Business plan

Analysing the strategic environment

Useful to take the tools in the following sequence, when you have unlimited word-length; for the assignment, you will need to select out of the nine:

1. General evaluation: market size, growth and share

2. Degree of turbulence

3. Factors affecting many industries: PESTEL analysis

USE COUNTRY RANKINGS

USE PESTEL SUMMARY FROM GLOBAL COMPETITIVENESS INDEX

4. Growth: Industry Life-cycle analysis

5. Factors specific to the industry: Key factors for success

6. Factors specific to competition: Five Forces analysis

7. Factors specific to co-operation: Four Links analysis (this could be done under Strategy Formulation)

8. Factors specific to immediate competitors

9. Customer analysis: demand, segmentation and positioning

Step 2: Measure the degree of turbulence

Low High

Turbulence level

• Changeability: the degree to which the environment is likely to

change

• Predictability: the degree to which such changes can be predicted

• When changeability is are high, essential to use emergent

processes

· Changeability

· Complexity? How simple or complex?

· Degree of novelty? Experienced previously? Very different from past?

· Predictability

· Rate of change? Fast or slow?

· Visibility? Forecastable or unpredictable? Can you see it coming over the horizon?

Step 3: Factors influencing many industries PESTEL

Analysis

• Consider the general environment surrounding many businesses under six main headings:

– Political

– Economic

– Sociological

– Technological

– Environmental

– Legal

Step 4: Industry Life-Cycle Analysis

Sales

Growth

Maturity

Decline

Introduction

Cash user phases Cash generator phases

Time

(Step 5: Factors specific to the industry

Key Factors for Success

• Many industries or markets have factors that are essential to deliver profits in that market: the key factors for success (KFS)

• Useful to identify KFS because they will help set the agenda for strategy: if strategy fails to address these issues, it may fail completely

• Useful also because there are many possible issues that might be considered by strategic management: KFS helps to select the key issues

Step 6: Factors specific to competition

Porter’s Five Forces analysis

• Underpinning logic: economic power in the market place

• Key question: how much bargaining power does a company have against the five forces acting against it?

• The Five Forces: each with an example of their power

1. Industry competitors – e.g. some may have stronger brands

2. Customers – e.g. may be large enough to dictate buying terms

3. Suppliers – e.g. perhaps supplying a unique ingredient

4. Substitutes for the company’s products – e.g. may be cheaper

5. Potential new entrants – e.g. could enter the market with

new technology and threaten the company’s existence

See textbook page

Step 9: Customer analysis

Demand, Segmentation and Positioning

The following aspects need to be explored:

• Customer demand

• Market segmentation

• Market positioning

• Pricing, quality and servicing

• Present strategies

Examine in depth for company’s products

Keypoint: Competitive analysis is important in strategy, but ultimately it is the

Customers who make the buying decision