mktg 2 external swot porter

8/8/2019 Mktg 2 External Swot Porter

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McGraw-Hill/Irwin Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.STRATEGIC MANAGEMENT

Analyzing theExternal

Environment of theFirm

External AnalysisExternal Analysis


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3Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

Political/Legal

Political/Legal

EconomicEconomic

TechnologicalTechnological

GlobalGlobal

DemographicDemographic SocioculturalSociocultural

CompetitiveCompetitiveEnvironmentEnvironment

IndustryEnvironmentIndustryEnvironment

Components of the General EnvironmentComponents of the General Environment


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The macro-environmentThe macro-environment

is the assessment of the external forces that act upon thefirm and its customers, that create threats & opportunities


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The General Environment

General environmentaltrends and events

Little ability to predict themEven less ability to controlthem

Can vary across industries

GeneralEnvironmen

t

DemographicSociocultural

Political/LegalTechnologicalEconomic

Global


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6 Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

D emographic Segment

Aging population

Rising affluence

Changes in ethnic composition

Geographic distribution of population

Greater disparities in income levels

GeneralEnvironmen

t



Global


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Sociocultural Segment

More women in the workforce

Increase in temporary workers

Greater concern for fitness

Greater concern for environment

P ostponement of family formation

GeneralEnvironmen

t



Global


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P olitical/ Legal Segment

ReformationsD eregulation

Taxation at local, state,central levels

Legislation on corporategovernance reforms

GeneralEnvironmen

t



Global


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Technological Segment

Genetic engineering

Emergence of Internet technology

Computer-aided design/computer-

aided manufacturing systems(C AD /C AM)

Research in synthetic and exoticmaterials

P ollution/global warming

Miniaturization of computingtechnologies

Wireless technology

GeneralEnvironmen

t



Global


10/47


Economic Segment

Interest rates

Unemployment

Consumer P rice index

Trends in G D P

Changes in stock market valuations

GeneralEnvironmen

t



Global


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Global Segment

Increasing global trade

Currency exchange rates

Emergence of the Indian and ChineseeconomiesTrade agreements among regionalblocs (NAF T A, E U, ASEAN )

Creation of WTO (decreasingtariffs/free trade in services )

GeneralEnvironmen

t



Global


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The Competitive Environment

Sometimes called the taskor industry environment

IncludesCompetitors (existing andpotential )

Customers

Suppliers

P orters five-forces model

C ompetitiveEnvironmen

t

C ompetitorsC ustomersSuppliers


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In order to understand Marketing let us beginwith the Mark eting T rian gle

Customers

CompetitionCompany


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S WOT Analysis

Managers need to analyzeThe general environment

The firms industry and competitive environment

S WOT analysisStrengths

Weaknesses

OpportunitiesThreats

Basic technique for analyzing firm and industryconditions


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The purpose of S WOT AnalysisIt is an easy-to-use tool for developingan overview of a companys strategicsituation

It forms a basis for matching your companys strategy to its situation


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S WOT is the starting pointIt provides an overview of the strategicsituation.

It provides the raw material to domore extensive internal and externalanalysis.


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Opportunities An OPPORTU NITY is a chance for firmgrowth or progress due to a favorable

juncture of circumstances in thebusiness environment.

P ossible Opportunities:

Emerging customer needsQuality Improvements

Expanding global markets

Vertical Integration


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Threats A THR EAT is a factor in your companys external environment that

poses a danger to its well-being.P ossible Threats:

New entry by competitors

Changing demographics/shifting demandEmergence of cheaper technologies

Regulatory requirements


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Opportunities and Threats form a

basis for EX TERNAL analysisBy examining opportunities, you candiscover untapped markets, and newproducts or technologies, or identifypotential avenues for diversification.

By examining threats, you can identifyunfavorable market shifts or changes intechnology, and create a defensiveposture aimed at preserving your competitive position.


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The purpose of

Five-Forces AnalysisThe five forces are environmental forces

that impact on a companys ability tocompete in a given market.

The purpose of five-forces analysis is to

diagnose the principal competitivepressures in a market and assess howstrong and important each one is.


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P orters Five Forces Model of IndustryCompetition

Threat of new entrants

Bargainingpower of buyersBargaining power of suppliers

Threat of Substitute products

and services

Adapted from Porters Five Forces Model of Industry Competition


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The Threat of New Entrants

P rofits of established firms may beeroded by new competitors

High entry barriers lead to low

threat of new entriesEconomies of scale

P roduct differentiation

Capital requirements

Cost disadvantages independent of size

Access to distribution channels

Government policy


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The Bargaining P ower of Suppliers

Suppliers can exert power bythreatening to raise prices or reduce the quality of purchased

goods and services


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A supplier group will be powerfulwhen

The supplier group is dominated

by a few companies and is moreconcentrated than the industryit sells to

The supplier groups products are differentiated or it

has built up switching costs for the buyer The supplier group is not obliged to contend withsubstitute products for sale to the industry


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A supplier group will be powerfulwhen

The suppliers product is an

important input to the buyersbusiness

The supplier group poses a credible threat of forward integration

The industry is not an important customer of thesupplier group


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The Bargaining P ower of Buyers

A buyer group is powerful whenIt is concentrated or purchaseslarge volumes relative to seller sales

The products it purchases from theindustry are standard or undifferentiated

The products its purchases from the industry form acomponent of its product and represent a significant

fraction of its costIt earns low profits


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The Bargaining P ower of Buyers

A buyer group is powerful whenThe industrys product isunimportant to the quality of thebuyers products or services

The industrys product does not savethe buyer money

The buyers pose a credible threatof backward integration


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The Threat of Substitutes

Substitutes limit the potentialreturns of an industry

Ceiling on the prices that firms

in that industry can profitably chargeP rice/performance ratio


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The Intensity of Rivalry

J ockeying for position

P rice competition

Advertising battlesP roduct introductions

Increased customer service or warranties


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The Intensity of Rivalry

Interacting factors lead tointense rivalry

Numerous or equally balanced

competitorsSlow industry growth

Lack of differentiation or switching costs

High fixed or storage costs

Capacity augmented in large increments

High exit barriersD iverse strategies or personalities of rivals


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Implications of Five-Forces Analysis

The stronger the five forces collectively,the weaker the industrys profit potential.

Business-level strategic responses:P ositioning the company (defensive )

Influencing the balance of the forces (offensive )

Exploiting industry change


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The Five Forces are Unique to

Your Industry

Five-Forces Analysis is a framework for

analyzing a particular industry.Yet, the five forces affect all the other businesses in that industry.


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Competitor AnalysisCompetitor AnalysisAssumptionsAssumptions

Wh at assumptions do our competitors h old about t h e futureof industry and t h emselves?

Current StrategyCurrent Strategy

Does our current strategy supportch anges in t h e competitiveenvironment?

Future ObjectivesFuture ObjectivesHow do our goals compare to our competitors goals?

CapabilitiesCapabilitiesHow do our capabilities compare

to our competitors?

ResponseResponseWh at will our competitors do in t h e

future?

Wh at will our competitors do in t h e

future?Wh ere do we h ave acompetitiveadvantage?

Wh ere do we h ave acompetitiveadvantage?

How will th

is ch

angeour relations h ip wit h our competition?How will t

his c

hangeour relations h ip wit h

our competition?


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Future ObjectivesFuture ObjectivesHow do our goals compareto our competitors goals?How do our goals compareto our competitors goals?Where will emphasis beplaced in the future?Where will emphasis beplaced in the future?

What is the attitudetoward risk?What is the attitudetoward risk?

What Drives the competitor?

Competitor AnalysisCompetitor Analysis


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What is the competitor doing?What can the competitor do?



Current StrategyCurrent StrategyHow are we currently

competing?

How are we currently

competing?Does this strategysupport changes in thecompetitive structure?

Does this strategysupport changes in thecompetitive structure?



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What does the competitor believeabout itself and the industry?Future ObjectivesFuture ObjectivesHow do our goals compare

to our competitors goals?How do our goals compareto our competitors goals?Where will emphasis beplaced in the future?Where will emphasis beplaced in the future?



competing?


competing?Does this strategysupport changes in thecompetition structure?

Does this strategysupport changes in thecompetition structure?

Do we assume the futurewill be volatile?Do we assume the futurewill be volatile?

Are we assuming stablecompetitive conditions?Are we assuming stablecompetitive conditions?

What assumptions do ourcompetitors hold about theindustry and themselves?


AssumptionsAssumptions



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What are the competitorscapabilities?Future ObjectivesFuture ObjectivesHow do our goals compare

to our competitors goals?How do our goals compareto our competitors goals?Where will emphasis beplaced in the future?Where will emphasis beplaced in the future?



competing?





Are we operating undera status quo?Are we operating undera status quo?




What are my competitorsstrengths and weaknesses?What are my competitorsstrengths and weaknesses?

How do our capabilitiescompare to ourcompetitors?


CapabilitiesCapabilities



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competing?





Are we operating undera status quo?Are we operating undera status quo?




ResponseResponseWhat will our competitorsdo in the future?What will our competitorsdo in the future?Where do we have acompetitive advantage?Where do we have acompetitive advantage?

How will this change ourrelationship with ourcompetition?

How will this change ourrelationship with ourcompetition?

CapabilitiesCapabilitiesWhat are my competitorsstrengths and weaknesses?What are my competitorsstrengths and weaknesses?





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F actorsInfluencingCompany sMarketingStrategy

F actorsInfluencingCompany sMarketingStrategy


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CONTENTS of MARKETING PLANCONTENTS of MARKETING PLANBusiness Mission Statement

Objectives

Situation Analysis (S WOT)

Marketing Strategy

Target Market Strategy

Marketing MixP ositioningP roductP romotionP riceP lace D istributionP eopleP rocess

Implementation, Evaluation and Control


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The Marketing ProcessThe Marketing ProcessBusinessMission

Statement

Objectives

Situationor SWOT Analysis

ImplementationEvaluation, Control

Target Market Strategy

Marketing Strategy

Product

Promotion

Place/Distribution

Price

Marketing Mix


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B usiness Strategic-PlanningProcess

External environment(Opportunity &

Threat analysis )

Internal Environment

(Strength/ Weakness analysis )

Goal FormulationBusiness Mission


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Strategy F ormulationEnvironmental Analysis

Internal AnalysisCompetitor Customer Supplier

RegulatorySocial/ P olitical

Technology Know- HowManufacturing Know- How

Marketing Know- HowD

istribution Know- HowLogistics

Strength & Weaknesses

Identity Core Competencies

Opportunities & Threats

Identify opportunity

Fit internal Competencies with external opportunities

Firm Strategies


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Copyright 2005 by The McGraw Hill Companies Inc All rights reserved

W hy Market Leaders Suffered ?

HMT vs. Titan

HLL vs. Nirma

Bajaj vs. Honda

Market leadership today cannot be taken for granted.New and more efficient companies areable to upstage leaders in a much shorter period.

mktg 2 external swot porter

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