Description
Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy.
The External Environment:
Opportunities, Threats, Industry Competition, and Competitor Analysis
Ch2-1
Strategic Inputs
Chapter 2 External Environment Strategic Intent Chapter 3 Internal Environment Strategic Mission
The Strategic Management Process
Strategy Implementation
Chapter 10 Corporate Governance
Chapter 12 Strategic Leadership Chapter 11 Structure & Control Chapter 13
Entrepreneurship
Strategy Formulation
Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 8 International Strategy Chapter 6 Corporate-Level Strategy Chapter 9 Cooperative Strategies
Strategic Actions
Chapter 7 Acquisitions & Restructuring
& Innovation
Strategic Outcomes
Feedback
Strategic Competitiveness Above Average Returns
Ch2-2
Components of the General Environment
Economic
Demographic Industry Environment Competitive Environment Political/ Legal Technological
Ch2-3
Sociocultural
Global
Components of the General Environment
Demographic Segment ? Population size ? Age structure ? Geographic distribution ? ? ? ? Inflation rates Interest rates Trade deficits or surpluses Budget deficits or surpluses ? Ethnic mix ? Income distribution ? Personal savings rate ? Business savings rates ? Gross domestic product ? Labor training laws ? Educational philosophies and policies ? Concerns about the environment ? Shifts in work and career preferences ? Shifts in preferences regarding product and service characteristics ? Focus of private and government-supported R&D expenditures ? New communication technologies ? Newly industrialized countries ? Different cultural and institutional attributes Economic Segment
Political/Legal Segment
? Antitrust laws ? Taxation laws ? Deregulation philosophies ? Women in the workforce ? Workforce diversity ? Attitudes about work life quality
Sociocultural Segment
Technological Segment
? Product innovations ? Applications of knowledge
Global Segment
? Important political events ? Critical global markets
Ch2-4
External Environmental Analysis
The external environmental analysis process should be conducted on a continuous basis. This process includes four activities: Scanning
Identifying early signals of environmental changes and trends
Monitoring Detecting meaning through ongoing observations
of environmental changes and trends
Forecasting Developing projections of anticipated outcomes
based on monitored changes and trends
Assessing
Determining the timing and importance of environmental changes and trends for firms' strategies and their management
Ch2-5
External Environmental Analysis
States in the top 10 of those that are trying to transform themselves to the realities and needs of a digital economy may experience an influx of high-tech companies and skilled workers as well as increases in tax revenues
Top 10 U.S. States Moving Toward Digital Economy
Rank 1 2 3 4 5 6 7 8 9 10 State Massachusetts California Colorado Washington Connecticut Utah New Hampshire New Jersey Delaware Arizona
Ch2-6
Porter’s Five Forces Model of Competition
Threat of Threat of New New Entrants Entrants
Ch2-7
Threat of New Entrants
Economies of Scale
Barriers to Entry
Product Differentiation Capital Requirements
Switching Costs
Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy
Expected Retaliation
Ch2-8
Porter’s Five Forces Model of Competition
Threat of Threat of New New Entrants Entrants
Bargaining Power of Suppliers
Ch2-9
Bargaining Power of Suppliers
Suppliers are likely to be powerful if:
Suppliers exert power in the industry by: * Threatening to raise prices or to reduce quality
Supplier industry is dominated by a few firms Suppliers’ products have few substitutes Buyer is not an important customer to supplier Suppliers’ product is an important input to buyers’ product
Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases
Suppliers’ products are differentiated
Suppliers’ products have high switching costs Supplier poses credible threat of forward integration
Ch2-10
Porter’s Five Forces Model of Competition
Threat of Threat of New New Entrants Entrants
Bargaining Power of Suppliers
Bargaining Power of Buyers
Ch2-11
Bargaining Power of Buyers
Buyer groups are likely to be powerful if: Buyers are concentrated or purchases are large relative to seller’s sales Purchase accounts for a significant fraction of supplier’s sales Products are undifferentiated Buyers face few switching costs Buyers’ industry earns low profits Buyer presents a credible threat of backward integration Product unimportant to quality
Buyers compete with the supplying industry by:
* Bargaining down prices * Forcing higher quality * Playing firms off of each other
Buyer has full information
Ch2-12
Porter’s Five Forces Model of Competition
Threat of Threat of New New Entrants Entrants
Bargaining Power of Suppliers
Bargaining Power of Buyers
Threat of Substitute Products
Ch2-13
Threat of Substitute Products
Keys to evaluate substitute products: Products with similar function limit the prices firms can charge Products with improving price/performance tradeoffs relative to present industry products Example: Electronic security systems in place of security guards Fax machines in place of overnight mail delivery
Ch2-14
Porter’s Five Forces Model of Competition
Threat of Threat of New New Entrants Entrants
Bargaining Power of Suppliers
Rivalry Among Competing Firms in Industry
Bargaining Power of Buyers
Threat of Substitute Products
Ch2-15
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
Occurs when a firm is pressured or sees an opportunity
Price competition often leaves the entire industry worse off Advertising battles may increase total industry demand, but may be costly to smaller competitors
Ch2-16
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
Ch2-17
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
Ch2-18
Effects of Entry Barriers and Exit Barriers on Industry Profits
Exit Barriers Low High
Low Entry Barriers
High
Ch2-19
Effects of Entry Barriers and Exit Barriers on Industry Profits
Exit Barriers Low High
Low Entry Barriers
Low, Stable Returns
High
Ch2-20
Effects of Entry Barriers and Exit Barriers on Industry Profits
Exit Barriers
Low
High
Low Entry Barriers
Low, Stable Returns
High
High, Stable Returns
Ch2-21
Effects of Entry Barriers and Exit Barriers on Industry Profits
Exit Barriers
Low
High
Low Entry Barriers
Low, Stable Returns
Low, Risky Returns
High
High, Stable Returns
Ch2-22
Effects of Entry Barriers and Exit Barriers on Industry Profits
Exit Barriers Low High
Low Entry Barriers
Low, Stable Returns
Low, Risky Returns
High
High, Stable Returns
High, Risky Returns
Ch2-23
Competitor Analysis
The follow-up to Industry Analysis is effective analysis of a firm’s Competitors
Industry Environment Competitive Environment
Ch2-24
Competitor Analysis
Assumptions What assumptions do our competitors hold about the future of industry and themselves? Current Strategy Does our current strategy support changes in the competitive environment? Future Objectives How do our goals compare to our competitors’ goals? Capabilities How do our capabilities compare to our competitors?
Ch2-25
Response
What will our competitors do in the future? Where do we have a competitive advantage?
How will this change our relationship with our competition?
Competitor Analysis
Future Objectives
How do our goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk?
What Drives the competitor?
Ch2-26
Competitor Analysis
Future Objectives
How do our goals compare to our competitors’ goals? Where Current will emphasis be Strategy placed in the future? How are we currently What is the attitude competing? toward risk? Does this strategy support changes in the competitive structure?
What is the competitor doing? What can the competitor do?
Ch2-27
Competitor Analysis
Future Objectives
How do our goals compare to our competitors’ goals? Where Current will emphasis be Strategy placed in the future? How are we currently What is the attitude competing? Assumptions toward risk? Does this strategy Do we assume the future support changes in the will be volatile? competition structure? What assumptions do our competitors hold about the industry and themselves? Are we assuming stable competitive conditions?
What does the competitor believe about itself and the industry?
Ch2-28
Competitor Analysis
Future Objectives
How do our goals compare to our competitors’ goals? Where Current will emphasis be Strategy placed in the future? How are we currently What is the attitude competing? Assumptions toward risk? Does this strategy Do we assume the future supportwill changes in the be volatile? competition structure? What assumptions do our competitors hold about the Capabilities 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?
What are the competitor’s capabilities?
Ch2-29
Competitor Analysis
Future Objectives
How do our goals compare to our competitors’ goals? Where Current will emphasis be Strategy placed in the future? How are we currently What is the attitude competing? Assumptions toward risk? Does this strategy Do we assume the future supportwill changes in the be volatile? competition structure? What assumptions do our Capabilities competitors 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?
Response
What will our competitors do in the future? Where do we have a competitive advantage? How will this change our relationship with our competition?
Ch2-30
doc_873013161.ppt
Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy.
The External Environment:
Opportunities, Threats, Industry Competition, and Competitor Analysis
Ch2-1
Strategic Inputs
Chapter 2 External Environment Strategic Intent Chapter 3 Internal Environment Strategic Mission
The Strategic Management Process
Strategy Implementation
Chapter 10 Corporate Governance
Chapter 12 Strategic Leadership Chapter 11 Structure & Control Chapter 13
Entrepreneurship
Strategy Formulation
Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 8 International Strategy Chapter 6 Corporate-Level Strategy Chapter 9 Cooperative Strategies
Strategic Actions
Chapter 7 Acquisitions & Restructuring
& Innovation
Strategic Outcomes
Feedback
Strategic Competitiveness Above Average Returns
Ch2-2
Components of the General Environment
Economic
Demographic Industry Environment Competitive Environment Political/ Legal Technological
Ch2-3
Sociocultural
Global
Components of the General Environment
Demographic Segment ? Population size ? Age structure ? Geographic distribution ? ? ? ? Inflation rates Interest rates Trade deficits or surpluses Budget deficits or surpluses ? Ethnic mix ? Income distribution ? Personal savings rate ? Business savings rates ? Gross domestic product ? Labor training laws ? Educational philosophies and policies ? Concerns about the environment ? Shifts in work and career preferences ? Shifts in preferences regarding product and service characteristics ? Focus of private and government-supported R&D expenditures ? New communication technologies ? Newly industrialized countries ? Different cultural and institutional attributes Economic Segment
Political/Legal Segment
? Antitrust laws ? Taxation laws ? Deregulation philosophies ? Women in the workforce ? Workforce diversity ? Attitudes about work life quality
Sociocultural Segment
Technological Segment
? Product innovations ? Applications of knowledge
Global Segment
? Important political events ? Critical global markets
Ch2-4
External Environmental Analysis
The external environmental analysis process should be conducted on a continuous basis. This process includes four activities: Scanning
Identifying early signals of environmental changes and trends
Monitoring Detecting meaning through ongoing observations
of environmental changes and trends
Forecasting Developing projections of anticipated outcomes
based on monitored changes and trends
Assessing
Determining the timing and importance of environmental changes and trends for firms' strategies and their management
Ch2-5
External Environmental Analysis
States in the top 10 of those that are trying to transform themselves to the realities and needs of a digital economy may experience an influx of high-tech companies and skilled workers as well as increases in tax revenues
Top 10 U.S. States Moving Toward Digital Economy
Rank 1 2 3 4 5 6 7 8 9 10 State Massachusetts California Colorado Washington Connecticut Utah New Hampshire New Jersey Delaware Arizona
Ch2-6
Porter’s Five Forces Model of Competition
Threat of Threat of New New Entrants Entrants
Ch2-7
Threat of New Entrants
Economies of Scale
Barriers to Entry
Product Differentiation Capital Requirements
Switching Costs
Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy
Expected Retaliation
Ch2-8
Porter’s Five Forces Model of Competition
Threat of Threat of New New Entrants Entrants
Bargaining Power of Suppliers
Ch2-9
Bargaining Power of Suppliers
Suppliers are likely to be powerful if:
Suppliers exert power in the industry by: * Threatening to raise prices or to reduce quality
Supplier industry is dominated by a few firms Suppliers’ products have few substitutes Buyer is not an important customer to supplier Suppliers’ product is an important input to buyers’ product
Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases
Suppliers’ products are differentiated
Suppliers’ products have high switching costs Supplier poses credible threat of forward integration
Ch2-10
Porter’s Five Forces Model of Competition
Threat of Threat of New New Entrants Entrants
Bargaining Power of Suppliers
Bargaining Power of Buyers
Ch2-11
Bargaining Power of Buyers
Buyer groups are likely to be powerful if: Buyers are concentrated or purchases are large relative to seller’s sales Purchase accounts for a significant fraction of supplier’s sales Products are undifferentiated Buyers face few switching costs Buyers’ industry earns low profits Buyer presents a credible threat of backward integration Product unimportant to quality
Buyers compete with the supplying industry by:
* Bargaining down prices * Forcing higher quality * Playing firms off of each other
Buyer has full information
Ch2-12
Porter’s Five Forces Model of Competition
Threat of Threat of New New Entrants Entrants
Bargaining Power of Suppliers
Bargaining Power of Buyers
Threat of Substitute Products
Ch2-13
Threat of Substitute Products
Keys to evaluate substitute products: Products with similar function limit the prices firms can charge Products with improving price/performance tradeoffs relative to present industry products Example: Electronic security systems in place of security guards Fax machines in place of overnight mail delivery
Ch2-14
Porter’s Five Forces Model of Competition
Threat of Threat of New New Entrants Entrants
Bargaining Power of Suppliers
Rivalry Among Competing Firms in Industry
Bargaining Power of Buyers
Threat of Substitute Products
Ch2-15
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
Occurs when a firm is pressured or sees an opportunity
Price competition often leaves the entire industry worse off Advertising battles may increase total industry demand, but may be costly to smaller competitors
Ch2-16
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
Ch2-17
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
Ch2-18
Effects of Entry Barriers and Exit Barriers on Industry Profits
Exit Barriers Low High
Low Entry Barriers
High
Ch2-19
Effects of Entry Barriers and Exit Barriers on Industry Profits
Exit Barriers Low High
Low Entry Barriers
Low, Stable Returns
High
Ch2-20
Effects of Entry Barriers and Exit Barriers on Industry Profits
Exit Barriers
Low
High
Low Entry Barriers
Low, Stable Returns
High
High, Stable Returns
Ch2-21
Effects of Entry Barriers and Exit Barriers on Industry Profits
Exit Barriers
Low
High
Low Entry Barriers
Low, Stable Returns
Low, Risky Returns
High
High, Stable Returns
Ch2-22
Effects of Entry Barriers and Exit Barriers on Industry Profits
Exit Barriers Low High
Low Entry Barriers
Low, Stable Returns
Low, Risky Returns
High
High, Stable Returns
High, Risky Returns
Ch2-23
Competitor Analysis
The follow-up to Industry Analysis is effective analysis of a firm’s Competitors
Industry Environment Competitive Environment
Ch2-24
Competitor Analysis
Assumptions What assumptions do our competitors hold about the future of industry and themselves? Current Strategy Does our current strategy support changes in the competitive environment? Future Objectives How do our goals compare to our competitors’ goals? Capabilities How do our capabilities compare to our competitors?
Ch2-25
Response
What will our competitors do in the future? Where do we have a competitive advantage?
How will this change our relationship with our competition?
Competitor Analysis
Future Objectives
How do our goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk?
What Drives the competitor?
Ch2-26
Competitor Analysis
Future Objectives
How do our goals compare to our competitors’ goals? Where Current will emphasis be Strategy placed in the future? How are we currently What is the attitude competing? toward risk? Does this strategy support changes in the competitive structure?
What is the competitor doing? What can the competitor do?
Ch2-27
Competitor Analysis
Future Objectives
How do our goals compare to our competitors’ goals? Where Current will emphasis be Strategy placed in the future? How are we currently What is the attitude competing? Assumptions toward risk? Does this strategy Do we assume the future support changes in the will be volatile? competition structure? What assumptions do our competitors hold about the industry and themselves? Are we assuming stable competitive conditions?
What does the competitor believe about itself and the industry?
Ch2-28
Competitor Analysis
Future Objectives
How do our goals compare to our competitors’ goals? Where Current will emphasis be Strategy placed in the future? How are we currently What is the attitude competing? Assumptions toward risk? Does this strategy Do we assume the future supportwill changes in the be volatile? competition structure? What assumptions do our competitors hold about the Capabilities 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?
What are the competitor’s capabilities?
Ch2-29
Competitor Analysis
Future Objectives
How do our goals compare to our competitors’ goals? Where Current will emphasis be Strategy placed in the future? How are we currently What is the attitude competing? Assumptions toward risk? Does this strategy Do we assume the future supportwill changes in the be volatile? competition structure? What assumptions do our Capabilities competitors 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?
Response
What will our competitors do in the future? Where do we have a competitive advantage? How will this change our relationship with our competition?
Ch2-30
doc_873013161.ppt