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Chapter 02 Powerpoint - Strategic Management

Strate

Uploaded by

lilly_teixeira
Copyright
© Attribution Non-Commercial (BY-NC)
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2-1

STRATEGIC MANAGEMENT

CHAPTER 2

Gregory G. Dess and G. T. Lumpkin

Chapter 2

Analyzing the External Environment of the Firm

McGraw-Hill/Irwin

Copyright 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

2-3

Learning Objectives

After studying this chapter, you should have a good understanding of:
The importance of developing forecasts Why environmental scanning, monitoring, and collecting competitive intelligence are critical inputs to forecasting

Why scenario planning is a useful technique


The impact of the general environment on a firms strategies and performance How forces in the competitive environment can affect profitability How a firm can improve its competitive position by increasing its power vis--vis forces in the competitive environment How trends in the general environment and forces in the competitive environment can affect performance The concept and implications of strategic groups

STRATEGIC MANAGEMENT

CHAPTER 2

Gregory G. Dess and G. T. Lumpkin

2-4 Exhibit 2.1

Inputs to Forecasting
Environmental Scanning

Environmental
Monitoring

Forecasts

Competitive Intelligence

STRATEGIC MANAGEMENT

CHAPTER 2

Gregory G. Dess and G. T. Lumpkin

2-5

General Environment: Key Components


Demographic
Aging population

Technological
Genetic engineering

Changes in ethnic composition


Greater income disparities

Emergence of Internet technology


CAD/CAM

Sociocultural
More women in the workforce
Postponement of family formation

Economic
Interest rates Changes in stock market valuations

Political/Legal
Tort reform Americans with Disabilities Act

Global
Currency exchange rates Emergence of the Indian and Chinese economies

STRATEGIC MANAGEMENT

CHAPTER 2

Gregory G. Dess and G. T. Lumpkin

2-6 Exhibit 2.3


(adapted)

Impact of General Environmental Trends on Various Industries


Industry Positive Neutral Negative

Segment/Trends/Events

Demographic Aging population Sociocultural More women in the workforce Political/legal Tort reform Technological Genetic engineering Economic Interest Rate Increases Global Global Trade STRATEGIC MANAGEMENT

Health Care Baby products


Clothing Baking Products

Legal Services Auto Manufacturing


Pharmaceutical Publishing Residential construction Grocery products
CHAPTER 2


Gregory G. Dess and G. T. Lumpkin

Shipping

2-7 Exhibit 2.4

Porters Five Forces Model of Industry Competition


POTENTIAL ENTRANTS

Threat of new entrants Bargaining power of suppliers


SUPPLIERS Rivalry Among Existing Firms

INDUSTRY COMPETITORS

Bargaining power of buyers


BUYERS

Threat of substitute products or services

SUBSTITUTES

Reprinted with the permission of The Free Press, a division of Simon & Schuster, Inc. from Competitive Strategy: Techniques for Analyzing Industries and Competitors by Michael E. Porter. Copyright 1980, 1998 by The Free Press.

STRATEGIC MANAGEMENT

CHAPTER 2

Gregory G. Dess and G. T. Lumpkin

2-8

Rivalry Among Competitors: Influences


Number of competitors Industry growth rate Fixed costs, scale issues Lack of differentiation Low switching costs High exit barriers (specialized assets, emotional commitment, restrictions)

STRATEGIC MANAGEMENT

CHAPTER 2

Gregory G. Dess and G. T. Lumpkin

2-9

Rivalry among Competitors: Outcomes


Using price competition and price wars Staging advertising battles Increasing warranties or services Making new product introductions Jockeying for strategic position

STRATEGIC MANAGEMENT

CHAPTER 2

Gregory G. Dess and G. T. Lumpkin

2-10

Threat of New Entrants: Entry Barriers


Economies of scale Differentiation/brand loyalty Capital requirements Switching costs Access to distribution channels Other cost disadvantages:
Location Raw materials Proprietary technology

STRATEGIC MANAGEMENT

CHAPTER 2

Gregory G. Dess and G. T. Lumpkin

2-11

Bargaining Power of Suppliers and Buyers: Influences


Their size Number Ability to switch Availability of substitutes Criticality of product Ability to vertically integrate Suppliers vertically integrate forward Buyers vertically integrate backward

STRATEGIC MANAGEMENT

CHAPTER 2

Gregory G. Dess and G. T. Lumpkin

2-12

Bargaining Power of Suppliers and Buyers: Outcomes


Outcomes are a function of the relative bargaining power and dependencies of parties Bargaining power is evidenced through Price Quality Service

STRATEGIC MANAGEMENT

CHAPTER 2

Gregory G. Dess and G. T. Lumpkin

2-13

Threat of Substitute Products


Places an upper limit on prices Consists of products with a similar function
Electronic security/security guards DSL/Cable modem Coffee/tea/cola Fax/overnight delivery of documents

STRATEGIC MANAGEMENT

CHAPTER 2

Gregory G. Dess and G. T. Lumpkin

2-14

Results of Industry Analysis


To one in the industry -- Unattractive industry: intense rivalry, low entry barriers, strong suppliers and buyers, strong product substitutes Attractive industry: little rivalry, high entry barriers, weak buyers and suppliers, weak product substitutes

STRATEGIC MANAGEMENT

CHAPTER 2

Gregory G. Dess and G. T. Lumpkin

2-15

Competitor Analysis
What are the competitors capabilities What is the competitor currently doing and what is the competitor capable of doing What are the competitors current and future objectives What are the competitors beliefs about himself, us, others, the environment What are the competitors beliefs about the future

STRATEGIC MANAGEMENT

CHAPTER 2

Gregory G. Dess and G. T. Lumpkin

2-16 Exhibit 2.6

The World Automobile Industry: Strategic Groups


Ferrari Lamborghini Porsche

High
Mercedes* BMW

Price

Toyota Ford General Motors Chrysler* Honda Nissan

Hyundai Kia Low Low Breadth of Product Line

High

* Chrysler and Mercedes (part of DiamlerChrysler) are separated for purposes of illustration. Note: Members of each strategic group are only illustrative not inclusive.

STRATEGIC MANAGEMENT

CHAPTER 2

Gregory G. Dess and G. T. Lumpkin

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