Strategic Management Slides - Chapter 3 "the External Assessment"
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Strategic Management Slides - Chapter 3 "the External Assessment"
- 1. Fred R. David Prentice Hall Ch.3-1 Chapter 3 The External Assessment Strategic Management: Concepts and Cases. 9th edition Fred R. David PowerPoint Slides by Anthony F. Chelte Western New England College
- 2. Fred R. David Prentice Hall Ch.3-2 Chapter Outline • The Nature of an External Audit • The Industrial Organization View • Economic Forces • Social, Cultural, Demographic, and Environmental Forces
- 3. Fred R. David Prentice Hall Ch.3-3 Chapter Outline • Political, Governmental, and Legal Forces • Technological Forces • Competitive Forces
- 4. Fred R. David Prentice Hall Ch.3-4 The External Assessment Prediction is very difficult, especially about the future. -- Neils Bohr
- 5. Fred R. David Prentice Hall Ch.3-5 External Strategic Management Audit Also called: – Environmental scanning – Industry analysis
- 6. Fred R. David Prentice Hall Ch.3-6 External Strategic Management Audit External Audit: – Identification and evaluation of trends and events beyond control of single firm • Increased foreign competition • Populations shifts • Aging society • Information technology • Computer revolution
- 7. The Industrial Organization (I/O) View • The Industrial Organization (I/O) approach to competitive advantage advocates that external (industry) factors are more important than internal factors in a firm achieving competitive advantage. Fred R. David Prentice Hall Ch.3-7
- 8. Fred R. David Prentice Hall Ch.3-8 Purpose: – Development of Finite List: • Opportunities • Threats to be avoided Nature of External Audit
- 9. Fred R. David Prentice Hall Ch.3-9 Five (5) broad categories: 1. Economic forces 2. Social, cultural, demographic, & environmental forces 3. Political, governmental, and legal forces 4. Technological factors 5. Competitive forces Key External Forces
- 10. Fred R. David Prentice Hall Ch.3-10 Relationships Between Key External Forces and an Organization Key External Forces Competitors Suppliers Distributors Creditors Customers Employees Communities Managers Stockholders Labor Unions Special Interest Groups Products Services Opportunities & Threats
- 11. Fred R. David Prentice Hall Ch.3-11 Performing an External Audit Gather competitive intelligence on factors: – Social – Cultural – Demographic – Environmental – Economic – Political, legal, governmental – technological
- 12. Fred R. David Prentice Hall Ch.3-12 Performing an External Audit Key factors: – Vary over time – Vary by industry
- 13. Fred R. David Prentice Hall Ch.3-13 Performing an External Audit Variables include: – Market share – Breadth of competing products – World economies – Foreign affiliates – Proprietary account advantages – Price competitiveness – Technological advancements – Interest rates – Pollution abatement
- 14. Fred R. David Prentice Hall Ch.3-14 Economic Forces Monitor Key Economic Variables: Availability of credit Level of disposable income Interest rates Inflation rates Money market rates Federal government budget deficits Gross domestic product trend Consumption patterns
- 15. Fred R. David Prentice Hall Ch.3-15 Monitor Key Economic Variables: • Unemployment trends • Worker productivity levels • Value of the dollar in world markets • Stock market trends • Foreign countries’ economic conditions • Import/export factors • Demand shifts for goods/services • Income differences by region/customer •
- 16. Fred R. David Prentice Hall Ch.3-16 Monitor Key Economic Variables: • Price fluctuations • Exportation of labor & capital • Monetary policies • Fiscal policies • Tax rates • ECC policies • OPEC policies • LDC policies
- 17. Fred R. David Prentice Hall Ch.3-17 Social, Cultural, Demographic & Environmental Forces Major impact on: – Products – Services – Markets – customers
- 18. Fred R. David Prentice Hall Ch.3-18 Social, Cultural, Demographic & Environmental Forces • World population > 6 billion • U.S. population < 300 million • Great potential for domestic production expansion to other markets • Domestic only is a risky strategy
- 19. Fred R. David Prentice Hall Ch.3-19 Social, Cultural, Demographic & Environmental Forces Trends for the 2000’s – – More educated consumers – Population aging – Minorities more influential – Local rather than federal solutions – Fixation with youth decreasing – Hispanics increase to 15% by 2021 – African Americans increase to 14% by 2021
- 20. Fred R. David Prentice Hall Ch.3-20 Social, Cultural, Demographic & Environmental Forces Key variables – • Childbearing rates • Number of special-interest groups • Number of marriages • Number of divorces • Number of births • Number of deaths • Immigration & emigration rates
- 21. Fred R. David Prentice Hall Ch.3-21 Monitor Key Variables • Life expectancy rates • Per capita income • Attitudes toward business • Average disposable income • Buying habits • Ethical concerns • Attitudes toward saving
- 22. Fred R. David Prentice Hall Ch.3-22 Monitor Key Variables • Racial equality • Average level of education • Government regulation • Attitudes toward customer service • Attitudes toward product quality • Energy conservation • Social responsibility
- 23. Fred R. David Prentice Hall Ch.3-23 Monitor Key Variables • Value placed on leisure time • Recycling • Waste management • Air & water pollution • Ozone depletion • Endangered species
- 24. Fred R. David Prentice Hall Ch.3-24 Political, Govt., & Legal Forces Government Regulation • Key opportunities & key threats • Antitrust legislation (Microsoft) • Tax rates • Lobbying efforts • Patent laws
- 25. Fred R. David Prentice Hall Ch.3-25 Political, Govt., & Legal Forces Increasing Global Interdependence • Impact of political variables – Formulation of Strategies – Implementation of Strategies
- 26. Fred R. David Prentice Hall Ch.3-26 Political, Govt., & Legal Forces Increasing Global Interdependence • Strategists in a global economy • Forecast political climates • Legalistic skills • Diverse world cultures
- 27. Fred R. David Prentice Hall Ch.3-27 Political, Govt., & Legal Forces Globalization of Industry • Worldwide trend toward similar consumption patterns • Global buyers & sellers • E-commerce • Instant transmission of money & information across continents
- 28. Fred R. David Prentice Hall Ch.3-28 Political, Govt., & Legal Forces Key Political, govt., & legal variables: • Government regulation/deregulation • Tax law changes • Special tariffs • Political Action Committees (PACs) • Voter participation rates • Number of patents • Changes in patent laws
- 29. Fred R. David Prentice Hall Ch.3-29 Technological Forces Internet changes the nature of opportunities and threats -- • Alters life cycle of products • Increases speed of distribution • Creates new products and services • Eases limitations of geographic markets • Alters economies of scale • Changes entry barriers
- 30. Fred R. David Prentice Hall Ch.3-30 Technological Forces Capitalizing on Information Technology (IT) • Chief Information Officer (CIO) • Chief Technology Officer (CTO)
- 31. Fred R. David Prentice Hall Ch.3-31 Technological Forces Technology-based issues – Underlie nearly every strategic decision
- 32. Strategy and Future Forecast • Linear regression is based on the assumption that the future will be just like the past. Fred R. David Prentice Hall Ch.3-32
- 33. Fred R. David Prentice Hall Ch.3-33 Competitive Forces Collection and evaluation of information on competitors is essential for successful strategy formulation
- 34. Fred R. David Prentice Hall Ch.3-34 Competitive Forces Competition in virtually all industries can be described as intense.
- 35. Fred R. David Prentice Hall Ch.3-35 Competitive Forces Identifying rival firms • Strengths • Weaknesses • Capabilities • Opportunities • Threats • Objectives • Strategies
- 36. Fred R. David Prentice Hall Ch.3-36 Competitive Forces Key Questions About Competitors: • Their strengths • Their weaknesses • Their objectives and strategies • Their responses to all external variables (e.g. social, political, demographic, etc.) • Their vulnerability to our alternative strategies
- 37. Fred R. David Prentice Hall Ch.3-37 Competitive Forces Key Questions About Competitors: • Our vulnerability to successful strategic counterattack • Our product and service positioning relative to competitors • Entry and exit of firms in the industry • Key factors for our current position in industry
- 38. Fred R. David Prentice Hall Ch.3-38 Competitive Forces Key Questions About Competitors: • Sales and profit rankings of competitors over time • Nature of supplier and distributor relationships • The threat of substitute products or services
- 39. Fred R. David Prentice Hall Ch.3-39 Competitive Forces Sources of Corporate Information: • Moody’s Manuals • Standard Corporation Descriptions • Value Line Investment Surveys • Dun’s Business Rankings • Standard & Poor’s Industry Surveys • Industry Week • Forbes, Fortune, Business Week
- 40. Fred R. David Prentice Hall Ch.3-40 Competitive Forces Competitive Intelligence Programs: • Systematic and ethical process for gathering and analyzing information about the competition’s activities and general business trends to further a business’ own goals.
- 41. Fred R. David Prentice Hall Ch.3-41 Competitive Analysis: Porter’s Five- Forces Model Potential development of substitute products Rivalry among competing firms Bargaining power of suppliers Potential entry of new competitors Bargaining power of consumers