Strategic Management ( 6 questions)
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strategic_management_2a.pptStrategic Management # 2
The External Assessment
External Situation Analysis
Sources of External Information
The Nature of the External Audit
Economic Factors
Political, Governmental, and Legal Forces
Technological Forces
Competitive Forces - Porter’s Five-Forces Model
Social, Cultural, Demographic &
Environmental Forces
The External Environment
The external environment includes the organizations and forces outside the company that affect management’s ability to successfully implement their strategies.
External Situational Analysis
Gather intelligence
External Situational Analysis
Sources of Information
- Internet
- Libraries
- Suppliers
- Distributors
- Salespersons
- Customers
- Competition
Purpose of External Audit
- Identify key issues that could affect the firm
- Opportunities
- Threats
- Challenges
External Strategic Management Audit
Forecasting Tools and Techniques
- Forecasts are educated assumptions about future trends and events
- Quantitative techniques – Most appropriate when historical data is available and there is a constant relationship
- Qualitative techniques
- Trendwatching.com
- Springwise.com
Performing the External Audit
Variables
- Important trends vs fads
- Market share / share of mind & hearts
- Breadth of competing products
- Price competitiveness
- World economies
- Proprietary account advantages
- Technological advancements
- Global weather patterns
Publics
- Any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives
- Financial publics
- Media publics
- Government publics
- Citizen-action publics
- Local publics
- General public
- Internal publics
Note to Instructor
In slideshow view, click on movie icon to launch Tom’s Shoes video snippet. See accompanying DVD for full video segment.
Customers
Consumer markets
Business markets
Reseller markets
Government markets
International markets
Macro Environment
ECONOMIC
ENVIRONMENT
DEMOGRAPHIC ENVIRONMENT
TECHNOLOGICAL ENVIRONMENT
POLITICAL/LEGAL ENVIRONMENT
CULTURAL ENVIRONMENT
NATURAL
ENVIRONMENT
Economic
Environment
Changes in employment &income
New products offering financially cautious buyers greater value—the right combination of quality and service at a fair price.
New technologies
Economic Environment
Note to Instructor
This graphic highlights a car targeted to India’s growing middle class.
Discussion Questions
What changes might there be in U.S. income over the next year? What are positioned as “value cars.”
The students might quote current economic declines or rises. The “value cars” will probably include some of the smaller cars by Kia, Ford, Honda, and Toyota.
Economic Forces
- Interest Rates
- Sequester
- Layoffs, Threats of downsizing
- Economic standard of living
- Severe weather - tornadoes, floods, fires
- Energy costs / availability
- Food costs
- BRIC & PIIIGS
Political/Legal
Environment
Political environment consists of laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society
Political, Government & Legal Forces
Key opportunities & threats
- Stabilize Banking, Housing & Employment
- Supervise Rating Agencies
- Tax rates – increase ?
- Lobbying efforts
- Healthcare Reform
- Immigration control
Government Regulation
Political / Legal Environment
Government Regulation -Banking, Immigration
Regulatory Agencies - FAA, FDA, Commerce, Fed Reserve
Increasing Legislation vs Agency Enforcement
Controlling the Process / Lobbying
Increased Emphasis on Ethics & Social Responsibility
You Move
No, You Move
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Increased emphasis on ethics, socially responsible behavior &
cause-related marketing
Political Environment
The Company’s Macro-environment
Technological Environment
- Most dramatic force in changing the marketplace
- Creates new products
and opportunities - Safety & security of
new product always
a concern
Note to Instructor
Discussion Question
Ask students what changes they have seen in technology in the past four years including medical products, communications, and media.
They will most likely talk about the use of artificial organs and stem cell research, the growth of PDA’s like the iPod, and the use of new media products including DVR or TiVo.
Technological Environment
Technological Revolution
Growth Industries
New Industries
New Services & Products
Social Concerns
Government Research - SBIR
Applying Technology
Technological Forces
Major Impact –
- Internet
- Cloud computing
- Social Media - Facebook
- Open source development - Linux, Wiki
- Mobile Communications - Twitter
- Widespread video surveillance
- Multi media integration - Smart Phones
- Manufacturing – 3D Printers
Essential for nearly every strategic decision
3D Printer
http://www.ted.com/talks/lisa_harouni_a_primer_on_3d_printing.htm
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Technological
Environment
Competitors
Firms must gain strategic advantage by positioning their offerings against competitors’ offerings
Types of competition
Direct
Substitution
Discretionary income
Research is Critical
Competitive Forces
Collection & evaluation of data on competitors is essential for successful strategy formulation
Competition on virtually all industries
can be described as intense.
Competitive Forces
- Moody’s Manuals
- Standard Corporation Descriptions
- Value Line Investment Surveys
- Dun’s Business Rankings
- Standard & Poor’s Industry Surveys
- Industry Week
- Forbes, Fortune, Business Week
- Mystery shopping / reverse engineering
Sources of Corporate Information
Porter’s Five Forces
Model of Competition
Potential development
of substitute products
Rivalry among
competing firms
Bargaining power
of suppliers
Potential entry of new competitors
Bargaining power
of consumers
Competitive Forces
- Share of heart & mind matters
- Understand what business you are in
- Broke or not, fix it - The second Curve
- Innovate or evaporate
- Acquisition is essential to growth
- People make a difference
- No substitute for quality
7 Characteristics of most Competitive U.S. Firms:
