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EMB 690 SM Lecture 3 NSU Final

The document discusses the external environment analysis for strategic management. It covers the macro-environment including technological, economic, demographic, political/legal, and socio-cultural factors. Industry structure is analyzed using Porter's five forces model of competition. Competitor analysis involves gathering intelligence on competitors' objectives, strategies, capabilities, and assumptions. Critical success factors are the key elements that affect an industry's ability to prosper.

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Kazi Saif Hasan Shuvo
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31 views

EMB 690 SM Lecture 3 NSU Final

The document discusses the external environment analysis for strategic management. It covers the macro-environment including technological, economic, demographic, political/legal, and socio-cultural factors. Industry structure is analyzed using Porter's five forces model of competition. Competitor analysis involves gathering intelligence on competitors' objectives, strategies, capabilities, and assumptions. Critical success factors are the key elements that affect an industry's ability to prosper.

Uploaded by

Kazi Saif Hasan Shuvo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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North South University

School of Business and Economics (SBE)

EMB 690 Strategic Management


Intersession Semester, 2023
Lecture 3
Recap…
Define and discuss:
Strategy.
Strategic management.
Historical perspective.
Strategic vision and strategic mission.
Strategic management process.
Importance and Challenges of SM.
The External Environment Analysis
Today’s Lecture outline

External environment:
o The macro-environment.
o Industry structure.
o Competitors analysis (Strategic group
mapping).
❑Critical success factors.
❑Why is an external analysis important?
❑Why organisations should “look externally”?
The External Environment
❑A company’s external environment
includes all relevant factors and
influences outside the company’s
boundaries; by relevant, means
important enough to have a bearing on
the decisions the company ultimately
makes about its direction, objectives,
strategy, and business model.
External Environment

Central components of the external analysis


The macro-environment/General environment.
Industry structure.
Competitor analysis (Strategic group mapping).
Critical success factors.
Components of the Macro Environment

Technological

Global Industry Environment Economic

Competitor

Demographic Environment Political and


Legal

Socio-cultural
The Macro Environment (cont.)
The global segment
❑Changes in global trade.
❑Wars.
❑Political regimes.
❑Trade agreements among regional trade blocs
(NAFTA, EU, ASEAN).
❑Trade boycotts.
❑The emergence of the Indian and Chinese
economies.
❑Creation of WTO.
❑Increased risks associated with terrorism.
❑Pandemic.
The Macro Environment (cont.)
Economic segment
❑Inflation rates.
❑Interest rates.
❑Trends in GDP.
❑Currency exchange rates.
❑Unemployment levels.
❑Consumer price index (CPI).
❑Disposable income and personal savings rates.
❑Changes in stock market valuations.
The Macro Environment (cont.)
Demographics

❑Aging population (life spans).


❑Rising affluence.
❑Population growth rates.
❑Changes in ethnic composition (Ethnic mix).
❑Geographic dispersion of population.
❑Greater disparities in income levels.
The Macro Environment (cont.)
Political and Legal
❑Legislation and proposed legislative changes.
❑Taxation law.
❑Labor law.
❑Deregulations.
❑Trade practices.
❑Government policy.
❑Trends in governments’ role.
The Macro Environment (cont.)
Socio-cultural
❑More women in the workforce (Workforce
diversity).
❑Increase in temporary workers.
❑Greater concern for fitness (Health
Consciousness).
❑Greater concern for the environment
(Environmental movement).
❑“Time poor” professionals.
❑Postponement of the family formulation.
❑Inner city living.
The Macro Environment (cont.)
Technological
❑Genetic engineering.
❑Three-dimensional (3D) printing.
❑Research in synthetic and exotic materials.
❑Pollution/Global warming.
❑Miniaturization of computing technologies.
❑Wireless communications.
❑Nanotechnology.
❑Big data analytics.
oAdvances in technology have contributed to the
development of economies, e.g., Singapore.
The Industry Environment

What is an industry?
A group of organisations producing a product(s) or
providing a service(s) which is (are) close
substitutes.

The industry environment has a more direct effect


on the individual organization.
The Industry Environment
What is an industry?
Four Dimensions
o Products.
o Customers.
o Geography.
o Stages in the production distribution pipeline.
Porter’s Five Forces Model

What is it?
❑A model devised by Michael Porter to aid
firms in analyzing competitive forces in an
industry environment.
(see Porter, M.E. 1979, “How Competitive Forces Shape Strategy”, Harvard Business
Review, Mar-Apr, pp. 137-45)
Five Forces Model of Competition
(The industry environment more direct effect on the individual organisation)

Substitute
Products or services
(of firms in
other industries)
Suppliers of
Key Inputs
Rivalry
Buyers
Among
Competing
Sellers

Potential New Entrants

(Porter,1979)
Porter’s Five Forces Model (cont.)

Porter’s rule
❑The stronger each of these forces, the more
limited the ability of established companies
to raise prices and earn higher profits.

THE TASK OF STRATEGIC MANAGER.


Interpreting industry analyses
Low entry barriers.
Suppliers and buyers have strong positions. Unattractive
Strong threats from substitute products. industry
Intense rivalry among competitors.

Low profit potential


Interpreting industry analyses

High entry barriers.


Suppliers and buyers have weak positions. Attractive
Few threats from substitute products.
industry
Moderate rivalry among competitors.

High profit potential


Strategic groups within industries

The concept of strategic groups


–A competitor grouping uses similar
strategies that differ from other industry
groups within an industry.
Strategic blocks are groups of companies
within an industry that exhibit denser
strategic links among themselves than with
other companies in the industry.
Strategic groups in the international airline industry
Competitor Analysis
❑ Competitor intelligence.
❑ The ethical gathering of needed information.
and data that provides insight into the competitors:
❑Future objectives.
❑What drives the competitor?
❑Current strategy.
❑What the competitor is doing and can do.
❑Assumptions.
❑What the competitor believes about its firm and the industry.
❑Capabilities.
❑Competitor firm’s capabilities, strengths, and weaknesses.
Business Business Business Your Own
A B C Business

Future
strategic
objectives

Current
Strategy
Capabilities
Competitor Analysis Components
Critical success factors (Key success factors)
❑ An industry’s key success factors (KSFs) are those things
that most affect industry members’ ability to prosper in
the marketplace:
o Particular strategy elements.
o product attributes.
o Resources.
o Competencies.
o Competitive capabilities.
o Business outcomes that spell the difference between profit
and loss (Thomson & Strickland, 2007).
Three questions to help in identifying CSFs
1. On what basis do customers choose between the competing
brands of sellers? (What product attributes?)
2. What resources and competitive capabilities do a seller need to
have to be competitively successful?
3. What does it take for sellers to achieve a sustainable
competitive advantage?

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