business policy & strategy
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7/31/2019 Business Policy & Strategy
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Business Policy & Strategy
External Environment Analysis
PEST
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The General Environment Segments & Elements
Demographic Segment Population sizeAge Structure
Geographic distribution
Ethnic MixIncome Distribution
Economic Segment Inflation Rates
Interest Rates
Trade and fiscal deficits
Personal savings rate
Business Saving rates
GDP and GNPPolitical/legal segment Antitrust laws
Taxation laws
Deregulation philosophy
GAAR
Product safety / liability
Labor laws
Educational
philosophies
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The General Environment Segments & Elements
Socio-cultural segment Women in the w/f
Work force diversity
Attitudes about the
quality of work life
Environmental
concerns
Shifts in work and
career preferences
Shifts in preferencesregarding products and
service characteristics
Technological segment Product Innovations
Applications of
knowledge
Public Private
partnerships
New communicationtechnologies
Global segment Important political
events
Critical markets
Newly industrialized
countries
Culture and institutional
attributes
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Entry Barriers
Scale Economies
Product differentiation
Capital requirements
Switching costs
Distribution access
Cost disadvantages independent of scale(proprietary product technology, raw material
access, locations, subsidies, Govt. policies
Expected retaliation
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Entry Barriers
Slow Industry Growth
High fixed / storage costs
Lack of differentiation and low switching costs Capacity Augmentation (PVC)
Diverse competition
High strategic stakes High exit barriers and Mobility barriers
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Strategic Groups
A group of firms in an industry following the
same or similar strategy along the same
strategic dimensions
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Strategic Group Analysis
Strategic group mapping is an analytical tool
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Strategic Group Analysis
Strategic group mapping is an analytical tool. Methodsand Techniques for Analyzing Business Competition, wehave often been asked to identify the most useful orinsightful models for CI. Each model has its own
strengths and weaknesses: selecting the most useful ormost insightful technique is always highly dependenton the strategic issue at hand.
However, among the vast number of techniques
available, many are either unknown to most analystsand CI professionals or under-utilized, and yet they canprovide great insight. One of these analyticaltechniques is strategic group analysis.
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Background
Subset of industry analysis
Developed in early 1970s
Porters Competitive Strategy: Techniques forAnalyzing Industries and Competitors in 1980
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Strategic Group Analysis
Strategic groups is a cluster of companies in anindustry
Groups of companies clustered around asimilar competitive approach or strategicposition
Companies in a group are similar to eachother but different from companies in othergroups
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Analysis is used to determine:
Different competitive positions of companies
in the industry
Intensity of rivalry within and between groups
Profit potential of various groups
Implications of competitive position
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Porters Five Force Model:
Threats of entry
Internal rivalry
Bargaining power of buyers and suppliers
Threat of substitution
The Five Forces jointly determine the
profitability of the industry, the groups in theindustry and individual companies within thegroups
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Strengths
Comprehensiveness
Helpful in dealing with fast-changing
environment
Encourages finding new ideas and strategies
More accurate strategic analysis
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Weaknesses
Provides little guidance on implementation
Depends on identifying the strategically
important dimensions
Requires in-depth industry knowledge and
experience
Does not incorporate importance of
government and social issues
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Step 1: Analyze industry structure
Complete a Five Force Industry Analysis:
Threat of new entrants
Bargaining power of suppliers
Bargaining power of buyers
Threat of substitution
Degree of internal rivalry
Identify all major competitors in the industry
based on competitive variables
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Step 2: Map the strategic groups
Key variable for defining strategic groups:
Specialization
Cost position
Brand identification
Service
Push vs. Pull
Price policy
Channel Selection
Leverage
Product quality
Technological leadership
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Strategic Maps of the United States Airline Industry
Braniff
TWA
Eastern
United
American
Delta
WesternRepublic Ozark
USAir Piedmont
FrontierAirCal
PSA
South-
west
Texas Intl
United
South-
west
America
West
InternationalInternational
NationalNational
Regional Regional
No Frills No FrillsFull Service Full Service
Quality of Service Quality of Service
GeographicS
cope
The Late 1970s The Early 1990s
Reno
Air
Continental
Pan
Am
Northwest
Laker
World
American
TWA
Delta
USAir
NorthwestConti-
nental
Kiwi
Others
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Step 3:Measure the strength of barriers
between groups
Identify factors that prevent firms in one groups from
competing with companies in other groups
Assess the strength of bargaining power between
groups and industry buyers/suppliers Determine the treat of substitutes between groups
Evaluate the degree of rivalry between groups
Undertake Five Force analysis of groups to determinerelative competitive position
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Step 4: Understand companies strategy with
reference to groups interaction
Recognize groups strengths and weaknesses
Identify the strategic group that representsthe greatest opportunity
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Step 5:Identify next step
Create a new group
Move to a better group
Strengthen the existing group Strengthen companys position within existing
group
Move to a new group and make it better
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Strategic Group Analysis Summary
Depends on highly qualitative inputs and
analysts judgment
Does not require a lot of resources
Can be used for current and dynamic strategy
planning
Can be performed in short period of time
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Competitive Intelligence
Future Objectives
Goal Comparisons
Future Emphasis
Attitude towards risk
Current Strategy
How are we currently
competing?
Does the strategy support
changes in the competitivestructure?
Assumptions
Is the future volatile?
Are we operating under a
status quo?
What assumptions do the
competitors hold about the
industry and themselves?
Capabilities
Strengths/weaknessesRating compared to
competitors
Response
Competitors future actions
Future competitive advantage
How will the relationship change
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