The External Environment Opportunities, Threats,Industry Com

8/9/2019 The External Environment Opportunities, Threats,Industry Com

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All rights reserved.All rights reserved.

PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie Cook

The University of West AlabamaThe University of West Alabama

StrategicStrategic

ManagementManagementCompetitiveness and Globalization:Competitiveness and Globalization:

Concepts and CasesConcepts and Cases Michael A. Hitt • R. Dane !relan" • Robert #. Hoskisson

$eventh e"ition

STRATEGIC

MANAGEMENT

INPUTS

CHAPT#R %CHAPT#R %

The ExternalThe External

Environment:Environment:

Opportunities, Threats,Opportunities, Threats,

Industry Competition,Industry Competition,and Competitor Analysisand Competitor Analysis


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K K NOWLEDGENOWLEDGE OOBJECTIVESBJECTIVES

1.1. Explin the importn!e o" nl#$ing nd understndingExplin the importn!e o" nl#$ing nd understnding

the "irm%s externl environment.the "irm%s externl environment.

2.2. &e"ine nd des!ri'e the generl environment nd the&e"ine nd des!ri'e the generl environment nd the

industr# environment.industr# environment.

(.(. &is!uss the "our !tivities o" the externl environmentl&is!uss the "our !tivities o" the externl environmentl

nl#sis pro!ess.nl#sis pro!ess.

).). *me nd des!ri'e the generl environment%s six*me nd des!ri'e the generl environment%s six

segments.segments.

+.+. ,denti"# the "ive !ompetitive "or!es nd explin ho the#,denti"# the "ive !ompetitive "or!es nd explin ho the#

determine n industr#%s pro"it potentil.determine n industr#%s pro"it potentil.

Studying this chapter should provide you with the strategic

management knowledge needed to:


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K K NOWLEDGENOWLEDGE OOBJECTIVESBJECTIVES (cont’d)(cont’d)

.. &e"ine strtegi! groups nd des!ri'e their in"luen!e on&e"ine strtegi! groups nd des!ri'e their in"luen!e on

the "irm.the "irm.

7.7. &es!ri'e ht "irms need to no 'out their&es!ri'e ht "irms need to no 'out their!ompetitors nd di""erent methods in!luding ethi!l!ompetitors nd di""erent methods in!luding ethi!l

stndrds used to !olle!t intelligen!e 'out them.stndrds used to !olle!t intelligen!e 'out them.

Studying this chapter should provide you with the strategic

management knowledge needed to:


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FIGUREFIGURE 2.12.1 The External Environment The External Environment


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General EnvironmentGeneral Environment

&imensions in the 'roder so!iet# tht in"luen!e&imensions in the 'roder so!iet# tht in"luen!en industr# nd the "irms ithin it3n industr# nd the "irms ithin it3

&emogrphi!&emogrphi!

E!onomi!E!onomi!4oliti!l/legl4oliti!l/legl

So!io!ulturlSo!io!ulturl

Te!hnologi!lTe!hnologi!l

5lo'l5lo'l


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TABLE TABLE 2.12.1 The General Environment: Segments and Elements The General Environment: Segments and Elements


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Industry EnvironmentIndustry Environment

The set o" "!tors dire!tl# in"luen!ing "irm ndThe set o" "!tors dire!tl# in"luen!ing "irm ndits !ompetitive !tions nd !ompetitiveits !ompetitive !tions nd !ompetitive

responsesresponses

Thret o" ne entrntsThret o" ne entrnts

4oer o" suppliers4oer o" suppliers

4oer o" 'u#ers4oer o" 'u#ers

Thret o" produ!t su'stitutesThret o" produ!t su'stitutes

,ntensit# o" rivlr# mong !ompetitors,ntensit# o" rivlr# mong !ompetitors



Cometitor AnalysisCometitor Analysis

5thering nd interpreting5thering nd interpretingin"ormtion 'out ll o" thein"ormtion 'out ll o" the

!ompnies tht the "irm!ompnies tht the "irm

!ompetes ginst.!ompetes ginst.

nderstnding the "irm%snderstnding the "irm%s!ompetitor environment!ompetitor environment

!omplements the insights!omplements the insights

provided '# stud#ing theprovided '# stud#ing the

generl nd industr#generl nd industr#

environments.environments.



Analysis o! the External EnvironmentsAnalysis o! the External Environments

5enerl environment5enerl environment 9o!used on the "uture9o!used on the "uture

,ndustr# environment,ndustr# environment

9o!used on "!tors nd !onditions in"luen!ing "irm%s9o!used on "!tors nd !onditions in"luen!ing "irm%spro"it'ilit# ithin n industr#pro"it'ilit# ithin n industr#

:ompetitor environment:ompetitor environment

9o!used on predi!ting the d#nmi!s o" !ompetitors%9o!used on predi!ting the d#nmi!s o" !ompetitors%!tions; responses nd intentions!tions; responses nd intentions



TABLE TABLE 2.2 2.2 Comonents o! the External Environmental AnalysisComonents o! the External Environmental Analysis

$cannin& ,denti"#ing erl# signls o" environmentl!hnges nd trends

Monitorin& &ete!ting mening through ongoing

o'servtions o" environmentl !hnges

nd trends

'orecastin& &eveloping pro


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"ortunities and Threats"ortunities and Threats

=pportunit#=pportunit# A !ondition in the generl A !ondition in the generl

environment tht; i" exploited;environment tht; i" exploited;

helps !ompn# !hievehelps !ompn# !hieve

strtegi! !ompetitiveness.strtegi! !ompetitiveness.

ThretThret

A !ondition in the generl A !ondition in the generl

environment tht m# hinder environment tht m# hinder !ompn#%s e""orts to !hieve!ompn#%s e""orts to !hieve

strtegi! !ompetitiveness.strtegi! !ompetitiveness.


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Segments o! the General EnvironmentSegments o! the General Environment

#$ont%d$ont%d&

The E!onomi! SegmentThe E!onomi! Segment

,n"ltion rtes,n"ltion rtes

,nterest rtes,nterest rtes

Trde de"i!its or surplusesTrde de"i!its or surpluses

>udget de"i!its or surpluses>udget de"i!its or surpluses

4ersonl svings rte4ersonl svings rte

>usiness svings rtes>usiness svings rtes

5ross domesti! produ!t5ross domesti! produ!t


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#$ont%d$ont%d&

The 4oliti!l/?egl SegmentThe 4oliti!l/?egl Segment

Antitrust ls Antitrust ls

Txtion lsTxtion ls

&eregultion philosophies&eregultion philosophies

?'or trining ls?'or trining ls

Edu!tionl philosophies ndEdu!tionl philosophies nd

poli!iespoli!ies


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#$ont%d$ont%d&

The So!io!ulturl SegmentThe So!io!ulturl Segment

Women in the orpl!eWomen in the orpl!e

Wor"or!e diversit#Wor"or!e diversit#

Attitudes 'out @ulit# o" orli"e Attitudes 'out @ulit# o" orli"e

:on!erns 'out environment:on!erns 'out environment

Shi"ts in or nd !reer pre"eren!esShi"ts in or nd !reer pre"eren!es

Shi"ts in produ!t nd servi!e pre"eren!esShi"ts in produ!t nd servi!e pre"eren!es


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#$ont%d$ont%d&

The Te!hnologi!l SegmentThe Te!hnologi!l Segment

4rodu!t innovtions4rodu!t innovtions

Appli!tions o" noledge Appli!tions o" noledge

9o!us o" privte nd government-supported B&9o!us o" privte nd government-supported B&

expendituresexpenditures

*e !ommuni!tion te!hnologies*e !ommuni!tion te!hnologies


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#$ont%d$ont%d&

The 5lo'l SegmentThe 5lo'l Segment

,mportnt politi!l events,mportnt politi!l events

:riti!l glo'l mrets:riti!l glo'l mrets*el# industrili$ed !ountries*el# industrili$ed !ountries

&i""erent !ulturl nd institutionl&i""erent !ulturl nd institutionl

ttri'utesttri'utes


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Industry Environment AnalysisIndustry Environment Analysis

,ndustr# &e"ined,ndustr# &e"ined A group o" "irms produ!ing produ!ts tht re !lose A group o" "irms produ!ing produ!ts tht re !lose

su'stitutessu'stitutes

9irms tht in"luen!e one nother9irms tht in"luen!e one nother

,n!ludes ri!h mix o" !ompetitive strtegies tht,n!ludes ri!h mix o" !ompetitive strtegies tht!ompnies use in pursuing strtegi!!ompnies use in pursuing strtegi!

!ompetitiveness nd 'ove-verge returns!ompetitiveness nd 'ove-verge returns


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FIGUREFIGURE 2.2 2.2 The Five For$es o! Cometition 'odel The Five For$es o! Cometition 'odel


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Threat o! (e) Entrants: Barriers to Threat o! (e) Entrants: Barriers to

EntryEntry E!onomies o" s!leE!onomies o" s!le 4rodu!t di""erentition4rodu!t di""erentition

:pitl re@uirements:pitl re@uirements

Sit!hing !ostsSit!hing !osts

A!!ess to distri'ution !hnnels A!!ess to distri'ution !hnnels

:ost disdvntges independent o" s!le:ost disdvntges independent o" s!le

5overnment poli!#5overnment poli!#

Expe!ted retlitionExpe!ted retlition


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Barriers to EntryBarriers to Entry

E!onomies o" S!leE!onomies o" S!leCrginl improvements in e""i!ien!# tht "irmCrginl improvements in e""i!ien!# tht "irm

experien!es s it in!rementll# in!reses its si$eexperien!es s it in!rementll# in!reses its si$e

9!tors dvntges nd disdvntges relted9!tors dvntges nd disdvntges relted

to lrge- nd smll-s!le entr#to lrge- nd smll-s!le entr#

9lexi'ilit# in pri!ing nd mret shre9lexi'ilit# in pri!ing nd mret shre

:osts relted to s!le e!onomies:osts relted to s!le e!onomies

:ompetitor retlition:ompetitor retlition


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Barriers to Entry #$ont%d&Barriers to Entry #$ont%d&

4rodu!t di""erentition4rodu!t di""erentition ni@ue produ!tsni@ue produ!ts

:ustomer lo#lt#:ustomer lo#lt#

4rodu!ts t !ompetitive4rodu!ts t !ompetitive

pri!espri!es

:pitl e@uirements:pitl e@uirements 4h#si!l "!ilities4h#si!l "!ilities

,nventories,nventories

Creting !tivitiesCreting !tivities

Avil'ilit# o" !pitl Avil'ilit# o" !pitl

Sit!hing :ostsSit!hing :osts

=ne-time !osts !ustomers=ne-time !osts !ustomers

in!ur hen the# 'u# "rom in!ur hen the# 'u# "rom

di""erent supplier di""erent supplier

*e e@uipment*e e@uipment

etrining emplo#eesetrining emplo#ees 4s#!hi! !osts o" ending 4s#!hi! !osts o" ending

reltionshipreltionship

A!!ess to &istri'ution A!!ess to &istri'ution

:hnnels:hnnels

Sto!ing or shel" sp!eSto!ing or shel" sp!e

4ri!e 'res4ri!e 'res

:oopertive dvertising:oopertive dvertising

llon!esllon!es


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Barriers to Entry #$ont%d&Barriers to Entry #$ont%d&

:ost &isdvntges:ost &isdvntges

,ndependent o" S!le,ndependent o" S!le 4roprietr# produ!t4roprietr# produ!t

te!hnolog#te!hnolog#

9vor'le !!ess to r9vor'le !!ess to r

mterilsmterils &esir'le lo!tions&esir'le lo!tions

5overnment poli!#5overnment poli!# ?i!ensing nd permit?i!ensing nd permit

re@uirementsre@uirements

&eregultion o" industries&eregultion o" industries

Expe!ted retlitionExpe!ted retlition esponses '# existingesponses '# existing

!ompetitors m# depend!ompetitors m# depend

on "irm%s present ste inon "irm%s present ste in

the industr# vil'lethe industr# vil'le

'usiness options'usiness options


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Bargaining *o)er o! SuliersBargaining *o)er o! Suliers

Supplier poer in!reses hen3Supplier poer in!reses hen3Suppliers re lrge nd "e in num'er.Suppliers re lrge nd "e in num'er.

Suit'le su'stitute produ!ts re not vil'le.Suit'le su'stitute produ!ts re not vil'le.

,ndividul 'u#ers re not lrge !ustomers o" suppliers,ndividul 'u#ers re not lrge !ustomers o" suppliersnd there re mn# o" them.nd there re mn# o" them.

Suppliers% goods re !riti!l to the 'u#ers%Suppliers% goods re !riti!l to the 'u#ers%

mretpl!e su!!ess.mretpl!e su!!ess.

Suppliers% produ!ts !rete high sit!hing !osts.Suppliers% produ!ts !rete high sit!hing !osts.

Suppliers pose thret to integrte "orrd intoSuppliers pose thret to integrte "orrd into

'u#ers% industr#.'u#ers% industr#.


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Bargaining *o)er o! BuyersBargaining *o)er o! Buyers

>u#er poer in!reses hen3>u#er poer in!reses hen3>u#ers re lrge nd "e in num'er.>u#ers re lrge nd "e in num'er.

>u#ers pur!hse lrge portion o" n industr#%s totl>u#ers pur!hse lrge portion o" n industr#%s totl

output.output.

>u#ers% pur!hses re signi"i!nt portion o" >u#ers% pur!hses re signi"i!nt portion o"

supplier%s nnul revenues.supplier%s nnul revenues.

>u#ers% sit!hing !osts re lo.>u#ers% sit!hing !osts re lo.

>u#ers !n pose thret to integrte '!rd into the>u#ers !n pose thret to integrte '!rd into the

sellers% industr#.sellers% industr#.


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Threat o! Su+stitute *rodu$ts Threat o! Su+stitute *rodu$ts

The thret o" su'stitute produ!ts in!resesThe thret o" su'stitute produ!ts in!reseshen3hen3

>u#ers "!e "e sit!hing !osts.>u#ers "!e "e sit!hing !osts.

The su'stitute produ!t%s pri!e is loer.The su'stitute produ!t%s pri!e is loer.

Su'stitute produ!t%s @ulit# nd per"ormn!e reSu'stitute produ!t%s @ulit# nd per"ormn!e re

e@ul to or greter thn the existing produ!t.e@ul to or greter thn the existing produ!t.

&i""erentited industr# produ!ts tht re vlued&i""erentited industr# produ!ts tht re vlued

'# !ustomers redu!e this thret.'# !ustomers redu!e this thret.


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Intensity o! Rivalry Among CometitorsIntensity o! Rivalry Among Cometitors

,ndustr# rivlr# in!reses hen3,ndustr# rivlr# in!reses hen3 There re numerous or e@ull# 'ln!ed !ompetitors.There re numerous or e@ull# 'ln!ed !ompetitors.

,ndustr# groth slos or de!lines.,ndustr# groth slos or de!lines.

There re high "ixed !osts or high storge !osts.There re high "ixed !osts or high storge !osts.

There is l! o" di""erentition opportunities or loThere is l! o" di""erentition opportunities or lo

sit!hing !osts.sit!hing !osts.

When the strtegi! stes re high.When the strtegi! stes re high.

When high exit 'rriers prevent !ompetitors "romWhen high exit 'rriers prevent !ompetitors "rom

leving the industr#.leving the industr#.


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Lo) entry +arriers

Interreting Industry AnalysesInterreting Industry Analyses

Unattra$tiveUnattra$tiveIndustryIndustry

Suliers and+uyers have strongositions

Strong threats!rom su+stituterodu$ts

Intense rivalryamong$ometitors

Low profit potential


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Interreting Industry Analyses #$ont%d&Interreting Industry Analyses #$ont%d&

Attra$tiveAttra$tiveIndustryIndustry

,igh entry+arriers

Suliers and+uyers have )ea-

ositions

Fe) threats !romsu+stitute

rodu$ts'oderate rivalryamong$ometitors

High profit potential


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Strategi$ GrousStrategi$ Grous

Strtegi! 5roup &e"inedStrtegi! 5roup &e"ined A set o" "irms emphsi$ing similr strtegi! A set o" "irms emphsi$ing similr strtegi!

dimensions nd using similr strtegiesdimensions nd using similr strtegies

,nternl !ompetition 'eteen strtegi! group "irms,nternl !ompetition 'eteen strtegi! group "irms

is greter thn 'eteen "irms outside tht strtegi!is greter thn 'eteen "irms outside tht strtegi!group.group.

There is more heterogeneit# in the per"ormn!e o"There is more heterogeneit# in the per"ormn!e o"

"irms ithin strtegi! groups."irms ithin strtegi! groups.

– Similr mret positionsSimilr mret positions – Similr produ!tsSimilr produ!ts

– Similr strtegi! !tionsSimilr strtegi! !tions


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Strategi$ GrousStrategi$ Grous

Strtegi! &imensionsStrtegi! &imensionsExtent o" te!hnologi!l ledershipExtent o" te!hnologi!l ledership

4rodu!t @ulit#4rodu!t @ulit#

4ri!ing 4oli!ies4ri!ing 4oli!ies&istri'ution !hnnels&istri'ution !hnnels

:ustomer servi!e:ustomer servi!e


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Cometitor AnalysisCometitor Analysis

:ompetitor ,ntelligen!e:ompetitor ,ntelligen!e The ethi!l gthering o" needed in"ormtion nd dtThe ethi!l gthering o" needed in"ormtion nd dt

tht provides insight into3tht provides insight into3

A !ompetitor%s dire!tion A !ompetitor%s dire!tion future objectivesfuture objectives ) )

A !ompetitor%s !p'ilities nd intentions A !ompetitor%s !p'ilities nd intentions currentcurrent

strategy strategy ) )

A !ompetitor%s 'elie"s 'out the industr# A !ompetitor%s 'elie"s 'out the industr# itsits

assumptionsassumptions

A !ompetitor%s A !ompetitor%s capabilitiescapabilities


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Cometitor Analysis #$ont%d&Cometitor Analysis #$ont%d&

Do do our golsDo do our gols

!ompre ith our!ompre ith our

!ompetitors% gols!ompetitors% gols

Where ill the emphsisWhere ill the emphsis

'e pl!ed in the "uture'e pl!ed in the "uture Wht is the ttitudeWht is the ttitude

tord ristord ris

'tre (b)ectives'tre (b)ectives


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Do re e !urrentl#Do re e !urrentl#

!ompeting!ompeting

&oes this strteg#&oes this strteg#

support !hnges in thesupport !hnges in the

!ompetitive stru!ture!ompetitive stru!ture


Crrent $trate&yCrrent $trate&y


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&o e ssume the&o e ssume the

"uture ill 'e voltile"uture ill 'e voltile Are e operting under Are e operting under

sttus @uo sttus @uo

Wht ssumptions doWht ssumptions do

our !ompetitors holdour !ompetitors hold'out the industr# nd'out the industr# nd

themselvesthemselves



Assm*tionsAssm*tions


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Wht re our strengthsWht re our strengths

nd enessesnd enesses

Do do e rteDo do e rte

!ompred to our!ompred to our

!ompetitors!ompetitors




Ca*abilitiesCa*abilities


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Wht ill ourWht ill our

!ompetitors do in the!ompetitors do in the"uture"uture

Where do e hold nWhere do e hold n

dvntge over ourdvntge over our

!ompetitors!ompetitors

Do ill this !hngeDo ill this !hnge

our reltionship ithour reltionship ith

our !ompetitorsour !ompetitors

Res*onseRes*onse'tre (b)ectives'tre (b)ectives



Ca*abilitiesCa*abilities


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ComlementorsComlementors

:omplementors:omplementors The netor o" !ompnies tht sell !omplementr#The netor o" !ompnies tht sell !omplementr#

produ!ts or servi!es or re !ompti'le ith the "o!lprodu!ts or servi!es or re !ompti'le ith the "o!l

"irm%s on produ!t or servi!e."irm%s on produ!t or servi!e.

," !omplementor%s produ!t or servi!e dds vlue," !omplementor%s produ!t or servi!e dds vlueto the sle o" the "o!l "irm%s produ!t or servi!e; itto the sle o" the "o!l "irm%s produ!t or servi!e; it

is liel# to !rete vlue "or the "o!l "irm.is liel# to !rete vlue "or the "o!l "irm.

Doever; i" !omplementor%s produ!t or servi!e isDoever; i" !omplementor%s produ!t or servi!e is

in mret into hi!h the "o!l "irm intends toin mret into hi!h the "o!l "irm intends toexpnd; the !omplementor !n represent expnd; the !omplementor !n represent

"ormid'le !ompetitor."ormid'le !ompetitor.


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Ethi$al ConsiderationsEthi$al Considerations

4r!ti!es !onsidered 'oth legl nd ethi!l34r!ti!es !onsidered 'oth legl nd ethi!l3='tining pu'li!l# vil'le in"ormtion='tining pu'li!l# vil'le in"ormtion

Attending trde "irs nd shos to o'tin !ompetitors% Attending trde "irs nd shos to o'tin !ompetitors%

'ro!hures; vie their exhi'its; nd listen to'ro!hures; vie their exhi'its; nd listen to

dis!ussions 'out their produ!tsdis!ussions 'out their produ!ts

4r!ti!es !onsidered 'oth unethi!l nd illegl34r!ti!es !onsidered 'oth unethi!l nd illegl3

>l!mil>l!mil

TrespssingTrespssingEvesdroppingEvesdropping

Steling drings; smples; or do!umentsSteling drings; smples; or do!uments

The External Environment Opportunities, Threats,Industry Com

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