Find Strategic Opportunities
Week Two Lecture
Chapter Three – Strategic Thinking
In Chapter Three the focus is on strategic thinking. So often we hear the phrase “think outside the box”. What exactly does that mean? It means to apply strategic thinking. The term strategic thinking is defined as the “process of developing and evaluating every decision and action in light of current and future circumstances, the direction you want to go in and the results you want to achieve” (Sergay Group, 2011, Para3). How many times have you heard an employee say “this is how it’s always been done.” Or perhaps, “Why change what works?” Another example is “Why reinvent the wheel; if it’s working, why change it?” All of these are common lines of wanting to keep things working the same as they always have. However when applying strategic thinking you are aligning not only what is working today, but also assessing what will work tomorrow. This is where the phrase “think outside the box” comes into play. How can one formulate a strategy that will take into account the current and future circumstances without applying strategic thinking? The answer is simple: one can’t, which is why this chapter is so important in terms of strategic planning. In our readings this week one of the ways to apply strategic thinking is to find a better strategy. How can one go about this? There are multiple ways to achieve this. Our text book outlines three ways which include the following:
· Play a different game
· Be entrepreneurial
· Find more opportunities (Abraham, 2012)
Ultimately it all comes down to identifying what will help you be different from your competitors, what helps you stand out against the rest and how to find your own strategy that works best for your organization to achieve this. Take a minute and think about the company you currently work for or perhaps a past company you have worked with. Can you identify what made them stand out against their competition? How did they apply strategic thinking in terms of their strategic planning?
Chapter Four – External Environmental Analysis
The external environmental analysis consists of three key areas. These include the industry and competitive analysis, market analysis and the environmental trend analysis. According to Vitez (2009)
An industry analysis is a business function completed by business owners and other individuals to assess the current business environment. This analysis helps businesses understand various economic pieces of the marketplace and how these various pieces may be used to gain a competitive advantage. Although business owners may conduct an industry analysis according to their specific needs, a few basic standards exist for conducting this important business function (para. 1).
In the readings this week, our textbook does a great job of outlining the key questions one should ask pertaining to an industry analysis. In addition, there are several economic characteristics that need to be taken into consideration when conducting an industry analysis. These include:
· Industry size
· Industry growth rate
· Scope of competitive rivalry
· Number of competitors
· Stage in the industry life cycle
· The customers or buyers
· Degree of vertical integration
· Rate of technological innovation
· Product characteristics
· Economies of scale
· Capacity utilization
· Industry profitability (Abraham, 2012, p. 121).
Michael E. Porter, a Harvard Professor, identified what is known today as the Five Forces Model, which helps to identify the shape of competition within an industry (Hill & Jones, 2004). According to our textbook, the five forces described by Porter are:
· Rivalry among existing competitors
· Bargaining power of buyers
· Bargaining power of suppliers
· Threat of new entrants
· Threat of substitutes (Abraham, 2012, p. 123).
Please take a few minutes to watch the video below, which is an interview with Professor Porter that clearly illustrates how each of these five forces play a part in an industry analysis. The Five Competitive Forces That Shape Strategy – Harvard Business Review (Links to an external site.)Links to an external site. (http://youtu.be/mYF2_FBCvXw) Porter’s Five Forces has been a tool many companies have used. There is an interesting example of the application of this tool with Starbucks when they decided to expand into the United Kingdom. Please review the following article by John Dudovskiv (2014), which looks at how Starbucks applied the Porter’s Five Forces analysis: http://research-methodology.net/starbucks-porters-five-forces-analysis-2014/ (Links to an external site.)Links to an external site. The second part of Chapter Four discusses market analysis. A market analysis is basically a look at the market, competition, and consumers. According to the U.S.Small Business Administration, a market analysis should include the following:
· Industry description and outlook
· Information about your target market
· Distinguishing characteristics
· Size of the primary target market
· How much market share can you gain?
· Pricing and gross margin targets
· Competitive analysis
· Regulatory restrictions (n.d. para 2-9).
Our final topic in Chapter Four is on environmental trend analysis. As stated in our textbook, “analyzing environmental trends involves looking at what is changing and its potential impact on the economy” (Abraham, 2012, p. 135). Many times people will refer to an environmental analysis as a PEST analysis, which stands for the following:
· Political
· Economic
· Social
· Technological
Below is a video that helps illustrate how the PEST analysis helps organizations in terms of strategic planning. PEST Analysis – Shad Morris (Links to an external site.)Links to an external site. (http://youtu.be/_OR2XpNcWuo) Throughout Chapter Four there are numerous tools presented to help managers conduct external environmental analysis. These tools include: Porter’s Five Forces Model, Marketing Analysis and the PEST or Environmental Trend Analysis. All of these together are tools to help the company in the strategic planning of the organization. Forbes School of Business Faculty
References
Abraham, S. C. (2012). Strategic management for organizations. San Diego, CA: Bridgepoint Education, Inc. – Class text Dudovskiv, J. (2014, February 24). Starbucks porter’s five forces analysis 2014 (Links to an external site.)Links to an external site. . Research Methodology. Retrieved from http://research-methodology.net/starbucks-porters-five-forces-analysis-2014/ Harvard Business Review. (2008). The five competitive forces that shape strategy (Links to an external site.)Links to an external site. [Video file]. Retrieved from http://youtu.be/mYF2_FBCvXw Morris, S. (2013, December 18). PEST analysis (Links to an external site.)Links to an external site. [Video file]. Retrieved from http://youtu.be/_OR2XpNcWuo Seray Group. (2011). Strategic thinking - a task for all employees (Links to an external site.)Links to an external site. . Retrieved from http://www.sergaygroup.com/Smart-Talk/Strategic-Thinking.html U.S. Small Business Administration. (n.d.). Market analysis (Links to an external site.)Links to an external site. . Retrieved from http://www.sba.gov/content/market-analysis Vitez, O. (2014). Definition of industry analysis (Links to an external site.)Links to an external site. . Chron. Retrieved from http://smallbusiness.chron.com/definition-industry-analysis-830.html