A management assignment
g1056x130
490_F2F_Session2notes.pptMGMT 490
Session 2
Global Strategic Management
Professor Ranfeng Qiu
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Professor Ranfeng Qiu
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Studying this chapter should provide you with
the strategic management knowledge needed to:
Learning Objectives
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Explain the importance of analyzing and understanding the firm’s external environment.
Define and describe the general environment and the industry environment.
Discuss the four activities of the external environmental analysis process.
Name and describe the general environment’s seven segments.
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Professor Ranfeng Qiu
The interactions of three external environments
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Figure 2.1 The External Environment
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Professor Ranfeng Qiu
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Professor Ranfeng Qiu
Table 2.1 The General Environment: Segments and Elements
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External Environmental Analysis
- General environment
Focused on the future
- Industry environment
Focused on factors and conditions influencing a firm’s profitability within an industry
- Competitor environment
Focused on predicting the dynamics of competitors’ actions, responses and intentions
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Professor Ranfeng Qiu
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Table 2.2 Components of the External Environmental Analysis
External Environmental Analysis
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| Scanning | Identifying early signals of environmental changes and trends |
| Monitoring | Detecting meaning through ongoing observations of environmental changes and trends |
| Forecasting | Developing projections of anticipated outcomes based on monitored changes and trends |
| Assessing | Determining the timing and importance of environmental changes and trends for firms’ strategies and their management |
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Opportunities and Threats
- Opportunity
A condition in the general environment that, if exploited effectively, helps a firm achieve strategic competitiveness.
- Threat
A condition in the general environment that may hinder
a firm’s efforts to achieve strategic competitiveness.
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Professor Ranfeng Qiu
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Segments of the General Environment
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The Demographic Segment
Population
size
Age
structure
Geographic
distribution
Ethnic mix
Income distribution
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Segments of the General Environment (cont’d)
- The Economic Segment
Uncertainty in
Market growth rates
Consumer demand
Inflation and interest rates
Trade deficits or surpluses
Budget deficits or surpluses
Personal and business savings rates
Gross domestic product
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Professor Ranfeng Qiu
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Segments of the General Environment (cont’d)
- The Political/Legal Segment
Regulations
Consumer privacy laws
Lobbying
Antitrust, deregulation laws
Taxation
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Professor Ranfeng Qiu
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Segments of the General Environment (cont’d)
- The Sociocultural Segment
Changing attitudes and cultural values
Attitudes and approaches to health care
Attitudes about quality of worklife
Diverse and aging workforce
Women in the workplace
Concerns about environment
Shifts in work and career preferences
Shifts in product and service preferences
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Professor Ranfeng Qiu
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Segments of the General Environment (cont’d)
- The Technological Segment
Product innovations
Rapid technological change and the risk of disruption
Knowledge application
Growth of the Internet
New communication technologies
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Professor Ranfeng Qiu
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Segments of the General Environment (cont’d)
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Professor Ranfeng Qiu
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Segments of the General Environment (cont’d)
- The Physical Environment Segment
Emerging trends oriented to sustaining the world’s physical environment
Recognition of the interactive influence of ecological, social, and economic systems
Growing concerns for sustainable industry development and increased corporate social responsibility for the future effects of globalized operations
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Professor Ranfeng Qiu
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The concept of “value”
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Professor Ranfeng Qiu
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Core principles of business
- The value chain
- Value creation and value capture
- Added value
- Willingness to pay (WtP)
- Opportunity cost (O.C)
- Value “wedge”
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Professor Ranfeng Qiu
The Value Chain
Customers
Suppliers
Focal Business
Money Flow
Products/Outputs
Resources/Inputs
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Professor Ranfeng Qiu
- Suppliers and buyers/customers
Anyone willing to buy from / sell to your products (business).
- Value
is created by business interaction with suppliers and customers along a value chain.
Value and value chain
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Professor Ranfeng Qiu
- Added value = total value with you – total value without you
Added Value
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Consulting firms
Car manufacturers
Retail stores
Coffee shops
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Value capture vs. value creation
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Firm A takes firm B’s market share.
For instance, in the ever slower cellphone market, Motorola’s share was eaten by Nokia, Samsung, LG and Apple.
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- How is “value” measured?
Customers value the products they are buying
Suppliers value the resources they are selling
Value for a firm
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Customers
Suppliers
Focal Business
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Principle of Business
WtP - the most a customer would pay for a good or service in relation to next best alternative
Opportunity cost (O.C) - the least a supplier would pay for a good or service in relation to the next best alternative
Value wedge – the difference between WtP and O.C
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Professor Ranfeng Qiu
Principle of Business
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Someone might argue that firm maximize its value by lowering purchasing price from the suppliers and increase selling price to customers. But NO!!!! DO NOT Mix up Price/Costs with WtP and OC.
Why?
Because customers and suppliers will be upset and they will switch to other firms.
Ex.
Subway, bakery will provide bread to other sandwich stores and customers would turn to Mcdonald’s, Wendy’s…
Professor Ranfeng Qiu
Your supplier
You are a customer looking to make one purchase from Firm 1 or Firm 2.
You have a WtP of $50 for firm 1 and a WtP of $70 for firm 2. Given the prices below, which firm do you prefer? Why?
Firm 1 price =$40
Firm 2 price = $50
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Fim 2
$10
$70
Firm 1
$5
$50
Professor Ranfeng Qiu
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Someone might argue that firm maximize its value by lowering purchasing price from the suppliers and increase selling price to customers. But NO!!!! DO NOT Mix up Price/Costs with WtP and OC.
Why?
Because customers and suppliers will be upset and they will switch to other firms.
Ex.
Subway, bakery will provide bread to other sandwich stores and customers would turn to Mcdonald’s, Wendy’s…
Professor Ranfeng Qiu
Your customer
Consider 2 firms in a market:
You are a supplier. Firm 1 offers to pay you $10 for one unit of your goods. Firm 2 offers to pay you $16 for one unit of your goods.
As a supplier, why might your opportunity cost be different for firm 1 and firm 2?
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Firm 2
$10
$70
Firm 1
$5
$50
Professor Ranfeng Qiu
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Professor Ranfeng Qiu
Quick facts
- Premium coffee shops.
- The number of coffee cafes in the U.S -- 500 in 1992 to 10000 to 1999
Team Discussion - Starbucks
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| Café latte | Price |
| McCafe | $2.30 |
| Starbucks | $3.10 |
| Local premium coffee | $4.00 |
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Professor Ranfeng Qiu
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Professor Ranfeng Qiu
Local small premium coffee shops
https://www.youtube.com/watch?v=b3gxSyjpRZU
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Professor Ranfeng Qiu
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