bus 411 day 5 copyright 2005 prentice hall1. ch 1 -2 agenda question? assignment 1 corrected 3...

Bus 411

Day 5

Copyright 2005 Prentice Hall 1

Copyright 2005 Prentice Hall Ch 1 -2

Agenda Question? Assignment 1 Corrected

3 A’s, 2 B’s, 3 C’s & 1 D We will be working a collective SWOT for McDonald’s

during this class to be used for the next two assignments Assignment 2 posted

Due Feb 9 EFE and CPM for McDonald's

Assignment 3 will be assigned soon and due right after Winter break

Finish Discussion on The External Assessment

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 2 -3

Chapter 2The Business Vision & Mission

Strategic Management: Concepts & Cases

13th Edition

Fred David

McDonald's SWOTStrengths Weaknesses


Ch 2 -4

McDonald's SWOTOpportunities Threats


Ch 2 -5


Ch 3 -6

Chapter 3 The External Assessment

Strategic Management: Concepts & Cases

13th Edition

Fred David


Ch 3 -7

Key external forces

1. Economic

2. Social, cultural, demographic, and natural environment

3. Political, government, and legal

4. Technology

5. Competition


Ch 2 -8


Ch 3 -9

Trends More American households with people

living alone More DINKs (Dual income families with no

kids) especially in Urban Areas Aging Americans – affects all organizations

Social, Cultural, Demographic, and Natural Environmental Forces


Ch 3 -10

Political, Governmental, and Legal Forces

Key opportunities & threats Antitrust legislation Tax rates Lobbying activities Patent laws

Government Regulation


Ch 3 -11

Political, Governmental, and Legal Forces

Protectionist policies Tariffs vs. Free Trade

Governments taking equity stakes in companies Auto & Financial bailout in US


Ch 3 -12

Technological Forces

Major Impact –

•Internet


Ch 3 -13


Significance of IT

•Chief Information Officer (CIO)

•Chief Technology Officer (CTO)


Ch 3 -14


Essential for nearly every strategic decision


Ch 3 -15

Competitive Forces

Collection & evaluation of data on competitors is essential for successful strategy formulation


Ch 3 -16

Competitive Forces

•Strengths

•Weaknesses

•Capabilities

•Opportunities

•Threats

•Objectives

•Strategies

Identify Rival Firms’


Ch 3 -17

Competitive Forces

Competition in virtually all industries can be described as intense


Ch 3 -18

Key Questions Concerning Competitors Their strengths Their weaknesses Their objectives and strategies Their responses to external variables Their vulnerability to our alternative

strategies Our vulnerability to strategic counterattack


Ch 3 -19

Key Questions Concerning Competitors Our product/service positioning Entry and exit of firms in the industry Key factors for our current position in industry Sales/profit ranking of competitors over time Nature of supplier and distributor

relationships The threat of substitute products/services


Ch 3 -20

Competitive Forces

7 characteristics of most competitive firms Market share matters Understanding what business you are in Broke or not, fix it Innovate or evaporate Acquisition is essential to growth People make a difference No substitute for quality


Ch 3 -21

Competitive Intelligence

A systematic and ethical process for gathering and analyzing information about the competition’s activities and general business trends to further a business’s own goals


Ch 3 -22

Sources of Competitive Intelligence

Internet Employees Managers Suppliers Distributors Customers Creditors

Consultants Trade journals Want ads Newspaper articles Government filings Competitors


Ch 3 -23

Objectives of Competitive Intelligence Provide a general understanding of industry

and competitors Identify areas where competitors are

vulnerable and assess impact of actions on competitors

Identify potential moves that a competitor might make


Ch 3 -24

Market Commonality

The number and significance of markets that a firm competes in with rivals


Ch 3 -25

Resource Similarity

Extent to which the type and amount of a firm’s internal resources are comparable to a rival

Media Monitoring

Companies that gather competitive intelligence for a fee http://www.burrellesluce.com/ http://www.vocus.com/content/index.asp http://www.metromonitor.com/


Ch 2 -26


Ch 3 -27

The Five-Forces Model of Competition


Ch 3 -28

Steps to Determine if an Acceptable Profit Can Be Earned

1. Identify key aspects or elements of each competitive force

2. Evaluate how strong and important each element is for the firm

3. Decide whether the collective strength of the elements is worth the firm entering or staying in the industry


Ch 3 -29

The Five-Forces Model

Rivalry among competing firms Most powerful of the five forces Focus on competitive advantage of

strategies over other firms


Ch 3 -30

Conditions that Cause High Rivalry Among Competing Firms

High number of competing firms Similar size of firms competing Similar capability of firms competing Falling demand for the industry’s products Falling product/service prices in the

industry


Ch 3 -31


Consumers can switch brands easily Barriers to leaving the market are high Barriers to entering the market are low Fixed costs are high among firms

competing The product is perishable


Ch 3 -32


Rivals have excess capacity Consumer demand is falling Rivals have excess inventory Rivals sell similar products/services Mergers are common in the industry


Ch 3 -33


Potential Entry of New Competitors Barriers to entry are important Quality, pricing, and marketing can

overcome barriers


Ch 3 -34


Potential development of substitute products Pressure increases when:

Prices of substitutes decrease Consumers’ switching costs

decrease


Ch 3 -35


Bargaining Power of Suppliers is increased when there are: Large numbers of suppliers Few substitutes Costs of switching raw materials is high

Backward integration is gaining control or ownership of suppliers


Ch 3 -36


Bargaining power of consumers Customers being concentrated or

buying in volume affects intensity of competition

Consumer power is higher where products are standard or undifferentiated


Ch 3 -37

Conditions Where Consumers GainBargaining Power If buyers can inexpensively switch If buyers are particularly important If sellers are struggling in the face of falling

consumer demand If buyers are informed about sellers’

products, prices, and costs If buyers have discretion in whether and

when they purchase the product


Ch 3 -38

Sources of External Information: Unpublished Sources Customer surveys Market research Speeches at professional or shareholder

meetings Television programs Interviews and conversations with

stakeholders


Ch 3 -39

Sources of External Information: Published Sources Periodicals Journals Reports Government documents Abstracts Books Directories Newspapers Manuals


Ch 3 -40

Sources of External Information: Web Sites

http://www.marketwatch.com/ http://moneycentral.msn.com http://finance.yahoo.com http://www.bloomberg.com/markets/ https://us.etrade.com/e/t/invest/markets www.hoovers.com UMFK Databases


Ch 3 -41

Forecasting Tools and Techniques

Forecasts are educated assumptions about future trends and events Quantitative techniques – most

appropriate when historical data is available and there is a constant relationship

Qualitative techniques


Ch 3 -42

Assumptions

Estimates of future events based upon the best available information in the present


Ch 3 -43

Industry Analysis: The External Factor Evaluation (EFE) Matrix

Economic Social Cultural Demographic Environmental

Political Governmental Technological Competitive Legal


5 Steps (Page 80 & 81)

1. List key external factors10-20 (balanced 5&5 10&10)Opportunities then threats

Assign weights from 0.0 to 1.0 based on importanceSum of all weights across all factors = 1

Assign a rating from 1 to 4 for all factors where4 = the firm’s response is superior3 = the firm’s response is above avg2 = the firm’s response is average1 = the firm’s response is poor

1. Multiply the rating by the weight2. Sum the weighted scores


Ch 3 -45


Ch 3 -46


Ch 3 -47

Total weighted score of 4.0 Organization response is outstanding to threats

and weaknesses

Industry Analysis EFE

Total weighted score of 1.0 Firm’s strategies not capitalizing on opportunities

or avoiding threats

Average is 2.5


Ch 3 -48

Industry Analysis: Competitive Profile Matrix (CPM) Identifies firm’s major competitors and

their strengths & weaknesses in relation to a sample firm’s strategic positions

Critical success factors include internal and external issues


Steps to a CPM

Identify Critical Success Factors (CSF) Broad issues Internal and external (5 of each is a good mix)

Assign a weight to each CSF Must add up to 1

Assign a rating for your firm and each of your competitors 4 = major strength 3 = minor strength 2 = minor weakness 1 = major weakness

Multiply weight by rating Sum the weighted ratings and compare


Gateway Apple Dell

CSF’s Wt Rating Wt’d Score

Rating Wt’d Score

Rating Wt’d Score

Market share 0.15 3 0.45 2 0.30 4 0.60

Inventory sys 0.08 2 0.16 2 0.16 4 0.32

Fin position 0.10 2 0.20 3 0.30 3 0.30

Prod. Quality 0.08 3 0.24 4 0.32 3 0.24

Cons. Loyalty 0.02 3 0.06 3 0.06 4 0.08

Sales Distr 0.10 3 0.30 2 0.20 3 0.30

Global Exp. 0.15 3 0.45 2 0.30 4 0.60

Org. Structure 0.05 3 0.15 3 0.15 3 0.15


Gateway Apple Dell

CSF’s (cont’d) Wt Rating Wt’d Score

Rating Wt’d Score

Rating Wt’d Score

Prod. Capacity 0.04 3 0.12 3 0.12 3 0.12

E-commerce 0.10 3 0.30 3 0.30 3 0.30

Customer Serv 0.10 3 0.30 2 0.20 4 0.40

Price competitive

0.02 4 0.08 1 0.02 3 0.06

Mgt. experience 0.01 2 0.02 4 0.04 2 0.02

Total 1.00 2.83 2.47 3.49


Ch 3 -52


Ch 3 -53

Industry Analysis CPM

Just because one firm receives a 3.2 rating and another receives a 2.8 rating, it does not follow that the first firm is 20 percent better than the second.

Important –


Ch 3 -54

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

bus 411 day 5 copyright 2005 prentice hall1. ch 1 -2 agenda question? assignment 1 corrected 3...

Documents

pearson education

prentice hallch

prentice hallcopyright

external assessment

natural environment

technological forcesessential

equity stakes

free trade governments