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SMGT T3 (Ch3): Evaluating a company's external environment (PESTEL -…
SMGT T3 (Ch3): Evaluating a company's external environment
PESTEL - the 'macro-environment' (50)
Technological
Environmental (natural)
Sociocultural
Economic
Legal/Regulatory
Political
IMPORTANT: Go back and do activity 3.1 online - it is collaborative
Questions on the industry and competitive environment
What are the driving forces in the industry, and what impact will they have on competitive intensity and industry profitability?
What market positions do industry rivals occupy - who is strongly positioned and who is not?
How strong are the industry's competitive forces?
What strategic moves are rivals likely to make next?
What are the industry's key success factors?
Is the industry outlook conducive to good profitability?
Strategic group mapping (steps) (71)
Identify industry competitive characteristics
Degree of vertical integration (none, partial, full)
Use of distribution channels (retail, wholesale, online, multiple)
Level of service offering (no frills, limited, full)
Product-line breadth (wide, narrow)
Geographic coverage (local, national, global)
Price/quality range (low, medium, high)
Degree of diversification (none, some, considerable)
Plot companies using two of the characteristics (uncorrelated pair)
Assign clusters of companies to strategic groups
Circle each group in proportion to the group market share
Purpose (73)
Identify what areas on the map are more/less profitable
Identify 'white space' - a gap in the market
Identify close competitors v distant ones
Porter's 5 forces framework (51)
Forces
Threat of new entrants (58)
Reaction of existing firms (55)
Barriers to entry (55-)
Threat of substitute products (59)
Supplier bargaining power (61)
Rivalry between competitors (52) - (weapons of choice table 3.2 (55))
Customer bargaining power (63)
Used for analysing an industry's competitive forces on company strategy
Steps:
Evaluate the strength of the pressures, i.e. strong/moderate/weak
Determine if the overall picture supports high industry profitability
Identify parties involved for each force and the factors that create competitive pressure
Matching strategy to competitive forces can insulate the impact (65)
Key success factors (KSFs) (75)
Baseline factors that must be addressed by ALL companies in an industry
Up to five or six for the industry
Two or three most important ones
Use 3 questions (76) to determine KSFs
ARTICLE: External environmental analysis for SMEs (2010)
Possible approaches
Critical success factors (CSFs)
'What if' analysis
SWOT analysis
Stakeholder analysis
'Degrees of Turbulence' model
Forces of change
Supplier requirements
Regulatory changes
Customer expectations
Increasing competition
Technological advances
Steps
Assign an quantitative value to each force (0 to 8)
Assess the strength of the force for each force (1 to 9)
Multiply out each force, then add totals together (Max 360)
Interpret and act accordingly
5(Force of Change x Strength of change) = Degrees of Turbulence (max. 360)
Other tools
Competitor analysis (74) - Porter's 'Framework for competitive analysis
Value net analysis (66)
Alternative to five forces view
Combines some factors of five forces
Adds complementors into the mix
Takes a cooperative approach to analysis as well as a competitive view
Industry 'driving forces' of change (70)