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Strat Management Exam Prep (Section A (PESTLE (Megatrends- large scale…
Strat Management Exam Prep
Section A
PESTLE
Consider political impact within industry e.g. high gov involvement in defence industries
Social Factors- changing cultures & demographics
Tech Factors-nano tech/ rise of new tech
Ecological factors
Green issues- pollution waste/ climate change. Regulations that protect these.
Legal Factors
Legislative constraints or changes- competition law/health and safety laws etc.
Megatrends- large scale changes, slow to form
Influence many other activities over decades to come e.g. ageing populations and increased economic growth
Inflextion points- trends shift sharply up or down.
Weak signals- advanced signs of future trends that may help to identify inflexion points
Mortgage failures in California in 2007 were weak signal for financial crisis that hit global economy in 2008
Applying framework
Apply selectively- identify specific factors which impact on the industry, market and org in question
Identify whats important now but also what will become important in next few years
Use data to support points and analyse trends, identify opportunities and threats- main point of exercise
Industry Attractiveness- 5 Forces
Stages
Bargaining power of suppliers
Suppliers are this who supply orgs with what they need to produce the product or service
Powerful suppliers can reduce orgs profits
Supplier power is high when
Suppliers are concentrated
Suppliers provide specialist or rare input
Switching costs are high
Suppliers can integrate forwards e.g. low cost airlines cutting out the use of travel agents
Bargaining power of buyers
Buyers are orgs immediate customers not always the ultimate consumers
If buyers are powerful they can demand cheap prices or product/service improvements to reduce profits
Buyer power likely to be high when
Buyers have low switching costs
Buyers can supply their own inputs
Buyers are concentrated
Threat of substitute (products or services)
Substitutes offer similar benefit to an industry 's products or services but are from outside the industry
Customers will switch if
The price/performance ratio of the substitute is superior
Or substitute benefits from an innovation
Industry rivalry
Threat of new entrants
Barriers to entry are factors that need to be overcome by new entrants if they are to compete
Main barriers
economies of scale
Experience & Learning
Access to supply and distribution channels
Market penetration costs & differentiation
Legal barriers e.g. licensing
Retaliation from incumbents
The Framework
Competitive rivals are orgs with similar products/services aimed at same customer group and are direct competitors in the same industry/market
Rivalry increases when
Competitors are of roughly equal size
Competitors are aggressive in seeking leadership
The market is mature or declining
There are high fixed costs
Exit barriers are high
Exit barriers are high
there is a low level of differentiation
Implications of 5 forces
identifies attractiveness of industries
what influence can be exerted
forces will have different impact of different orgs e.g. large & small firms with barriers to entry
Types of industry
monopolistic - firm with dominant position in the market e.g. google in search engine market
oligopolistic- industry dominated by a few with limited rivalry- firms have power over buyers and suppliers
Perfectly competitive- barriers to entry low many equal rivals- few markets are perfect but many have features of highly competitive markets e.g. mini cabs in london
Hypercompetitive- frequency boldness & aggression of competitor interactions accelerate to create constant change e.g. mobile phones
Industry Life Cycle
Stages
Development
low rivalry- innovation key
Growth
Low rivalry - high growth & weak buyers lows barriers
Shake-out
Increase in rivalry slower growth , managerial and financial strength key
Maturity
Low growth standard products but higher entry barriers, market share and cost key
Decline
Extreme rivalry typically many exist and price competition -cost and commitment key
Strat groups
orgs within an industry of sector with similar strat characteristics/ or competing on similar bases
helps to understand comp
helps identify strat spaces within an industry
mobility barriers- obstacles of movement from one strat group to another
Market Segments
A market segment is a group of customers who have similar needs that are different from customer needs in other parts of the market
customer groups are small- niches
customer needs vary- focusing on distinctive needs can help build secure segment strat
Not all segment s are attractive or viable - evaluation needed
Framework for comp analysis
strat- how is firm competing
obj- where are the competitors current goals- their performance
assumptions- what assumptions do competitors hold
Competitors - resources and capabilities
Competitor Analysis
Blue Ocean Strat
VMOST
Vision- where the org wants to be, its long term goals
Mission- the orgs purpose what it is in business to do
Objectives- Shorter-term, specific targets to achieve x by y
Strat- what is going to do to achieve its vision and obj
Tactics- the means of delivering the strat or how to do it
Strat capabilities
Threshold capabilities
Tangible or Intangible
needed for an org to meet requirements to compete in a given market and achieve parity with competition -qualifiers
Distinctive capabilities
those that are required to achieve comp advantage- distinctive or unique are of value to customers and which competitors find difficult to imitate. -winners
Capabilities for comp advantage
Unique resources- tangible or intangible
Key issues
What are strat capabilities
How do strat capabilities contribute to comp advantage and superior performance
How to diagnose them and then how to manage the development of strat capabilities
VRIO
Value
Do resources enable a firm to exploit an external opp or neutralise an external threat
Rarity
how many competing firms already have valuable resources and strengths
Inimitability
Can it be copied, do firms face a cost disadvantage in obtaining or developing it.
Organisational support
is a firm organised to exploit the full competitive potential of its resources & capabilities
Valuable- N, Exploited by Org- N = Competitive Disadvantage
Valuable- Y, Rare- N, Exploited-N = Competitive equality
Valuable- Y, Rare- Y. Other two N= Temporary competitive advantage
Everything Y= Sustained Comp Advantage