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STRATEGIC MANAGEMENT & BUSINESS POLICY

12TH EDITION

THOMAS L. WHEELEN J. DAVID HUNGER


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Prentice Hall, Inc. 2009 4-2

Environmental scanning- the monitoring, evaluationand dissemination of information from the external

and internal environments to key people within thecorporation


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Identifying External Environmental Variables

Natural environment

Societal environment

Task environment


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Natural environment

Physical resources Wildlife

Climate


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Societal environment- social systems that influencelong-term decisions

Economic forces

Technological forces

Political-legal forces

Sociocultural forces


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Task environment- groups that directly affect acorporation and are affected by the corporation

Government Local communities

Suppliers

Competitors

Customers Creditors

Unions

Special interest groups/trade associations


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Industry analysis- an in-depth examination ofkey factors within a corporations task

environment


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STEEP Analysis- monitoring trends in the

societal and natural environments Sociocultural-

Technological-

Economic-

E

cological- Political-legal forces


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Trends in Economic Forces:

Interest rates

Home sales

Oil prices Emerging markets

BRIC countries

Eastern Europe


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Trends in Technological Forces:

Portable information devices and electronicnetworking

Alternative energy sources Precision farming

Virtual personal assistants

Genetically altered organisms

Smart, mobile robots


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Trends in Political-Legal Forces:

Enforcement of U.S. antitrust laws

Taxation and labor laws

Government bureaucracy World Trade Organization


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Trends in Sociocultural Forces:

Demographics

Increasing environmental awareness

Growing health consciousness Expanding seniors market

Impact of Gen Y

Declining mass market

Changing pace and location of life Changing household composition

Increasing diversity of workforce and markets


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Identifying External Strategic Factors:

Issues priority matrix- used to identify and analyze

developments in the external environment

External strategic factors- key environmental trendsthat are judged to have both a medium to highprobability of occurrence and a medium to high

probability of impact on the corporation


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Industry- a group of firms that produces asimilar product or service

Porters 5 forces: Threat of new entrants

Rivalry among existing firms

Threat of substitute products

Bargaining power of buyers Bargaining power of suppliers

Relative power of other stakeholders (added)


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Threat of new entrants- new entrants to anindustry bring new capacity, a desire to gainmarket share and substantial resources


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Entry barrier- an obstruction that makes it difficult fora company to enter an industry

Economies of scale

Product differentiation

Capital requirements

Switching costs

Access to distributionchannels

Cost disadvantages due to

size

Government policies


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Rivalry Among Existing Firms- new entrants to anindustry bring new capacity, a desire to gainmarket share and substantial resources

Number of competitors

Rate of industry growth

Product or service characteristics

Amount of fixed costs

Capacity Height of exit barriers

Diversity of rivals


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Threat of Substitute Products or Services-products that appear different but can satisfy thesame need as another product


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Bargaining Power of Buyers- ability of buyers toforce prices down, bargain for higher quality, playcompetitors against each other

Large purchases Backward integration

Alternative suppliers

Low cost to change suppliers

Product represents a high percentage of buyerscost

Buyer earns low profits

Product is unimportant to buyer


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Bargaining Power of Suppliers- ability of suppliersto raise prices or reduce quality

Industry is dominated by a few companies

Unique product or service Substitutes are not readily available

Ability to forward integrate

Unimportance of product or service to the industry


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Relative Power of Other Stakeholders

Government

Local communities

Creditors

Trade associations

Special interest groups

Unions

Shareholders Complementors- products that work well with a

firms product


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Industry Evolution

Fragmented industry- no firm has a largemarket share and each firm only serves a small

piece of the total market in competition with otherfirms

Consolidated industry- domination by a fewlarge firms, each struggles to differentiate productsfrom its competition


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Categorizing International Industries

Multi-domestic Industries- specific to eachcountry or group of countries

Global Industries- operate worldwide withmultinational companies making only smalladjustments for country-specific circumstances

Regional industries- multinational companiesprimarily coordinate their activities within regions


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Strategic group- a set of business units or firms thatpursue similar strategies with similar resources


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Strategic Types

Defenders- focus on improving efficiency

Prospectors- focus on product innovation andmarket opportunities

Analyzers- focus on at least two different productmarket areas

Reactors- lack a consistent strategy-structure-culture relationship


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Hypercompetition

Creates a condition of disequilibrium andchange

Competitive advantage comes from: knowledge of environment

willingness to take risks

Cannibalization of own products


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Key success factors- variables that can significantlyaffect the overall competitive positions ofcompanies within an industry

Industry matrix- summarizes the key success factorswithin a particular industry


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Using Key Success Factors to Create anIndustry Matrix

Competitive intelligence (business intelligence)- aformal program of gathering information on acompanys competitors

Sources of competitive intelligence:

Information brokers

Internet Industrial espionage

Investigatory services


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Monitoring Competitors for Strategic Planning

Primary activity of competitive intelligence is tomonitor competitors

Competitors organizations that offer same, similar, orsubstitute products or services in the businessareas in which a particular company operates


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Forecasting is based on a set of assumptions

Faulty underlying assumptions are the mostfrequent cause of forecasting errors

Useful forecasting techniques

Extrapolation

Brainstorming

Expert opinion Industry Scenario

Delphi technique

Statistical modeling

Prediction markets

Cross impact analysis


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1. Discuss how a development in a corporations natural andsocietal environments can affect the corporation throughits task environment

2. According to Porter, what determines the level ofcompetitive intensity in an industry?

3. According to Porters discussion of industry analysis, isPepsi Cola a substitute of Coca Cola?

4. How can a decision maker identify strategic factors in acorporations external international environment?

5. Compare and contrast trend extrapolation with the writingof scenarios as forecasting techniques


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PowerPoint created by:

Ronald Heimler

Dowling College- MBA

Georgetown University- BS Business

Administration Adjunct Professor- LIM College, NY

Adjunct Professor- Long IslandUniversity, NY

Lecturer- California State PolytechnicUniversity, Pomona, CA

President- Walter Heimler, Inc.


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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 ofAmerica.

Copyright 2010 Pearson Education, Inc.publishing as Prentice Hall

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