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External environment for THE organizations - Coggle Diagram
External environment for THE organizations
Strategic group analysis
three steps involved in the analysis and graphical representation of strategic groups
Identify the important competitive dimensions in an industry, taking into account the information you have available
Construct two-dimensional plots of the competitive dimensions
Analyse the firm’s position relative to competitors
Strategy groups consist of organizations:
possessing (or potentially possessing) similar competencies;
serving customer needs in the same market segment
producing products or services of similar quality
Competitor profiling
Overview
Objectives
Resources
Past record of performance
Current Products and services
Present strategies
Industry analysis
Porter's five forces model of industry analysis
Force 1: The threat of new entrants to the industry
The capital costs of entry
The higher the investment required, the less the threat from new entrants is likely to be: hotel, cruise line, airline
can be avoided by separating ownership from the management of the assets
a property company own the physical assets but a hotel operator manages the hotel
The lower the required investment, the greater the threat: tour operator travel agents
Brand loyalty and customer switching costs
Differentiated products and services create customers loyalty for a particular brands, which resist new entrants
Switching costs are imposed through customer loyalty schemes such as Guest Loyalty programs.
Economic of scale or scope available to existing competitors
Obtaining substantial economies of scale gives existing competitors an advantage over new competitors who will not be match their lower unit costs of production
Access to input and distribution channels
It is difficult to gain access to channels of distribution
The resistance offered by existing businesses
existing competitors seek to strengthen the barriers to entry by:
Increasing the costs of entry
Tying up input and distribution channels
Government regulation
The institutional environment plays a very important role in regulating competition
The government intervenes in
the formulation of investment policy
its implementation and even in firms' operations
Force 2: The threat of substitute products
The extent to which the price and performance of the substitute can match the industry's product
Industry's product
The more indirect the substitute, the less likely the price and performance will be comparable
THE products will compete for disposal income with other high-cost items such as cars and white goods
The willingness of buyers to switch to the substitute
Buyers will be more willing to switch if
Switching costs are low
competitors products offer lower price
competitors products offer improved performance
Competitors will attempt to reduce the threat from substitute products by
improving the performance
reducing costs and prices
differentiation
Force 3: The bargaining power of buyers
the relative power of buyers is likely to be most powerful when
there are few of them and they purchase large quantities
there are a large number of suppliers;
the size of the buyers is large relative to the size of the suppliers
switching costs for buyers from one product supplier to another are low
substitute products are available;
switching costs between suppliers is low
Force 4: The bargaining power of suppliers
suppliers to an industry are likely to be most powerful when
the resource that they supply is scarce
there are few substitutes for it
switching costs are high
they supply the resource to several industries
the suppliers themselves are large
the organizations in the industry buying the resource are small
Force 5: The intensity of rivalry among competitors in the industry
The relative size of competitors
When competitors in a sector are of roughly equal size
There is a possibility that rivalry is increased
profits fall as a result of this increased rivalry
The nature of costs in industry sectors
If sectors of an industry have high fixed costs in that they are capital intensive, rivalry amongst competitors may become more intense as price-cutting becomes a way of filling capacity.
The maturity of the markets served
If the market is mature and thus only growing slowly competition is likely to be more intense than a market that is still growing vigorously
The degree of brand loyalty of customers.
If customers are loyal to brands then there is likely to be less competition and what competition there is will be non-price.
The degree of differentiation
The more easily differentiated products are, the less intense the rivalry are
Government regulation
government controls over the international hotel sector are rare other than through normal planning restrictions.
The height of exit barriers
overcapacity may persist in such sectors for a period of time leading to increased rivalry between competitor
industry produce goods and services - the supply side of the economic system
Industry and market critical success factors
For THE organizations, CSFs are likely to lie in areas such as
the reputation of the brand
service excellence
product range
product features
distribution
innovation
CSFs and KPIs
CSFs are concerned with those factors or elements without which the strategy would not be
successful
KPIs are measures that quantify management objectives and enable the measurement of strategic performance.