Business Strategy Chapter 4 Evaluating a Company’s External Environment

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Slide 1: Evaluating a Company’s External Environment.

Slide 2: Understanding  the  Factors  that  Determine  a  Company’s  Situation

•     —Diagnosing a company’s situation has two facets :

1. —Assessing the company’s external or macro-environment.

—Industry and competitive conditions.

—Forces acting to reshape this environment.

1. Assessing the company’s internal or  micro-environment.

—Market position and competitiveness.

—Competencies, capabilities, resource strengths
and weaknesses, and competitiveness.

 

Slide 3: From Thinking Strategically about the Company’s Situation to Choosing a Strategy:

Slide 4: The Components of a Company’s  Macro-environment:

    

Slide 5: Thinking  Strategically  about  a Company’s  Macro-environment

• —   A company’s macro-environment includes all relevant factors and influences outside its boundaries
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•     —Diagnosing a company’s external situation involves assessing strategically important factors that have a bearing on the decisions a company’s makes about its

•   —Direction
• —  Objectives
• —  Strategy
•   —Business model
• 
  
• 
  
• 
  
• —   Requires that company managers scan

the external environment to

•   —Identify potentially important external developments
•   —Assess their impact and influence
• —  Adapt a company’s direction and strategy as needed

Slide 6: Key  Questions  Regarding  the Industry  and  Competitive  Environment:

1. What are the industry’s dominant economic traits?
2. How strong are competitive forces?
3. What forces are driving change in the industry?
4. What market positions do rivals occupy? What moves will they make next?
5. What are the key factors for competitive success?
6. How attractive is the industry from a profit perspective? 

Slide 7: What are the industry’s dominant economic traits?

1.   —Market size and growth rate
2. —  Number of rivals
3.   —Scope of competitive rivalry
4. —  Buyer needs and requirements
5. —  Degree of product differentiation
6.   —Product innovation
7.   —Supply/demand conditions
8. —  Pace of technological change
9.   —Vertical integration
10.   —Economies of scale
11.   —Learning and experience curve effects

Slide 8: 

Slide 9: What  Kinds  of Competitive Forces  Are  Industry  Members  Facing?

• —  Objectives are to identify

1.  —Main sources of competitive forces
2. — Strength of these forces

• —  Key analytical tool

1.  —Five Forces Model of Competition

Slide 10: The Five Forces Model of Competition

Slide 11: Analyzing  the  Five Competitive  Forces:  How  to  Do  It:

Step 1:  Identify the specific competitive pressures associated with each of the five forces.

Step 2:  Evaluate the strength of each competitive force -- fierce, strong, moderate to normal, or weak? 

Step 3:  Determine whether the collective strength of the five competitive forces is conducive to earning attractive profits.

Slide 12: Weapons for Competing and Factors Affecting Strength of Rivalry:

Slide 13: Factors Affecting Threat of Entry

Slide 14: Factors Affecting Competition From Substitute Products

 

Slide 15: Factors Affecting Bargaining Power of Suppliers

Slide 16: Factors Affecting Bargaining Power of Buyers