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STRATEGIC MANAGEMENT & BUSINESS POLICY
12TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER
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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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Identifying External Environmental Variables
Natural environment
Physical resources Wildlife
Climate
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Identifying External Environmental Variables
Societal environment- social systems that influencelong-term decisions
Economic forces
Technological forces
Political-legal forces
Sociocultural forces
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Identifying External Environmental Variables
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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Identifying External Environmental Variables
Industry analysis- an in-depth examination ofkey factors within a corporations task
environment
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Identifying External Environmental Variables
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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