profitability Strengths of the 5 forces differs across strategic groups The closer the strategic groups, in terms of strategy, the greater the likelihood of rivalry
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Chapter 2: The External Environment: Opportunities, Threats, Industry Competition and Competitor Analysis
Overview: Seven content areas
The firms external environment General and industry environment External environment analysis process activities (N=4) General environmental segments (N=6) Porters 5 Competitive Forces Strategic groups: Definition and influence Competitors & intelligence collection methods
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Competitor Analysis
(Contd)
Shown by organization's future objectives Revealed in organization's current strategy Shown in organization's assumptions
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Competitor Analysis
Competitor intelligence
(Contd)
better understand and anticipate competitors' objectives, strategies, assumptions, and capabilities
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Intelligence Collection
competitor intelligence
(Contd)
Some practices may be legal, but unethical Unethical tactics can include Blackmail Trespassing Eavesdropping Stealing drawings, samples or documents
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