strategic management - reference power point from south-western college publishing

8/8/2019 Strategic Management - Reference Power Point From South-Western College Publishing

1/28

Ch2-1

Chapter 2Chapter 2

The External Environment:

Opportunities, Threats, IndustryCompetition, and Competitor Analysis

The External Environment:

Opportunities, Threats, IndustryCompetition, and Competitor Analysis

Michael A. Hitt

R. Duane Ireland

Robert E. Hoskisson

Michael A. Hitt

R. Duane Ireland

Robert E. Hoskisson

2000 South-Western College Publishing2000 South-Western College Publishing


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Ch2-2

Political/

Legal

Political/

Legal

EconomicEconomic

TechnologicalTechnological

GlobalGlobal

DemographicDemographicSocioculturalSociocultural

CompetitiveCompetitive

EnvironmentEnvironment

IndustryEnvironment

IndustryEnvironment

Components of the General EnvironmentComponents of the General Environment


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Ch2-3

SWOT Analysis Strengths

Weaknesses Opportunities

Threats


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Ch2-4

The purpose of SWOT Analysis

It is an easy-to-use tool for developing

an overview of a companys strategic

situation

It forms a basis for matching your

companys strategy to its situation


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Ch2-5

SWOT is the starting point

It provides an overview of the strategic

situation.

It provides the raw material to do more

extensive internal and external analysis.


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Ch2-6

Opportunities

An OPPORTUNITY is a chance for firmgrowth or progress due to a favorable

juncture of circumstances in thebusiness environment.

Possible Opportunities:

Emerging customer needs Quality Improvements

Expanding global markets

Vertical Integration


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Ch2-7

Threats

A THREAT is a factor in yourcompanys external environment that

poses a danger to its well-being. Possible Threats:

New entry by competitors

Changing demographics/shifting demand Emergence of cheaper technologies

Regulatory requirements


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Ch2-8

Opportunities and Threats form a

basis for EXTERNAL analysis

By examining opportunities, you can

discover untapped markets, and newproducts or technologies, or identifypotential avenues for diversification.

By examining threats, you can identify

unfavorable market shifts or changes intechnology, and create a defensiveposture aimed at preserving yourcompetitive position.


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Ch2-9

The purpose of

Five-Forces Analysis

The 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 competitive

pressures in a market and assess how

strong and important each one is.


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Ch2-10

Threat of

New

Entrants

Threat of

New

Entrants

Threat of

New

Entrants

Threat of

New

Entrants

Porters Five Forces

Model of Competition

Porters Five Forces



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Ch2-11

Threat of New EntrantsThreat of New Entrants

Barriers to

Entry

Barriers to

Entry

Expected RetaliationExpected Retaliation

Government PolicyGovernment Policy

Economies of ScaleEconomies of Scale

Product DifferentiationProduct Differentiation

Capital RequirementsCapital Requirements

Switching CostsSwitching Costs

Access to Distribution ChannelsAccess to Distribution Channels

Cost Disadvantages IndependentCost Disadvantages Independent

of Scaleof Scale


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Ch2-12

Bargaining

Power of

Suppliers

Bargaining

Power of

Suppliers

Threat of

New

Entrants

Threat of

New

Entrants

Threat of

New

Entrants

Porters Five Forces


Porters Five Forces



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Ch2-13

Bargaining Power of SuppliersBargaining Power of Suppliers

Suppliers exert power

in the industry by:

Suppliers exert power

in the industry by:

* Threatening to raise* Threatening to raise

prices or to reduce qualityprices or to reduce quality

Powerful suppliers

can squeeze industry

profitability if firms

are unable to recover

cost increases

Powerful suppliers

can squeeze industry

profitability if firms

are unable to recover

cost increases

Suppliers are likely to be powerful if:Suppliers are likely to be powerful if:

Supplier industry is dominated by aSupplier industry is dominated by afew firmsfew firms

Suppliers products have few substitutesSuppliers products have few substitutes

Buyer is not an important customer toBuyer is not an important customer tosuppliersupplier

Suppliers product is an importantSuppliers product is an importantinput to buyers productinput to buyers product

Suppliers products are differentiatedSuppliers products are differentiated

Suppliers products have highSuppliers products have highswitching costsswitching costs

Supplier poses credible threat ofSupplier poses credible threat of

forward integrationforward integration


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Ch2-14

Bargaining

Power of

Buyers

Bargaining

Power of

Buyers

Threat of

New

Entrants

Threat of

New

Entrants

Threat of

New

Entrants

Bargaining

Power of

Suppliers

Bargaining

Power of

Suppliers

Porters Five Forces


Porters Five Forces



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Ch2-15

Bargaining Power of BuyersBargaining Power of Buyers

Buyers compete

with the supplying

industry by:

Buyers compete

with the supplying

industry by:

* Bargaining down prices* Bargaining down prices

* Forcinghigherquality* Forcinghigherquality

* Playing firms off of* Playing firms off of

each othereach other

Buyer groups are likely to be powerful if:Buyer groups are likely to be powerful if:

Buyers are concentrated or purchasesBuyers are concentrated or purchases

are large relative to sellers salesare large relative to sellers sales

Purchase accounts for a significantPurchase accounts for a significant

fraction of suppliers salesfraction of suppliers sales

Products are undifferentiatedProducts are undifferentiated

Buyers face few switching costsBuyers face few switching costs

Buyers industry earns low profitsBuyers industry earns low profitsBuyer presents a credible threat ofBuyer presents a credible threat of

backward integrationbackward integration

Product unimportant to qualityProduct unimportant to quality

Buyer has full informationBuyer has full information


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Ch2-16

Threat of

Substitute

Products

Threat of

Substitute

Products

Threat of

New

Entrants

Threat of

New

Entrants

Threat of

New

Entrants

Bargaining

Power of

Buyers

Bargaining

Power of

Buyers

Bargaining

Power of

Suppliers

Bargaining

Power of

Suppliers

Porters Five Forces


Porters Five Forces



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Ch2-17

Threat of Substitute ProductsThreat of Substitute Products

Products

with similar

functionlimit the

prices firms

can charge

Products

with similar

functionlimit the

prices firms

can charge

Keys to evaluate substitute products:Keys to evaluate substitute products:

Products with improvingProducts with improving

price/performance tradeoffsprice/performance tradeoffs

relative to present industryrelative to present industryproductsproducts

Example:Example:

Electronic security systems inElectronic security systems inplace of security guardsplace of security guards

Fax machines in place ofFax machines in place of

overnight mail deliveryovernight mail delivery


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Ch2-18

Threat of

Substitute

Products

Threat of

Substitute

Products

Threat of

New

Entrants

Threat of

New

Entrants

Threat of

New

Entrants

Rivalry Among

Competing Firms

in Industry

Rivalry Among

Competing Firms

in Industry

Bargaining

Power of

Buyers

Bargaining

Power of

Buyers

Bargaining

Power of

Suppliers

Bargaining

Power of

Suppliers

Porters Five Forces


Porters Five Forces



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Ch2-19

Rivalry Among Existing CompetitorsRivalry Among Existing Competitors

Intense rivalry often plays out in the following ways:Intense rivalry often plays out in the following ways:

Jockeying for strategic positionJockeying for strategic position

Using price competitionUsing price competition

Staging advertising battlesStaging advertising battles

Making new product introductionsMaking new product introductions

Increasing consumer warranties or serviceIncreasing consumer warranties or service

Occurs when a firm is pressured or sees an opportunityOccurs when a firm is pressured or sees an opportunity

Price competition often leaves the entire industry worse offPrice competition often leaves the entire industry worse off

Advertising battles may increase total industry demand, butAdvertising battles may increase total industry demand, but

may be costly to smaller competitorsmay be costly to smaller competitors


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Ch2-20

CutthroatCutthroat competitioncompetition is more likely to occur when:is more likely to occur when:

Rivalry Among Existing CompetitorsRivalry Among Existing Competitors

Numerous or equally balanced competitorsNumerous or equally balanced competitors

Slow growth industrySlow growth industry

High fixed costsHigh fixed costs

Lack of differentiation or switching costsLack of differentiation or switching costs

High storage costsHigh storage costs

Capacity added in large incrementsCapacity added in large increments

High strategic stakesHigh strategic stakes

High exit barriersHigh exit barriers

Diverse competitorsDiverse competitors


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Ch2-21

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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Ch2-22

Competitor AnalysisCompetitor Analysis

The followThe follow--up to Industry Analysis isup to Industry Analysis iseffective analysis of a firmseffective analysis of a firms CompetitorsCompetitors

CompetitiveCompetitive

EnvironmentEnvironment

IndustryEnvironmentIndustryEnvironment


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Ch2-23


AssumptionsAssumptions

What assumptions do ourcompetitors hold about the futureof industry and themselves?

Current StrategyCurrent Strategy

Does our current strategy supportchanges in the competitiveenvironment?

Future ObjectivesFuture Objectives

How do our goals compare to ourcompetitors goals?

CapabilitiesCapabilities

How do our capabilities compare

to our competitors?

ResponseResponse

What will ourcompetitors do in the

future?

What will ourcompetitors do in the

future?Where do we have acompetitiveadvantage?

Where do we have acompetitiveadvantage?

How will this changeour relationship withour competition?

How will this changeour relationship withour competition?


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Ch2-24

Future ObjectivesFuture ObjectivesHow do our goals compare

to our competitors goals?

How do our goals compare


Where will emphasis be

placed in the future?



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

What Drives the competitor?



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Ch2-25

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











How are we currently

competing?


competing?

Does this strategy

support changes in the

competitive structure?

Does this strategy


competitive structure?



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Ch2-26

What does the competitor believeabout itself and the industry?












competing?


competing?

Does this strategy


competition structure?

Does this strategy



Do we assume the future

will be volatile?


will be volatile?

Are we assuming stable

competitive conditions?

Are we assuming stable

competitive conditions?

What assumptions do our

competitors hold about the

industry and themselves?







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Ch2-27

What are the competitorscapabilities?












competing?


competing?

Does this strategy



Does this strategy




will be volatile?


will be volatile?

Are we operating under

a status quo?


a status quo?








What are my competitors

strengths and weaknesses?



How do our capabilities

compare to our

competitors?


compare to our

competitors?




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Ch2-28












competing?


competing?

Does this strategy



Does this strategy




will be volatile?


will be volatile?


a status quo?


a status quo?








ResponseResponseWhat will our competitors

do in the future?

What will our competitors

do in the future?

Where do we have a

competitive advantage?

Where do we have a

competitive advantage?

How will this change ourrelationship with our

competition?

How will this change ourrelationship with our

competition?







compare to our

competitors?


compare to our

competitors?


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