Docstoc

S. M 3

Document Sample
S. M 3 Powered By Docstoc
					Chapter 3
The External Assessment



    Strategic Management:
        Concepts & Cases
          12th Edition
          Fred David




Copyright © 2009 Pearson Education, Inc.   Ch 3 -1
Publishing as Prentice Hall
  Chapter Outline

                 The Nature of the External Audit



            The Industrial Organization (I/O) View


              Social, Cultural, Demographic, and
                     Environmental Forces


Copyright © 2009 Pearson Education, Inc.             Ch 3 -2
Publishing as Prentice Hall
  Chapter Outline (cont’d)

        Political, Governmental, and Legal Forces



                            Technological Forces



                              Competitive Forces


Copyright © 2009 Pearson Education, Inc.            Ch 3 -3
Publishing as Prentice Hall
  Chapter Outline (cont’d)

                      Porter’s Five-Forces Model



                  Sources of External Information



                  Forecasting Tools & Techniques


Copyright © 2009 Pearson Education, Inc.            Ch 3 -4
Publishing as Prentice Hall
  Chapter Outline (cont’d)

                                Global Challenge



      The External Factor Evaluation (EFE) Matrix



                 Competitive Profile Matrix (CPM)


Copyright © 2009 Pearson Education, Inc.            Ch 3 -5
Publishing as Prentice Hall
 External Assessment

        “It is not the strongest of the species that
        survive, nor the most intelligent, but the one
        most responsive to change.”
        – Charles Darwin


         “Nothing focuses the mind better than the
         constant sight of a competitor who wants to
         wipe you off the map.”
         – Wayne Calloway, Former CEO, PepsiCo
Copyright © 2009 Pearson Education, Inc.               Ch 3 -6
Publishing as Prentice Hall
 External Strategic
 Management Audit



     – Environmental Scanning

     – Industry Analysis




Copyright © 2009 Pearson Education, Inc.   Ch 3 -7
Publishing as Prentice Hall
 External Strategic
 Management Audit

     Identify & evaluate factors beyond the
     control of a single firm
          Increased foreign competition
          Population shifts
          Aging society
          Fear of traveling
          Stock market volatility


Copyright © 2009 Pearson Education, Inc.      Ch 3 -8
Publishing as Prentice Hall
 External Strategic
 Management Audit


    Purpose of External Audit
        Identify
            Opportunities
            Threats




Copyright © 2009 Pearson Education, Inc.   Ch 3 -9
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc.   Ch 3 -10
Publishing as Prentice Hall
 External Audit


     Gather competitive
     intelligence –

              Social
              Cultural
              Demographic
              Environmental
              Governmental
              Legal
              Technological



Copyright © 2009 Pearson Education, Inc.   Ch 3 -11
Publishing as Prentice Hall
 External Audit – Sources of
 Information
   •Internet
   •Libraries
   •Suppliers
   •Distributors
   •Salespersons
   •Customers
   •Competition
Copyright © 2009 Pearson Education, Inc.   Ch 3 -12
Publishing as Prentice Hall
 Performing External Audit




     Key Factors –
            Vary over time
            Vary by industry




Copyright © 2009 Pearson Education, Inc.   Ch 3 -13
Publishing as Prentice Hall
 Performing External Audit –
 Variables


    •Market share
    •Breadth of competing products
    •World economies
    •Foreign affiliates
    •Proprietary account advantages


Copyright © 2009 Pearson Education, Inc.   Ch 3 -14
Publishing as Prentice Hall
 Performing External Audit –
 Variables


    •Price competitiveness
    •Technological advancements
    •Interest rates
    •Pollution abatement



Copyright © 2009 Pearson Education, Inc.   Ch 3 -15
Publishing as Prentice Hall
 Performing External Audit


                                           Long-term Orientation


                                                Measurable
              External
              Factors                         Applicable to
                                             Competing Firms


                                               Hierarchical




Copyright © 2009 Pearson Education, Inc.                           Ch 3 -16
Publishing as Prentice Hall
 Industrial Organization (I/O)
 View



     – Industry factors more important than
     internal factors

            Performance determined by industry forces




Copyright © 2009 Pearson Education, Inc.                 Ch 3 -17
Publishing as Prentice Hall
I/O Perspective Firm Performance



          Industry Properties

                                             Economies of Scale

                                           Barriers to Market Entry

                                            Product Differentiation

                                           Level of Competitiveness




Copyright © 2009 Pearson Education, Inc.                              Ch 3 -18
Publishing as Prentice Hall
Research Findings


    “Approximately 20% of a firm’s profitability
    can be explained by the industry, whereas
    36% of the variance in profitability is
    attributed to the firm’s internal factors”




Copyright © 2009 Pearson Education, Inc.       Ch 3 -19
Publishing as Prentice Hall
Economic Forces


    Trends in the dollar’s value
    European Union
    Layoffs
    Economic standard of living




Copyright © 2009 Pearson Education, Inc.   Ch 3 -20
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc.   Ch 3 -21
Publishing as Prentice Hall
 Social, Cultural, Demographic,
 and Environmental Forces


    Major Impact –
          •Products
          •Services
          •Markets
          •Customers


Copyright © 2009 Pearson Education, Inc.   Ch 3 -22
Publishing as Prentice Hall
 Social, Cultural, Demographic,
 and Environmental Forces

     U.S. Facts
           •Aging population
           •Less Caucasian
           •Widening gap between rich & poor
           •2025 = 18.5% population > 65 years
           •2075 = no ethnic or racial majority

Copyright © 2009 Pearson Education, Inc.          Ch 3 -23
Publishing as Prentice Hall
States with the Highest Percentage of
Minorities
1.     Nevada
2.     Arizona
3.     Georgia
4.     Florida
5.     Idaho
6.     North Carolina
7.     Colorado

Copyright © 2009 Pearson Education, Inc.   Ch 3 -24
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc.   Ch 3 -25
Publishing as Prentice Hall
 Social, Cultural, Demographic,
 and Environmental Forces

     Facts
           •World population approaching 7
           billion
           •World population = 8 billion by 2028
           •World population = 9 billion by 2054
           •U.S. population < 300 million

Copyright © 2009 Pearson Education, Inc.           Ch 3 -26
Publishing as Prentice Hall
Social, Cultural, Demographic,
and Environmental Forces
    Trends
        More American households with people living
         alone
        Aging Americans – affects all organizations
        Population shift to the south and west
        Decimation and degradation of the natural
         environment



Copyright © 2009 Pearson Education, Inc.               Ch 3 -27
Publishing as Prentice Hall
 Social, Cultural, Demographic,
 and Environmental Forces

    Global trends
          •China’s labor rates less than Mexico
          •China provides more site location
          incentives than Mexico




Copyright © 2009 Pearson Education, Inc.          Ch 3 -28
Publishing as Prentice Hall
Natural Environment Perspective
Business Leaders Pushing for Legislation on Climate Change

         10 CEOs pressuring for caps on
          greenhouse-gas omissions
         Desiring a single national
          emissions cap
         Top 5 buyers of green power:
     1.    PepsiCo
     2.    Wells Fargo
     3.    Whole Foods
     4.    U.S. Air Force
     5.    Johnson & Johnson


Copyright © 2009 Pearson Education, Inc.                     Ch 3 -29
Publishing as Prentice Hall
 Social, Cultural, Demographic,
 and Environmental Forces
 21st Century Trends

  •More educated consumers
  •Aging population
  •Minorities more influential
  •Local rather than federal solutions


Copyright © 2009 Pearson Education, Inc.   Ch 3 -30
Publishing as Prentice Hall
 Social, Cultural, Demographic,
 and Environmental Forces (cont’d)

21st Century Trends

  •Fixation with youth decreasing
  •Hispanics increase to 15% by 2021
  •African-American increase to 14% by 2021


Copyright © 2009 Pearson Education, Inc.   Ch 3 -31
Publishing as Prentice Hall
 Key Social, Cultural, Demographic,
 and Environmental Variables

     Childbearing rates

     Number of special interest groups

     Number of marriages & divorces

     Number of births & deaths

     Immigration & emigration rates

Copyright © 2009 Pearson Education, Inc.   Ch 3 -32
Publishing as Prentice Hall
Social, Cultural, Demographic,
and Environmental Forces



                                                Actuarial Rates


         Monitor Key                          Per Capita Income

          Variables                        Attitudes Toward Business

                                            Avg. Disposable Income




Copyright © 2009 Pearson Education, Inc.                               Ch 3 -33
Publishing as Prentice Hall
Social, Cultural, Demographic,
and Environmental Forces



                                             Consumer Behavior


         Monitor Key                          Ethical Concerns

          Variables                        Attitudes Toward Saving

                                               Racial Equality




Copyright © 2009 Pearson Education, Inc.                             Ch 3 -34
Publishing as Prentice Hall
Social, Cultural, Demographic,
and Environmental Forces



                                                Avg. Educational Level


         Monitor Key                           Governmental Regulation

          Variables                        Attitudes Toward Customer Service

                                               Attitudes Toward Quality




Copyright © 2009 Pearson Education, Inc.                                  Ch 3 -35
Publishing as Prentice Hall
Social, Cultural, Demographic,
and Environmental Forces



                                           Energy Conservation


         Monitor Key                       Social Responsibility

          Variables                        Leisure-Time Values

                                                Recycling




Copyright © 2009 Pearson Education, Inc.                           Ch 3 -36
Publishing as Prentice Hall
Social, Cultural, Demographic,
and Environmental Forces



                                           Waste Management


         Monitor Key                       Air & Water Pollution

          Variables                          Ozone Depletion

                                           Endangered Species




Copyright © 2009 Pearson Education, Inc.                           Ch 3 -37
Publishing as Prentice Hall
 Political, Governmental, and
 Legal Forces

   Government Regulation

      Key opportunities & threats
              Antitrust legislation
              Tax rates

              Lobbying efforts

              Patent laws




Copyright © 2009 Pearson Education, Inc.   Ch 3 -38
Publishing as Prentice Hall
 Political, Governmental, and
 Legal Forces

   Increasing Global Interdependence


       Political variables impact –
            Formulation of strategies
            Implementation of strategies



Copyright © 2009 Pearson Education, Inc.    Ch 3 -39
Publishing as Prentice Hall
 Political, Governmental, and
 Legal Forces

   Increasing Global Interdependence


       Strategists in a global economy –
            Forecast political climates
            Legalistic skills
            Diverse world cultures


Copyright © 2009 Pearson Education, Inc.   Ch 3 -40
Publishing as Prentice Hall
 Political, Governmental, and
 Legal Forces

   Globalization of Industry
     Worldwide trend toward similar
      consumption patterns
     Global buyers and sellers
     E-commerce
     Technology for instant currency transfers


Copyright © 2009 Pearson Education, Inc.          Ch 3 -41
Publishing as Prentice Hall
 Key Political, Governmental, and Legal
 Variables

     Regulation/deregulation

     Tax law changes

     Special tariffs

     PAC’s

     Voter participation rates

Copyright © 2009 Pearson Education, Inc.   Ch 3 -42
Publishing as Prentice Hall
 Key Political, Governmental, and Legal
 Variables (cont’d)

     Number of patents

     Changes in patent laws

     Environmental protection laws

     Equal employment legislation

     Government subsidies

Copyright © 2009 Pearson Education, Inc.   Ch 3 -43
Publishing as Prentice Hall
 Key Political, Governmental, and Legal
 Variables (cont’d)

     Anti-trust enforcement

     Global relationships

     Import/export regulations

     Political conditions

     Location and severity of terrorist activity

Copyright © 2009 Pearson Education, Inc.           Ch 3 -44
Publishing as Prentice Hall
 Technological Forces



    Major Impact –
          •Internet
          •Communications
          •Semiconductors



Copyright © 2009 Pearson Education, Inc.   Ch 3 -45
Publishing as Prentice Hall
 Technological Forces



    Significance of IT
          •Chief Information Officer (CIO)
          •Chief Technology Officer (CTO)




Copyright © 2009 Pearson Education, Inc.     Ch 3 -46
Publishing as Prentice Hall
 Technological Forces

   Technology-based issues



    Essential for nearly every strategic decision




Copyright © 2009 Pearson Education, Inc.            Ch 3 -47
Publishing as Prentice Hall
 Competitive Forces



    Collection & evaluation of data on
    competitors is essential for successful
    strategy formulation




Copyright © 2009 Pearson Education, Inc.      Ch 3 -48
Publishing as Prentice Hall
 Competitive Forces



    Competition on virtually all industries can be
    described as intense




Copyright © 2009 Pearson Education, Inc.             Ch 3 -49
Publishing as Prentice Hall
 Competitive Forces
   Identifying Rival Firms

     •Strengths
     •Weaknesses
     •Capabilities
     •Opportunities
     •Threats
     •Objectives
     •Strategies

Copyright © 2009 Pearson Education, Inc.   Ch 3 -50
Publishing as Prentice Hall
 Key Questions Concerning Competitors


     Their strengths

     Their weaknesses

     Their objectives and strategies

     Their responses to external variables

     Their vulnerability to our alternative strategies

Copyright © 2009 Pearson Education, Inc.            Ch 3 -51
Publishing as Prentice Hall
 Key Questions Concerning Competitors (cont’d)


     Our vulnerability to strategic counterattack

     Our product/service positioning

     Entry and exit of firms in the industry

     Key factors for our current position in industry

     Sales/profit rankings of competitors over time

Copyright © 2009 Pearson Education, Inc.            Ch 3 -52
Publishing as Prentice Hall
 Key Questions Concerning Competitors (cont’d)




    Nature of supplier & distributor relationships


    The threat of substitute products/services


    Should we keep our strategies secret from
    employees and stakeholders?

Copyright © 2009 Pearson Education, Inc.             Ch 3 -53
Publishing as Prentice Hall
 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, BusinessWeek

Copyright © 2009 Pearson Education, Inc.   Ch 3 -54
Publishing as Prentice Hall
 Competitive Forces
   7 Characteristics of Most
   Competitive U.S. Firms:


     1. Market share matters
     2. Understand what business you are in
     3. Broke or not, fix it
     4. Innovate or evaporate



Copyright © 2009 Pearson Education, Inc.      Ch 3 -55
Publishing as Prentice Hall
 Competitive Forces
   7 Characteristics of Most
   Competitive U.S. Firms:


     5. Acquisition is essential to growth
     6. People make a difference
     7. No substitute for quality




Copyright © 2009 Pearson Education, Inc.     Ch 3 -56
Publishing as Prentice Hall
  The Five-Forces Model of Competition




Copyright © 2009 Pearson Education, Inc.   Ch 3 -57
Publishing as Prentice Hall
Steps to Determine if an Acceptable
Profit Can Be Earned
1.     Identify key aspects or elements of each
       competitive force
2.     Evaluate how strong and important each
       element is for the firm
3.     Decide whether the collective strength of
       the elements is worth the firm entering or
       staying in the industry


Copyright © 2009 Pearson Education, Inc.        Ch 3 -58
Publishing as Prentice Hall
 The Five-Forces Model


   Rivalry Among Competing Firms

      Most powerful of the five forces
      Focus on competitive advantage of
       strategies




Copyright © 2009 Pearson Education, Inc.   Ch 3 -59
Publishing as Prentice Hall
 The Five-Forces Model


   Potential Entry of New Competitors

      Barriers to entry are important
      Quality, pricing, and marketing can
       overcome barriers




Copyright © 2009 Pearson Education, Inc.     Ch 3 -60
Publishing as Prentice Hall
 The Five-Forces Model


   Potential Development of Substitute
   Products

      Pressures increase when consumers’
       switching costs decrease
      Firm’s plans for increased capacity &
       market penetration

Copyright © 2009 Pearson Education, Inc.       Ch 3 -61
Publishing as Prentice Hall
 The Five-Forces Model


   Bargaining Power of Suppliers

      Large number of suppliers & few
       substitutes affects intensity of competition
      Backward integration can gain control or
       ownership of suppliers


Copyright © 2009 Pearson Education, Inc.         Ch 3 -62
Publishing as Prentice Hall
 The Five-Forces Model


   Bargaining Power of Consumers

      Customers concentrated or buying in
       volume affects intensity of competition
      Consumer power is higher where products
       are standard or undifferentiated


Copyright © 2009 Pearson Education, Inc.   Ch 3 -63
Publishing as Prentice Hall
Conditions Where Consumers Gain
Bargaining Power
    If they can inexpensively switch
    If they are particularly important
    If sellers are struggling in the face of falling
     consumer demand
    If they are informed about sellers’ products,
     prices, and costs
    If they have discretion in whether and when
     they purchase the product

Copyright © 2009 Pearson Education, Inc.          Ch 3 -64
Publishing as Prentice Hall
Forecasting Tools and Techniques


    Forecasts are educated assumptions about
     future trends and events
        Quantitative techniques – most appropriate when
         historical data is available and there is a constant
         relationship
        Qualitative techniques




Copyright © 2009 Pearson Education, Inc.                 Ch 3 -65
Publishing as Prentice Hall
 The Global Challenge


    Faced by U.S. Firms –
          •Gain & maintain exports to other
          nations
          •Defend domestic markets against
          imported goods




Copyright © 2009 Pearson Education, Inc.      Ch 3 -66
Publishing as Prentice Hall
Global Perspective
China’s Automobile Producers Heading to the United States in 2008

    China’s auto exports doubled in 2006
    China produces more cars than Germany and is the
     world’s third largest automobile producer
    Changfeng Group first Chinese automaker in the Detroit
     Auto Show




Copyright © 2009 Pearson Education, Inc.                   Ch 3 -67
Publishing as Prentice Hall
 The Global Challenge


   Multinational Corporations (MNCs)

   Simultaneously globally competitive &
   nationally responsive




Copyright © 2009 Pearson Education, Inc.   Ch 3 -68
Publishing as Prentice Hall
 The Global Challenge


   Globalization
    Worldwide integration of:
          Strategy formulation
          Strategy implementation
          Strategy evaluation

Copyright © 2009 Pearson Education, Inc.   Ch 3 -69
Publishing as Prentice Hall
 The Global Challenge

   Globalization of Industries

    Similar consumption patterns
    Global buyers and sellers
    E-commerce
    Instant transmission of money &
    information

Copyright © 2009 Pearson Education, Inc.   Ch 3 -70
Publishing as Prentice Hall
 Industry Analysis: The External Factor
 Evaluation (EFE) Matrix

  Summarize & Evaluate


      Economic                   Demographic       Governmental

         Social                 Environmental      Technological

        Cultural                       Political   Competitive

Copyright © 2009 Pearson Education, Inc.                       Ch 3 -71
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc.   Ch 3 -72
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc.   Ch 3 -73
Publishing as Prentice Hall
 Industry Analysis EFE


     Total weighted score of 4.0
               Organization response is outstanding to threats
                and weaknesses




     Total weighted score of 1.0
               Firm’s strategies not capitalizing on opportunities
                or avoiding threats


Copyright © 2009 Pearson Education, Inc.                       Ch 3 -74
Publishing as Prentice Hall
 Industry Analysis EFE


     Important –


      Understanding the factors used in the EFE
      Matrix is more important than the actual
      weights and ratings assigned.



Copyright © 2009 Pearson Education, Inc.     Ch 3 -75
Publishing as Prentice Hall
 Industry Analysis: Competitive Profile
 Matrix (CPM)


       Identifies firm’s major competitors and
       their strengths & weaknesses in
       relation to a sample firm’s strategic
       positions



Copyright © 2009 Pearson Education, Inc.   Ch 3 -76
Publishing as Prentice Hall
 Industry Analysis CPM


     Important –


      Just because one firm receives a 3.2 rating
      and another receives a 2.8 rating, it does not
      follow that the first firm is 20 percent better
      than the second.


Copyright © 2009 Pearson Education, Inc.        Ch 3 -77
Publishing as Prentice Hall
 For Review (Chapter 3)

      Key Terms & Concepts

                     AOL                    Competitive Analysis

      Chief Information Officer            Competitive Intelligence
                (CIO)                                (CI)

      Chief Technology Officer               Competitive Profile
               (CTO)                           Matrix (CPM)

       Competitive Advantage                     Decruiting

Copyright © 2009 Pearson Education, Inc.                           Ch 3 -78
Publishing as Prentice Hall
 For Review (Chapter 3)

      Key Terms & Concepts

       Director of Competitive             External Factor Evaluation
              Analysis                           Matrix (EFE)

                Downsizing                      External Forces


      Environmental Scanning                   Industry Analysis

                                            Industrial Organization
              External Audit
                                                      (I/O)

Copyright © 2009 Pearson Education, Inc.                           Ch 3 -79
Publishing as Prentice Hall
 For Review (Chapter 3)

      Key Terms & Concepts

       Information Technology
                                            Lifecare Facilities
                 (IT)

                                           Porter’s Five-Forces
                   Internet
                                                  Model

           Learning from the
                                               Rightsizing
                Partner

           Linear Regression                World Wide Web

Copyright © 2009 Pearson Education, Inc.                          Ch 3 -80
Publishing as Prentice Hall
 For Review (Chapter 3)


      Key Terms & Concepts


                                  Tax Harmonization



                            Foreign Direct Investment




Copyright © 2009 Pearson Education, Inc.                Ch 3 -81
Publishing as Prentice Hall
      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 of America.




Copyright © 2009 Pearson Education, Inc.                                            Ch 3 -82
Publishing as Prentice Hall

				
DOCUMENT INFO
Shared By:
Tags:
Stats:
views:12
posted:10/22/2011
language:English
pages:82