Part I: Foundations of Strategic Management and the Strategy

Part II: Process Mission, Vision and Goals of the Corporation

Part III: Internal Strategic Analysis
Part IV: External Strategic Analysis
Part V: Strategy Formulation
Part VI: Strategy Implementation
Part VII: Strategy Evaluation
Part VIII: Corporate Social Responsibility

Part II: Mission, Vision and Goals of the Corporation

Strategic Management
Process

0 1 2
Goal Environment Strategy
al formulatio
setting*
scanning n

4 Evaluation 3 Strategy
and implementatio
control n

Source: Wheelen, Hunger (2012), ch.

1.5
 Goal Setting

“If you don’t set goals for yourself, you may be

doomed to work to achieve the goals of
someone else.”
Popular Proverb
Strategy

Allows top Mangers to

Define

o Goals
o Objectives

Strategy Is Also About Computing For

Tomorrow
 Vision Statement

Vision statement
• What do we want to achieve in the
future?
• Who do we want to become ?

Goals
• Define what you want to achieve
• Expressed as percentage

Objectives
•Actions to achieve goals
 Goal
Setting
 Expressed as percentage
Goals
 Define what you want to achieve

Growth Customer Retention Efficiency Profitabili

service ty

Increase Revenue By
10% and Decrease
Overhead By 5%
Goal Cont.…

Source:
clearlyso.com
Objectives
Actions to achieve goals

1 2 3
Acquiring 5 Finding Outsourcing
New Cheaper Activities
Customer Office
Every Month Premises
 Make clear:
 What is to be accomplished
Objective
Setting  How much is to be accomplished

 By when it is to be accomplished

 By whom it is to be accomplished
 Objective Setting Cont’d…
In short, an objective should be Specific,
Measurable, Achievable, Relevant and Time bound
(SMART)

• Specificity:indicates clearly what needs to be

achieved. Example: reduce delay.
• Measurability:indicates the possibility to
determine if the desired condition is fulfilled.
Example: Reduce delays by 40% by the end of
2012.
• Achievability: indicates a consensus and
commitment to the objectives among the major
stakeholders
 Objective Setting Cont’d…

• Relevance: Indicates objectives need to be

achievable. It answers feasibility, the availability
of authority of the managers and the means of
realization.

• Time bound: Indicates a clear understanding of

the time scales associated with each objective as
defined. It is difficult to have commitment
without time frame.
Goals vs. Objectives Summary

GOALS OBJECTIVES

 Longer statement, more Descriptive

Very short statement, few words
 Narrow in scope
Broad in scope
 Indirectly relates to the Mission Statement
Directly relates to the Mission Statement
 Covers short time period (such 1 year
Covers long time period (such as 10 years)
budget cycle)
 Vision Statements

Vision is a mental journey from known to the unknown,

creating the future from a montage of current facts,
hopes, dreams, threats and opportunities.

Visioning is the process of developing a vivid picture of

the future.

A vision can be:

 A mental picture of an "ideal" organization.
 An image of the future we seek to create
Example:
Vision of a pharmaceutical company
Vision = Future
direction What should our
Focus areas business be like in the
future?
What are we striving for?

With innovative drugs in our core areas cardiovascular and oncology we want to be
the recognised world market leader in 2030.
Our geographic marketing- and sales network is going to be global then.

Target positioning Time frame Regional presence

in focus areas
 Example Cont’d …

“To provide access to the worlds information in one

click”
Google
“To create economic opportunity for every members of
the global workforce”
Linked In
“Our vision serves as a framework for our roadmap &
guides every aspect of our business by describing what
we need to accomplish in order to continue achieving a
sustainable ,quality growth”
Coca Cola
Vision must be concise, clear, and
inspirational
The Mission

“Mission is defined as “the fundamental

purpose of the organization & its scope of
operation.”

“Organization mission is written in terms of the

general set of products & services the
organization provides & the markets & clients it
serves.
Mission Cont’d …
Characteristics of a Mission
Statement
 Defines current business activities
 Highlights boundaries of current business
 Conveys
 Who we are,
 What we do, and
 Where we are now
 Company specific, not generic —
so as to give a company its own identity

A company’s mission is not to make a

profit ! The real mission is always - “What will
we do to make a profit?”
Formulating the
Mission
Your organization’s mission statement is a concise
introduction to its work. It describes an organization
in terms of its:

Purpose: (WHY DO WE EXIST?)

Target Audience: (WHO DO WE SERVE?)

Business:(WHAT SERVICES DO WE
PROVIDE and HOW DO WE GO ABOUT
PROVIDING THEM?)
Example: Mission of a pharmaceutical company

Vision, Mission and

Objectives
Mission = Present scope of business
Who is addressed? (customers)
What is being satisfied? (needs)
How is that done? (distinctive
competencies)

Our aspiration is the battle against diseases.

Therefore we develop innovative drugs that have to be prescribed. We sell these all
over the world.

We want to play We do not offer We do not

on all markets generic products offer
OTC
Example Cont’d
…

Otis Elevator

Our mission is to provide any customer a means of moving people and

things up, down, and sideways over short distances with higher reliability
than any similar enterprise in the world.
Example
Cont’d …

“To build the webs most convenient ,secure, cost-

effective payment”
Pay pal

“To accelerate the world’s transition to sustainable

energy”
TESLA

Clear & Laser Focused

States The Company’s Purpose
Example
Cont’d …
“We save people money so they can live better”
Walmart
“Our business idea supports this vision by offering a wide
range of well-designed, functional home furnishing
products at prices so low that as many people as
possible will be able to afford them”
IKEA

States The Business Strategy

“ To be a company that inspire and fulfills your curiosity”
Sony
Vague (Don’t Show The Market Scope)
Value
Maximizing
s Profit

Upholding
Values And
Principles

How are we going to behave

and what do we believe in ?
Values
statements
Upholding Values and Principles

Constrains how
the organization Important for
Defines values
pursues its new recruits
goals
Values

Ethiopian’s Airline Value Statements

 As an airline, safety is our first priority.

 ET is a high performance and learning organization.

 We are an equal opportunity employer

 We treat internal and external customers the way we

would want to be treated

29
30
Examples
Cont’d…..
Facebooks Core Principles

o Impactful
o Dynamic
o Bold
o Open
o Responsible
It Communicates What The Company Stands Behind
Vision, Mission and
Objectives
Vision, Mission and
Objectives
increasingl
y
achievable, Values
What do we stand for? Basic beliefs and
tangible, norms
specific Mission Present business
Who are we? What do we do (and
why)? scope
Vision Aims for the
Where do we want to go? future
Long-term objectives
What do we want to achieve (performance
Performance
targets)? targets
Strategies Game
How can we turn our vision into reality? plan/Roadmap
Short-term objectives, milestones, actions &
KPI’s Budgets, project plans,
…
How exactly do we proceed? What are our intermediate
goals? Source: Wheelen, Hunger (2012), ch. 1.5,
6.2
Questions?
Part I: Foundations of Strategic Management and the Strategy
Part II: Process Mission, Vision and Goals of the Corporation
Part III: Internal Strategic Analysis
Part IV: External Strategic Analysis
Part V: Strategy Formulation
Part VI: Strategy Implementation
Part VII: Strategy Evaluation
Part VIII: Corporate Social Responsibility

Part III: Internal Strategic

Analysis
Strategic Management
Strategic Management Process
Process

0 1 2
Environment Strategy
Goal
al formulatio
setting*
scanning n

4 Evaluation 3 Strategy
and implementatio
control n

Source: Wheelen, Hunger (2012), ch.

1.5
 Outcomes From External & Internal
Environmental Analyses

By Studying the External By Studying the Internal

Environment, fi rms Environment, fi rms
identify: identify:

What might they

•
• What can they do?
choose to do?

Examine unique
Examine resources, capabilities
opportunities & & competencies
threats Sustainable
competitive
advantage

3
Internal Analysis of the
Organization
The Internal environment includes elements within the
organisations boundaries ,such as employees,
management ,& culture.

Key questions

 How well is the company's strategy working?

 What are the important capabilities ?

 Is the company competitively stronger than rivals?

The reality is most organisations do not have

a strategy that works
 Indicators how well a strategy
is working:

1. Whether the company is

recording gain in financial
strength & profitability
The Two
2. Whether the company's
Best competitive strength & market
Indicators standing are improving

The stronger the company's current

overall performance ,the less likely the
need for radical change in strategy
Internal Analysis of
the Organization

 Internal environment enables an organization

determine what it can do that is, the actions
permitted by its unique resources, capabilities
and core competencies.

 The proper matching of what a firm can do with

what it might do allows the pursuit of strategic
mission and formulation of strategies.
Resources,
Capabilities and
Core Competencies
• Resources, capabilities and core competencies
are the centers of any organizations internal
audit/internal analysis.

• To identify its strengths and weaknesses, it

needs to make analysis of resources,
capabilities and core competencies related to
each functional area of a firm.
Definitions: Resources and
Capabilities
Resources:
 An organization's assets “what we have”
 Resources is competitive asset that is owned or controlled by
a company
Tangible Intangible
Human
 Technology  Skills/know how
 Physical
 Reputation  Capacity for communication
 Financial  Culture
and collaboration
 Motivation
Resources are not productive on their own
 The ability to exploit the resources “what we do
well”
 An organizational capability is a “firm’s capacity
Capabilit to deploy resources for a desired end result.”
ies :

 Capabilities and competencies are often used as

synonyms, some authors define competencies as
a cross-functional integration & coordination of
 Analyzing Resources and
Capabilities
Appraising the strategic importance of resources and
capabilities

1) GAINING Scarcity
Extent of
competiti
Relevanc
ve e
advantag
e Durabilit
2 SUSTAININ
) G establishe y
Profit earning potential Sustainability
d Mobility
of a resource or of competitive
capability advantage
Replicabilit
y
3) EARNING
Property rights
Appropriability of
Relative
competiti
bargaining power
ve of others
advantag
e Embeddedness
of resources
Strategically important resources and capabilities are those
with the potential to generate substantial streams of profit for the
Grant (2013) p 127
Core Competencies

 The firm's resources and capabilities together

form its core competencies.

 These competencies enable innovation,

efficiency, quality, and customer
responsiveness, all of which can be leveraged to
create a cost advantage or a differentiation
advantage i.e., core competencies serve as
sources of competitive advantage.
 Competitiveness
Test
Not all a firm’s resources & capabilities have the potential to
be the basis for competitive advantage. This potential can
be realized when resources & capabilities pass these test

Resources & Capabilities: four criteria(VRIN) are:

• Valuable: is the resource or capability competitively

valuable?
• Rare: is the resource or capability rare-is it something rivals
lack?
• Costly to imitate: is the resource or capability inimitable or
hard to copy?
• Non-substitutable: is the resource or capability non-
substitutable /is it vulnerable to the treat of substitution from
different types of resources & capability?
 Core Competencies Cont’d …

• When the four criteria are met, resources & capabilities

become core competencies.

• Resources & capabilities must be continually strengthened

& nurtured to sustain their competitive power .

• A dynamic capability is the ability to modify ,deepen, or

reconfigure the company's existing resources in a
response to changes

N.B. Core competencies can become core

rigidities
 Core Competencies
Cont’d …

Why might core competencies become core rigidities?

According to William Cohen

 “A firm that continues to employ a previously successful strategy
eventually & inevitably falls victim to a competitor.”
 Then, core competencies can become core rigidities
 Strategic myopia & inflexibility on the part of the firm’s managers
eventually will result in core rigidities
 Core rigidities generate inertia & stifle innovation
Core Competencies Cont’d …

According to Leslie Wexner

 “Success does not beget success. Success

begets failure because the more that you know a
thing works, the less likely you are to think that it
will not work.

 When you have had a long string of victories, it’s

harder to foresee your own vulnerabilities.”

Examples of Core Rigidities:

 Core rigidity that may be centered on existing
routines
 Core rigidity that may be related to old
technology
 Core Competencies Cont’d …

Preventing Core Competencies from Becoming

Core Rigidities
 Realizing that a previous successful strategy might not
lead to success
 Realizing that success might not lead to success
indefinitely
 Continually evaluating whether the current core
competencies fit / match with the firm’s environment
Core Competencies Cont’d …
For building core competencies two conceptual tools
or frameworks might be available as firms search for
competitive advantage:

 Value chain analysis, which is a framework

for determining which value creating
competencies should be maintained, upgraded,
& developed and which should be outsourced.

 Determining which of the firm’s resources &

capabilities are core competencies using the
four criteria: valuable, rare, inimitable, non-
substitutable
Value chains
Every business consists of a collection of activities
undertaken while designing, producing, delivering,&
supporting its product or service.

All the various activities that the company performs

internally combine to form a value chain ,so called
because the underlaying intent of a company's
activities is to do things that ultimately create
value for buyers.
 A company's value chain consists of two
broad categories of activities :

 Primary activities that create

value
 Requisite support activities
enhance performance
Activates

A company's customer value

preposition depends on internally
performed & value chain activities of
allies
ValueThe
Chain Analysis
Value Chain Of A Company
According To Michael Porter

Company Infrastructure
Secondary
Activities

Human Resources
Technology development
Procurement
Primarily

Activitie

Inbound Marketing Outbound Service

Production
& Sales Logistics
Logistics
s

Source: Porter 1996, What is Strategy?, modified

Generic Building Blocks of Competitive Advantage
 Generic Building Blocks
Cont’d …
 Superior efficiency - the quantity of inputs that it
takes to produce a given output

 Superior quality - customer-perceived value in the

attributes of products/services, reliability etc.

 Superior innovation - anything new or novel,

uniqueness

 Superior customer responsiveness - identifying &

satisfying the needs of customers, customization
What is Value Added?
Industry value added

Value added of the Value added of the Value added Value added
supplier manufacturer sales of industry

Selling Price of
price = product
Selling = Price of
price
product
Industry Value Added vs. Value Added of
Individual Companies
Industry Value Added
Value added of the Value added of the Value added Value added
supplier manufacturer sales of industry

Selling Price of
price = product
Selling
price = Price of
product

Manufacturer’s Value Added

Selling
price Value Added

Profit
Input
Costs
Cost
The „Herbert“ effect: Direct vs. Indirect
Work
Value Chain
 SWOT Analysis
(Internal
Environment)

Strengths:
• It is a distinctive competence that gives the firm a comparative
advantage in the marketplace.

• Strengths may exist about financial resources, image, market

leadership, buyer/supplier relations etc.

Weaknesses:
• Weakness is a limitation or deficiency in resource, and capabilities
that seriously impedes a firm’s effective performance.

• Lack of facilities, financial resources, management capabilities,

marketing skills, and brand image can be source of weaknesses.
SWOT Analysis (Internal Environment) con…

SWOT Analysis
Identifies Organization’s Strengths, Weaknesses, Opportunities,
and Threats
Core Competency
A special strength that gives an organization a competitive
advantage
The SWOT
Matrix
The SWOT Matrix cont’d …

• S-O strategies pursue opportunities that are a good fit

to the company's strengths. ( maxi –Maxi strategies )

• W-O strategies overcome weaknesses to pursue

opportunities

• S-T strategies identify ways that the firm can use its
strengths to reduce its vulnerability to external threats.

• W-T strategies establish a defensive plan to prevent the

firm's weaknesses from making it highly vulnerable to
external threats.
The SWOT Matrix cont’d …

high
competitiveness

Important Important
Weaknesse : strengths:
Impact on

Invest hold / extend

low
Unimportant Unimportant
weaknesses: strengths:
Cost-optimal Hold if
solution cost
weak position is
strong
good
Relative competitive position
Part I: Foundations of Strategic Management and the Strategy
Part II: Process Mission, Vision and Goals of the Corporation
Part III: Internal Strategic Analysis
Part IV: External Strategic Analysis
Part V: Strategy Formulation
Part VI: Strategy Implementation
Part VII: Strategy Evaluation
Part VIII: Corporate Social Responsibility

Part IV: External Strategic

Analysis
 PESTLE
 Five Forces
 Scenario Analysis
 Strategic Groups
Strategic Management Process

0 1 2
Environment Strategy
Goal
al formulatio
setting*
scanning n

4 Evaluation 3 Strategy
and implementatio
control n

Source: Wheelen, Hunger (2012), ch.

1.5
Environmental – Analysis

“It is not the strongest species that

survive, nor the most intelligent, but
the one most responsive to change.”

Charles Darwin
 Outcomes From External & Internal
Environmental Analyses

By Studying the By Studying the Internal

External Environment, Environment, fi rms
fi rms identify: identify:

What might
•
• What they can do?
they choose
to do?
Examine unique
Examine resources, capabilities
opportunities & & competencies
threats Sustainable
competitive
advantage
3
 External Environmental
analysis

The External Environmental Analysis

Consists of:
The General Environment/Macro-
env.t
 Analysis of the general environment is focused on
its future impacts on firm’s performance.

 In this respect, the awareness & understanding of

an increasingly turbulent, complex & global general
environment is critical.
 The general environment influences the firm’s
strategic options & the decisions made considering
this factors.
What does PESTLE Stand For:

Political Economic Social

Technological Legal Environmental

Political Factors:
Political factors define the legal and regulatory
parameters of organizations’ operation:
• Government tax policies/regulations (Alcohol
products, used & electric cars issue in Ethiopia)
• Government laws on competition in the
marketplace (Incentives & Subsides)
• Political (in)stability
• Corruption
• Foreign trade policy
Other political actions aimed at protecting employees,
customers, the general public, and the environment
Political Factors:
Cont’d …

Political action can bring about substantial impact on

three governmental functions that influence the external
environment of firms:
 Supplier function: government decision regarding
the accessibility of private businesses to government-
owned natural resources and stockpiles of agricultural
products will profoundly affect the viability of the
strategies of the firms.

 Customer function: government demand for

products and services can create, sustain, enhance,
or eliminate many market opportunities.
Political Factors:
Cont’d …

 Competitive function: the government can

operate as an almost unbeatable competitor
in the marketplace.

Thus, knowing of government’s strategies can

help a firm avoid unfavorable confrontation with
the government as a competitor.
Economic Factors

Economic assessment must

address:

• This are determinants of a certain economic

performance

• The overall economic forecast and the likely

funding stream that will be available.

• The international and national forces that can

affect the economic well being of the
organization should be analyzed.
Economic Factors: Cont’d
…
Some key economic
variables:
 Currency value/exchange rates
 National GDP & economic growth
 Disposable income of consumers
 Interest rates
 Inflation rates
 Unemployment trends/rate
Social Factors

These factors include the beliefs, values,

attitudes, opinions, and lifestyle of persons
depending up on cultural, demographic, religious,
and ethnicity.
Social Factors: Cont’d …

Some key socio-cultural

variables

 Change in styles/choices
 Growth rate of population
 Population demographics (age
distribution)
 Cultural barriers
Technological Factors
 This factors are related to innovation ,technology & regulations
that surrounds technology that may affect your business
operation in the market favorably or unfavorably.

Organizations must strive to understand the existing

scientific or technological advances:

To avoid obsolescence and promote innovation, the

organization must be conscious of technological changes
that could affect its operation

It should understand that new technologies might require

new operation systems and bring about sudden and
dramatic effect on an organization’s environment.

Understandable technological adaptations can suggest

possibilities for new products, improvements in existing
products, or in manufacturing and marketing techniques
Technological Factors: Cont’d …
Some key technological variables

Improvement in Data storage

Rapid technological
production /protection
progress/innovation
technologies technology

R&D activity Automation

Legal Factors
This factors have some overlaps with political
factors ,but they includes more specific laws.
Some key legal variables
 Laws relating to wages /employment
 Antitrust laws
 Copyright/patent laws
 Consumer protection laws
 Discrimination laws
 Health & Safety Laws
Generally, its clear companies has to know what is &
what is not legal to operate successfully & rightfully.
Environmental Factors
 Environment in this context is used to address the
ecological aspects such as weather, climates ,and
climate changes.

Some key environmental variables

 Carbon emission /footprint

 Environmental protection regulations
 CSR policies
The Industry
Environment
Analysis of the
industry

Definition
 An industry is a group of firms producing products
that are close substitutes
 Firms that influence one another

 Includes a rich mix of competitive strategies that

companies use in pursuing strategic
competitiveness & earning above average
returns.
Definition Cont’d …

 Analysis of the industry environment is focused

on the factors & conditions influencing the
firm’s profitability in the industry.

 Compared to the general environment, the

industry environment has a more direct effect
on the firm’s strategic competitiveness &
capability of earning above-average returns.
Definition Cont’d …

It refers to the analysis of:

 Industry trends as a whole;

 Competition within the industry;

 Technologies employed;

 What it takes to succeed – the key success factors (KSF);

 Comparing the firm, its products, its systems, its

technology etc., with other firms in the industry.
Porter‘s Five forces
The nature and degree of competition &
profit potentials in an industry hinge on five
forces: Micro -Environment
Cont’d …

 The main purpose of the five force is to evaluate

the root cause of profitability in the industry
through analyzing competitive force & profit
potentials.

 Thus, competition in an industry is rooted in its

underlying economics, and competitive forces.

 Therefore, the collective strength of these forces

determines the ultimate profit potential and
attractiveness of an industry.
Cont’d …
 If competitive forces are high or intense the profit
potentials of a firms in that specific industry will
decrease.

 The weaker the forces collectively the greater the

opportunity for superior performance in the industry
would be.

 Thus, to cope with them the strategist must examine &

analyze the sources of competition.

For example:

What makes the industry vulnerable to entry?

What determines the bargaining power of

suppliers?
 Cont’d …

Knowledge of these underlying sources of

competitive pressure provides the groundwork
for a strategic plan of action to:
 Highlight the critical strengths and weaknesses of the
company
 Clarify the areas where strategic changes may yield
the greatest payoff
 Highlight the industry trends as either opportunities
or threats
Rivalry Among Competing
Firms
 This examines how the competition is the
marketplace
Industry rivalry increases when:
There are numerous or equally balanced
competitors
Industry growth slows or declines

There are high fixed costs or high storage costs

There is a lack of differentiation opportunities or
low switching costs
When high exit barriers prevent competitors
from leaving the industry(exist due to long term
loan agreement or high fixed cost)
Example: Rivalry in the airline industry is
Threat of Substitute
Products

Substitute Products essentially fulfills the same need even

though they mayof
The threat notsubstitute
look like identical on the surface.
products increases
when:
 Buyers face few switching costs

 The substitute product’s price is lower

 Substitute product’s quality and performance

are equal to or greater than the existing
product
Example : Threats of substitute in the Airline is considered at
Threat of Entry
When new players enter the market, it puts pressure
on price, and costs & they must share the market with
more players .
 The higher this barriers the less likely that more
High threat
player of new
enter theentry when
market . market entry barriers are low
The major sources of barriers to entry:
1. Capital requirements
2. Cost disadvantages & Economies of scale
3. Access to distribution channels
4. Government policy & Expected retaliation
5. Product differentiation

Example : Threat of Entry in the airline industry considered

low _ medium
The Bargaining
Power of Suppliers

Suppliers can exert bargaining power on

participants in an industry by raising prices or
reducing the quality of purchased goods and
services affecting the profitability of the industry.
 Powerful Suppliers Cont’d …

Supplier power increases when:

 Suppliers are large and few in number
 Suitable substitute products are not available
 Individual buyers are not large customers of suppliers and there
are many buyers
 Suppliers’ goods are critical to buyers’ marketplace success
 Suppliers’ products create high switching costs
 Suppliers pose a threat to integrate forward into buyers’
industry
Example : The Bargaining Power of Suppliers in the airline
industry considered very high(major inputs fuel
The Bargaining Power of Buyers

 To what extent are customers can put pressure on a

company by demanding minimum prices, higher quality
or more service, and play competitors off against each
other – all at the expense of industry profits.

 When buyers purchase from the industry standard or

undifferentiated products, they are always sure that
they can find alternative suppliers & may play one
company against another.
Cont’d …

Buyer bargaining power increases when:

• Buyers are large and few in number
• Buyers purchase a large portion of an industry’s total
output
• Buyers’ purchases are a significant portion of a
supplier’s annual revenues
• Buyers can switch to another product without
incurring high switching costs
• Buyers pose threat to integrate backward into the
sellers’ industry
Cont’d …
Examples: The bargaining powers of buyers in the airline industry are
very high
 Customers can be able to check prices easily through price comparison
websites.
 No switching cost involved in the process; however, some companies are
trying to change this through frequent flyer programs by rewarding
customers so that they came from time to time. i.e.;
Ethiopian Airline Sheba Miles
Delta Airline SkyMiles
Southwest Airlines Rapid Rewards
United Airlines Mileage Plus
 Generally, by analyzing the five forces, you can better understand the
industry's competition and profit potential.
 Note, understanding the forces that affect your company is the starting
point of developing your strategy.
Interpreting
Industry
Analyses
Interpreting Industry
Analyses
Competitor Analysis/Four Corner
Analysis
Competitor
Analysis /Four
Corner Analysis/

 The competitor environment is the final part of the

external environment requiring study.
 Competitor analysis focuses on each company against
which a firm directly competes.
 Analysis of competitors is focused on predicting the
dynamics of competitors' actions, responses &
intentions
Competitor Analysis Cont’d …

• Competing firms are keenly interested in

understanding each other’s objectives,
strategies, assumptions and capabilities.

• Furthermore, intense rivalry creates a strong

need to understand competitors.
Competitor Analysis Cont’d …

In a competitor analysis, the firm seeks to

understand:
 What drives the competitor, as shown by its future
objectives.
 What the competitor is doing and can do, as
revealed by its current strategy.
 What the competitor believes about its own firm
and the industry, as shown by its assumptions.
 What the competitor’s capabilities are, as shown by
its strengths and weaknesses.
Competitor Analysis Components
Competitor Analysis Cont’d …

 Competitor intelligence is used to get data and

information about competing firms.

 Competitor intelligence is the set of data and

information the firm gathers to better
understand and better anticipate competitor’s
objectives, strategies, assumptions and
capabilities.
Competitor Analysis Cont’d …

• Information about these different dimensions

helps the firm to prepare an anticipated
response profile for each competitor.

• Thus, the result of an effective competitor

analysis helps a firm to understand, interpret
and predict its competitors’ actions and
responses.
SW-OT Analysis (External
Environment)
Opportunities: An opportunity is a major favorable situation in a
firm’s environment.
Threats: A threat is a major unfavorable situation in a firm’s
environment.
Questions?