Exam
Learning Outcomes
Understanding the link between strategy, strategic analysis and competitive advantage
Adopt an awareness of external analysis tools and how these can be applied to support competitive advantage
Acknowledge the strategic role of PMD in competitive advantage
Key message? Context is important!!
2
The external environment plays a critical role in shaping individuals, industries, and businesses.
‘To keep the business ahead of the competition, managers must continually adjust their strategies to reflect the environment in which their businesses operate.’ Tan Chee Teik (2013)
2
The word ‘Strategy’ was initially introduced and defined in the ancient military dictionaries
It comes from the Greek word ‘strategos’, strictly meaning a general in command of an army; it is formed from ‘stratos’, meaning army and ‘ago’, meaning to lead
Used first time in business literature by William Newman (1951)
Strategy......
3
3
Strategic Analysis
‘... A theoretically informed understanding of the environment in which an organisation is operating, together with an understanding of the organisation’s interaction with its environment in order to improve organisational efficiency and effectiveness by increasing the organisation’s capacity to deploy and redeploy its resources intelligently.’
(Professor Les Worrall, Wolverhampton Business School)
4
4
“A market-oriented strategy that establishes a profitable and sustainable market position for the firm against all forces that determine industry competition by continuously creating and developing a competitive advantage from the potential sources that exist in a firm’s value chain.”
Definition of
Competitive
Strategy
5
5
Achieving Competitive Advantage
What makes your firm a better choice over other options in the marketplace?
What is the deciding factor, the thing that really makes the difference?
Examples of Competitive Advantage
Economies of Scale
Functionality
Human factor
Accuracy of Information
Innovative Technology
Employer of choice
Class Question:
Think of an example of an Employer of choice:
What makes them an EOC? What gives them competitive advantage?
Value
proposition
development
PESTLE Analysis
9
Macro environment factors: PESTLE Analysis
PESTLE Analysis
Social-cultural
Technological
Legal
Environment/Ethics
Political
Economical
Meso environment factors: Porter’s five forces
Micro environment factors: SWOT/TOWS
Strategy formation
Implementation
Monitoring and Evaluation
The setting between the macro and micro opportunities. It shapes the framework of a business or organisation and can be considered as its infrastructure: policies, standard operating procedures, rules and guidelines
Advantages:
It’s a simple framework.
It facilitates an understanding of the wider business environment.
It encourages the development of external and strategic thinking.
It can enable an organisation to anticipate future business threats and take action to avoid or minimise their impact.
It can enable an organisation to spot business opportunities and exploit them fully.
Disadvantages:
Some PESTLE analysis users oversimplify the amount of data used for decisions – it’s easy to use insufficient data.
The risk of capturing too much data may lead to ‘paralysis by analysis’.
The data used may be based on assumptions that later prove to be unfounded.
The pace of change makes it increasingly difficult to anticipate developments that may affect an organisation in the future.
To be effective, the process needs to be repeated on a regular basis.
9
Introducing PESTEL
10
10
PESTLE Analysis
11
Carry out a PESTLE Analysis of the external environment of an organisation of choice.
Select the critical factors that could affect the organisation’s PMD Strategy.
Check the HANDOUT on PESTLE Analysis.
30 minutes
11
Michael Porter’s Five Forces
Porters Five Forces is a simple but powerful tool for understanding the competitiveness of your business environment, and for identifying your strategy's potential profitability.
12
Concentration within an industry can be defined as the degree at which a small number of firms make up for the total production in the market. If the concentration is low, it simply means that top 'n' firms are not influencing the market production and the industry is considered to be highly competitive.
12
Michael Porter’s Five Forces: (1) Competitive rivalry
Number and strength of your competitors.
How many rivals do you have?
Who are they, and how does the quality of their products and services compare with yours?
Where rivalry is intense, companies can attract customers with aggressive price cuts and high-impact marketing campaigns. Also, in markets with lots of rivals, your suppliers and buyers can go elsewhere if they feel that they're not getting a good deal from you.
On the other hand, where competitive rivalry is minimal, and no one else is doing what you do, then you'll likely have tremendous strength and healthy profits.
13
13
Michael Porter’s Five Forces: (2) Supplier power
Determined by how easy it is for your suppliers to increase their prices.
How many potential suppliers do you have?
How unique is the product or service that they provide, and how expensive would it be to switch from one supplier to another?
The more you have to choose from, the easier it will be to switch to a cheaper alternative.
But the fewer suppliers there are, and the more you need their help, the stronger their position and their ability to charge you more. That can impact your profit.
14
14
Michael Porter’s Five Forces: (3) Buyer power
Ask yourself how easy it is for buyers to drive your prices down.
How many buyers are there, and how big are their orders?
How much would it cost them to switch from your products and services to those of a rival?
Are your buyers strong enough to dictate terms to you?
When you deal with only a few savvy customers, they have more power, but your power increases if you have many customers.
15
15
Michael Porter’s Five Forces: (4) Threat of substitution
Refers to the likelihood of your customers finding a different way of doing what you do.
For example, if you supply a unique software product that automates an important process, people may substitute it by doing the process manually or by outsourcing it.
A substitution that is easy and cheap to make can weaken your position and threaten your profitability.
16
16
Michael Porter’s Five Forces: (5) Threat of new entry
Your position can be affected by people's ability to enter your market.
How easily could this be done?
How easy is it to get a foothold in your industry or market?
How much would it cost, and how tightly is your sector regulated?
If it takes little money and effort to enter your market and compete effectively, or if you have little protection for your key technologies, then rivals can quickly enter your market and weaken your position.
If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair advantage of it.
17
17
PMD role in CAV
What is the role of PMD in competitive advantage?
How can PMD support?
Michael Porter’s Five Forces
Case Study:
Martin Johnson is deciding whether to switch his career from being a mechanic to being a farmer – he's always loved the countryside, and he wants a job where he can be his own boss. He creates the following Five Forces analysis to help him decide:
19
1
2
3
4
5
19
Michael Porter’s Five Forces
You are the PMD Director for Talent Management and Development at Media Rotana Hotel in Dubai. You have been assigned to conduct a Porter’s Five Forces Analysis before putting together an Attraction and Retention Strategy for PMD. With Expo 2020 around the corner and the risks from Covid, many hotels are attempting to poach staff from well-known hotels like your own, mainly to avoid cost. Big brand names are entering the race to excellence and you want to proactively prevent the use of expensive resources.
20
Redraw on a flipchart
20