strategic management - Emerging Trends and Market Analysis Elevator Pitch and Executive Summary

Prof. Bulzacki MGMT 661

Strategic Management

Week 2

https://www.linkedin.com/in/adrian-bulzacki/

INTRODUCTION TO EXTERNAL ENVIRONMENT

The external environment refers to the set of conditions outside an organization that can impact its performance and strategy. This environment is beyond the direct control of the company but crucial for its strategic planning and decision-making. Understanding the external environment helps companies anticipate changes, seize opportunities, and mitigate threats.

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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COMPONENTS OF THE EXTERNAL ENVIRONMENT

1. Macro-environment: This includes the broader forces affecting not only the industry but the whole society. These can be categorized using frameworks like PESTEL, which stands for:

 Political: Government policies, stability, tax guidelines, trade regulations, and political events.  Economic: Economic trends, growth rates, interest rates, inflation, and unemployment conditions that affect consumer purchasing power and business

operations.  Social: Societal and cultural aspects such as demographics, education levels, cultural trends, and lifestyle changes.  Technological: Innovations, technological developments or barriers, and the rate of technological change.  Environmental: Environmental issues, ecological conditions, climate change, and sustainability practices.  Legal: Laws, mandatory regulations, and legal constraints including labor laws, consumer laws, and health and safety regulations.

2. Industry and sector analysis: This part of the external environment looks at the more immediate operational landscape in which a company operates. It includes the analysis of competitors, market size, market growth or decline, market trends, and the overall attractiveness of the industry.

3. The competitive environment: This involves the analysis of the specific market competition. It includes the strategies of current and potential competitors, their strengths and weaknesses, market positioning, and how all these factors influence the competitive dynamics of the industry.

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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WHY IT MATTERS: EXTERNAL ENVIRONMENT

• Strategic Alignment: Companies need to align their strategies with the external environment to ensure relevance and competitiveness. For instance, a tech company might need to innovate rapidly in response to technological advancements to maintain its market position.

• Risk Management: By understanding the external environment, companies can foresee potential risks and develop strategies to address them effectively.

• Opportunity Identification: Analyzing the external environment can reveal new market opportunities, whether through emerging technologies, shifts in consumer preferences, or changes in regulatory landscapes.

• Resource Allocation: Insights from the external environment help in smarter allocation of resources. For example, understanding economic conditions can help a company decide whether to expand operations or conserve cash.

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ENVIRONMENTAL SCANNING

Environmental scanning is a method used by organizations to monitor, evaluate, and disseminate information from the external and internal environments. The goal of environmental scanning is to identify potential opportunities and threats outside the organization to facilitate proactive, rather than reactive, strategies in business planning.

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KEY ASPECTS OF ENVIRONMENTAL SCANNING:

1. Continuous Process: Environmental scanning should be an ongoing activity that organizations conduct regularly. This ensures that they stay current with changes that may affect their operations, strategies, and competitive advantage.

2. Broad Scope: It encompasses a wide range of elements both external and internal to the organization. Externally, it looks at factors like economic conditions, market trends, political landscapes, technological innovations, social changes, and regulatory frameworks. Internally, it involves assessing strengths and weaknesses, resources, current strategies, and employee capabilities.

3. Information Gathering: This involves collecting information from various sources such as news outlets, market reports, trade associations, scientific journals, and insights from stakeholders including customers, suppliers, and competitors.

4. Analysis: The gathered information is analyzed to identify patterns, trends, and emerging issues. This analysis helps in forecasting future conditions and assessing their possible impact on the organization.

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IMPORTANCE OF ENVIRONMENTAL SCANNING:

• Strategic Decision Making: By providing a clear, current picture of the environment in which the company operates, environmental scanning aids strategic decision-making. It helps managers anticipate and respond to changes in the external environment effectively.

• Opportunity Identification: Regular scanning can reveal new business opportunities, potentially lucrative markets, and ideas for product innovation. This allows organizations to capitalize on these opportunities before competitors do.

• Threat Avoidance: Environmental scanning helps in identifying potential threats to the organization’s welfare early enough that they can be mitigated or avoided altogether.

• Resource Allocation: With a better understanding of the business landscape, organizations can make more informed decisions about where to allocate resources in order to maximize returns and minimize risks.

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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TECHNIQUES USED IN ENVIRONMENTAL SCANNING:

• SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats): Helps in assessing internal and external factors that could impact the organization's objectives.

• PESTEL Analysis (Political, Economic, Social, Technological, Environmental, Legal): Focuses on macro-environmental factors that might influence the organization’s performance.

• Porter’s Five Forces: Analyzes the competitive intensity and attractiveness of a market.

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MACRO-ENVIRONMENTAL ANALYSIS

Macro-environmental analysis is a crucial strategic tool used to assess the broader external factors that impact an organization's operations and decision-making. This analysis helps organizations understand the dynamic and often uncontrollable elements that could influence their business in the short or long term. It typically involves examining aspects across different domains using tools like PESTEL analysis, which stands for Political, Economic, Social, Technological, Environmental, and Legal factors.

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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COMPONENTS OF MACRO-ENVIRONMENTAL ANALYSIS:

1. Political Factors: These involve government policies, political stability or instability in a market, tax policies, trade restrictions and tariffs, labor laws, and environmental regulations. Political factors can affect how a company operates and its profitability. For example, a change in government can lead to changes in business regulations or fiscal policies that could affect the business.

2. Economic Factors: This includes economic growth rates, interest rates, exchange rates, inflation, and unemployment rates in the economy. Economic indicators dictate the economic climate and purchasing power of consumers and businesses. For instance, high inflation rates may reduce consumer spending, affecting businesses that rely on high consumer demand.

3. Social Factors: These reflect the societal forces that include cultural trends, demographics, population analytics, lifestyle changes, and education levels. Social shifts can impact on the demand for a business’s products and services. For example, an aging population may increase the demand for healthcare services.

4. Technological Factors: These entail emerging technological advancements, innovation, internet infrastructure, and barriers to technology. The pace of technological change can influence how an organization delivers its products and services. Companies need to keep abreast of technological developments to maintain a competitive edge.

5. Environmental Factors: Environmental concerns include climate change, weather, and environmental regulations that impact how companies operate and the products they offer. Companies are increasingly pressured to develop sustainable practices and reduce their environmental footprint.

6. Legal Factors: This includes all regulatory frameworks and laws that a company might need to comply with. Legal factors affect how a company operates, its costs, and the products it offers. This could include consumer laws, safety standards, labor laws, and antitrust laws.

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PURPOSE AND IMPORTANCE OF MACRO- ENVIRONMENTAL ANALYSIS • Risk Management: Understanding macro-environmental factors helps businesses anticipate and mitigate risks before they become unmanageable.

• Opportunity Recognition: By examining the macro environment, companies can spot emerging trends and capitalize on them to gain a competitive advantage.

• Strategic Planning: Macro-environmental analysis provides essential data for strategic planning. It enables businesses to align their strategies with the external environment.

• Long-term Vision: This analysis helps businesses in forecasting and preparing for the future, ensuring sustainability and growth in changing conditions.

Overall, macro-environmental analysis is vital for businesses to navigate the complexities of global markets. It helps in building robust strategies that are responsive to the external environment, enhancing the organization's ability to thrive amid uncertainties.

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INDUSTRY AND SECTOR ANALYSIS

Industry and sector analysis are essential components of strategic planning, providing insights that help businesses understand the market conditions they operate within and guide their competitive strategies. These analyses allow companies to gauge the overall health of the industry or sector, identify key trends, and determine their positioning relative to competitors.

Definitions:

Industry Analysis: Focuses on a specific industry and examines the market dynamics, key players, competitive environment, market growth or decline, technological developments, regulatory impacts, and other factors specific to that industry. This analysis helps in understanding the external factors that affect all businesses within that marketplace.

Sector Analysis: Broader than industry analysis, sector analysis examines a larger segment of the economy, which can encompass several related industries. For example, the financial sector includes industries such as banking, insurance, and investment services.

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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COMPONENTS OF INDUSTRY AND SECTOR ANALYSIS:

1. Market Structure: Analyzing how an industry is structured is crucial. This includes understanding whether the industry is fragmented or consolidated, the number of players, and their market shares.

2. Competitive Dynamics: This involves identifying the intensity of competition within the industry, which can be influenced by factors such as barriers to entry, level of rivalry, and the threat of substitutes. Porter’s Five Forces analysis is a popular tool used here.

3. Growth Trends: Analyzing past growth patterns and forecasting future growth. This includes looking at factors like historical sales growth, innovation in the industry, and external economic factors that could impact growth.

4. Regulatory Environment: Understanding the impact of laws and regulations on the industry. This includes current and potential future legislation that might affect how companies operate within the sector.

5. Technological Changes: Identifying technological advancements that could disrupt or enhance the way the industry operates. This involves assessing the adoption of new technologies, potential cost savings, and increased efficiencies.

6. Economic Impact: Analyzing how broader economic conditions affect the industry. This includes factors such as consumer spending, economic downturns, and currency fluctuations.

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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IMPORTANCE OF INDUSTRY AND SECTOR ANALYSIS:

• Strategic Decision Making: Provides a solid foundation for making informed strategic decisions, such as market entry, product development, and competitive positioning.

• Risk Assessment: Helps in identifying potential risks in the industry or sector, including economic downturns, technological disruption, or regulatory changes.

• Opportunity Identification: By understanding industry trends and dynamics, companies can spot opportunities for innovation, market expansion, or strategic partnerships.

• Performance Benchmarking: Allows a company to compare its performance against industry standards and competitors, identifying areas for improvement or investment.

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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THE COMPETITIVE ENVIRONMENT

The competitive environment of a business refers to the external market landscape in which a company operates. It encompasses all the forces and conditions that influence a company's ability to compete effectively in its industry. Analyzing the competitive environment is crucial for understanding the dynamics that affect market position and profitability.

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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KEY ELEMENTS OF THE COMPETITIVE ENVIRONMENT:

1. Competitors: Identifying who the direct and indirect competitors are, their strengths, weaknesses, market share, and strategies. Understanding competitors helps a company determine its own competitive advantages and areas where it may be vulnerable.

2. Market Conditions: Includes market demand, supply conditions, pricing trends, and the overall size and growth rate of the market. These factors determine the potential for profitability and expansion within the industry.

3. Customer Base: Understanding the needs, preferences, and buying behaviors of customers. This involves segmenting the market and targeting specific customer groups whose needs align best with the company's offerings.

4. Barriers to Entry: These are factors that prevent or hinder new competitors from easily entering an industry. Barriers can include high startup costs, access to technology, regulatory requirements, and customer loyalty to established brands.

5. Threat of Substitutes: The degree to which products from other industries can replace or compete with the company’s products. A high threat of substitutes can limit a company’s pricing power and market share.

6. Supplier Power: Represents the bargaining power of suppliers who provide inputs necessary for the industry. High supplier power can affect a company’s margins and its ability to control costs.

7. Buyer Power: Reflects the influence that customers have over the pricing and quality of products. When buyers have significant power, they can demand lower prices or higher product quality, impacting profitability.

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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IMPORTANCE OF UNDERSTANDING THE COMPETITIVE ENVIRONMENT: • Strategic Planning: Insights from analyzing the competitive environment are crucial for strategic planning, allowing companies to position themselves effectively in the market.

• Innovation and Adaptation: Understanding competitive pressures can drive innovation and adaptation, as companies must continuously improve their offerings and operations to maintain a competitive edge.

• Risk Management: By understanding the competitive landscape, companies can better anticipate and manage potential risks related to new entrants, competitive actions, and changes in market conditions.

• Resource Allocation: It helps in making informed decisions about where to allocate resources in order to exploit competitive advantages and minimize weaknesses.

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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HOW A CORPORATION IS GOVERNED

Stockholders

Board of Directors

Corporate Officers

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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REMOVAL OF CEO EXAMPLE

Known:

6 Directors

CEO is a Director and Chairman of the Board

6 Officers

“CEO operates under the privilege of the Board”

3 Board members in favour and 1 maybe

COO is the ideal replacement.

Steps:

1. Secessions Plan

2. Review U.S.A./Company Charter/Director’s Charter/Employee Agreement/Business Act/Company Minute Book

3. Read the Room (Life rule: Never call a vote without knowing the result in advance)

4. Consult Legal 1. Reason’s

5. Schedule Meeting of the Board (COO) 1. Agenda (Define the Chair)

1. Removal of CEO

2. 2nd and Maybe Remove as Director.

3. Define Conflicts.

4. Appoint new CEO

2. Reason’s for calling the vote.

6. Initiate Board Meet

7. Vote/Meeting Minutes.

8. Revoke Email and System Access.

9. Bonus: Press Release

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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ROBERT'S RULES OF ORDER

Robert's Rules of Order is the most widely used set of rules for meeting conduct in the United States. It provides guidelines for running meetings, making decisions, and voting in a structured manner. The rules are designed to ensure that meetings are fair and that all members have the opportunity to voice their opinions.

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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Motion or Action Purpose What to Say Can Interrupt

Speaker Need a Second

Can Be Debated

Can Be Amended

Votes Needed

Call to Order To officially start the meeting. "The meeting will come to order." No No No No None

Approve Minutes To confirm the record of the last meeting.

"Are there any corrections to the minutes?"

No No No Yes Majority

Adjourn To end the meeting. "I move that we adjourn." No Yes No No Majority Recess To take a short break. "I move that we recess for..." No Yes Yes Yes Majority

Complain about Noise, etc.

To request a disturbance be addressed.

"I rise to a question of privilege regarding..."

Yes No No No None (Ruling by Chair)

Suspend the Rules To temporarily set aside a rule.

"I move to suspend the rules..." No Yes No No Two-thirds

Object to the Consideration

To prevent a motion from being considered.

"I object to the consideration of this motion."

Yes No No No Two-thirds against consideration

Amend a Motion To modify a motion. "I move to amend the motion by..." No Yes Yes Yes Majority

Withdraw a Motion To remove a motion from consideration.

"I request to withdraw my motion." No No No No Majority if objected, otherwise none

Call for the Orders of the Day

To return to the scheduled agenda.

"I call for the orders of the day." Yes No No No None

Point of Order To correct a procedural error. "Point of order." Yes No No No None (Ruling by Chair)

Appeal To challenge a ruling of the chair.

"I appeal the decision of the chair." Yes Yes Yes No Majority

Suspend the Rules To temporarily alter or set aside rules.

"I move to suspend the rules..." No Yes No No Two-thirds

Point of Information To ask a clarifying question. "Point of information." or "I rise to a point of information."

Yes No No No None

Division of the Assembly

To request a re-vote for clarity.

"I call for a division." Yes No No No None

Lay on the Table To temporarily postpone discussion on an item.

"I move to lay the matter on the table."

No Yes No No Majority UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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DISCUSSION: INTEGRATION OF ANALYSES

How a company can integrate insights from environmental scanning, macro- environmental analysis, and industry analysis to make strategic decisions.

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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DISCUSSION: ENVIRONMENTAL SCANNING TECHNIQUES

Discuss best practices for environmental scanning in various industries. How do companies gather and analyze data to stay ahead of market trends?

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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DISCUSSION: THE COMPETITIVE ENVIRONMENT

How do barriers to entry affect competition in high-tech industries compared to traditional industries?

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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GROUP ACTIVITY: ENVIRONMENTAL SCANNING SIMULATION Conduct a simulation where students perform an environmental scanning exercise for a fictitious company. Have them identify key opportunities and threats and present their findings.

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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ONLINE DISCUSSION: ENVIRONMENTAL SCANNING TECHNIQUES Discuss best practices for environmental scanning in various industries. How do companies gather and analyze data to stay ahead of market trends?

UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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THANK YOU QUESTIONS? UCW – MGMT 661- Strategic Management - Prof. Adrian Bulzacki

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