ch03 discussion light
DESCRIPTION
Strategy ManagementRobert E. Hoskisson; Michael A. Hitt; R. Duane IrelandTRANSCRIPT
©2004 by South-Western/Thomson Learning 1
The External Environment: Opportunities, The External Environment: Opportunities, Threats, Industry Competition, and Threats, Industry Competition, and
Competitor AnalysisCompetitor Analysis
Robert E. Hoskisson
Michael A. Hitt
R. Duane Ireland
Chapter 3Chapter 3
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Chapter 2Chapter 2Strategic LeadershipStrategic Leadership
Chapter 1Chapter 1Introduction toIntroduction to
Strategic ManagementStrategic Management
StrategicThinking
The Strategic Management ProcessThe Strategic Management Process
Chapter 6Chapter 6Competitive Rivalry andCompetitive Rivalry andCompetitive DynamicsCompetitive Dynamics
Chapter 9Chapter 9International StrategyInternational Strategy
Chapter 3Chapter 3The ExternalThe ExternalEnvironmentEnvironment
Chapter 5Chapter 5Business-LevelBusiness-Level
StrategyStrategy
Chapter 8Chapter 8Acquisition andAcquisition and
Restructuring StrategiesRestructuring Strategies
Chapter 11Chapter 11Corporate GovernanceCorporate Governance
Chapter 7Chapter 7Corporate-Level StrategyCorporate-Level Strategy
Chapter 10Chapter 10Cooperative StrategyCooperative Strategy
Chapter 12Chapter 12Strategic EntrepreneurshipStrategic Entrepreneurship
StrategicAnalysis
CreatingCompetitiveAdvantage
MonitoringAnd CreatingEntrepreneurialOpportunities
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Discussion QuestionsDiscussion Questions1. What are the components of the
general environment? How does each affect the strategy of a firm?
2. What are the five competitive forces in an industry environment?
3. What attributes make each of the five competitive forces intense?
4. What is a strategic group and why is it an important concept?
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Discussion Questions (cont.)Discussion Questions (cont.)5. How do you conduct a competitor
analysis?
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Discussion Question 1Discussion Question 1
What are the components of the general environment? How does each affect the strategy of a firm?
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General
Env
iron
men
t
General
Environment
Gen
eral
Environm
ent
EconomicEconomic
Political/Legal
Political/Legal
TechnologicalTechnologicalG
loba
lG
loba
l
Dem
ogra
phic
Dem
ogra
phic Sociocultural
Sociocultural
The External EnvironmentThe External Environment
IndustryIndustryEnvironmentEnvironment
Threat of new entrantsThreat of new entrantsPower of suppliersPower of suppliersPower of buyersPower of buyers
Product substitutesProduct substitutesIntensity of rivalryIntensity of rivalry
CompetitorCompetitorEnvironmentEnvironment
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External Environmental AnalysisExternal Environmental AnalysisA continuous process which includesA continuous process which includes
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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External Environmental AnalysisExternal Environmental Analysis
Strategic IntentStrategic IntentStrategic MissionStrategic Mission
The ExternalThe ExternalEnvironmentEnvironment
Analysis of general environmentAnalysis of general environment
Analysis of industry environmentAnalysis of industry environment
Analysis of competitor environmentAnalysis of competitor environment
The ExternalThe ExternalEnvironmentEnvironment
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General EnvironmentGeneral Environment Sociocultural segmentSociocultural segment
Women in the workplaceWomen in the workplace Workforce diversityWorkforce diversity Attitudes about quality of worklifeAttitudes about quality of worklife Concerns about environmentConcerns about environment Shifts in work and career preferencesShifts in work and career preferences Shifts in product and service preferencesShifts in product and service preferences
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Economic segmentEconomic segment
General EnvironmentGeneral Environment
Inflation ratesInflation rates Interest ratesInterest rates Trade deficits or surplusesTrade deficits or surpluses Budget deficits or surplusesBudget deficits or surpluses Personal savings ratePersonal savings rate Business savings ratesBusiness savings rates Gross domestic productGross domestic product
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General EnvironmentGeneral EnvironmentPolitical/Legal SegmentPolitical/Legal Segment
Antitrust lawsAntitrust laws Taxation lawsTaxation laws Deregulation philosophiesDeregulation philosophies Labor training lawsLabor training laws Educational philosophies and policiesEducational philosophies and policies
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General EnvironmentGeneral Environment
Technological SegmentTechnological Segment Product innovationsProduct innovations Applications of knowledgeApplications of knowledge Focus of private and government-supported Focus of private and government-supported
R&D expendituresR&D expenditures New communication technologiesNew communication technologies
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General EnvironmentGeneral EnvironmentGlobal SegmentGlobal Segment
Important political eventsImportant political events Critical global marketsCritical global markets Newly industrialize countriesNewly industrialize countries Different cultural and institutional attributesDifferent cultural and institutional attributes
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General EnvironmentGeneral EnvironmentDemographic SegmentDemographic Segment
Population sizePopulation size Age structureAge structure Geographic Geographic
distributiondistribution Ethnic mixEthnic mix Income distributionIncome distribution
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Discussion Question 2Discussion Question 2
What are the five competitive forces in an industry environment?
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Industry EnvironmentIndustry EnvironmentA set of factors that directly influences A set of factors that directly influences
a company and its competitive actions a company and its competitive actions and responsesand responses
Interaction among these factors Interaction among these factors determine an industry’s profit potentialdetermine an industry’s profit potential Threat of new entrantsThreat of new entrants Power of suppliersPower of suppliers Power of buyersPower of buyers Product substitutesProduct substitutes Intensity of rivalryIntensity of rivalry
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Five Forces Model of CompetitionFive Forces Model of Competition
Identify current and potential competitors Identify current and potential competitors and determine which firms serve themand determine which firms serve them
Conduct competitive analysisConduct competitive analysis Recognize that suppliers and buyers can Recognize that suppliers and buyers can
become competitorsbecome competitors Recognize that producers of potential Recognize that producers of potential
substitutes may become competitorssubstitutes may become competitors
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Threat of New Entrants
Threat of New Entrants
Bar
gain
ing
Pow
er o
f
Bar
gain
ing
Pow
er o
f Su
pplie
rsSu
pplie
rs
Bargaining Power of Bargaining Power of BuyersBuyers
Threat of Substitute
Threat of Substitute
Products
Products
Rivalry A
mong
Rivalry A
mong
Competing Firm
s
Competing Firm
s
Five Forces Model of CompetitionFive Forces Model of Competition
Five Forces ofFive Forces ofCompetitionCompetition
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Discussion Questions
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Discussion Question 3Discussion Question 3
What attributes make each of the five competitive forces intense?
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Threat of New EntrantsThreat of New EntrantsBarriers to entryBarriers to entry
Economies of scaleEconomies of scale Product differentiationProduct differentiation Capital requirementsCapital requirements Switching costsSwitching costs Access to distribution channelsAccess to distribution channels Cost disadvantages independent of scaleCost disadvantages independent of scale Government policyGovernment policy Expected retaliationExpected retaliation
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Bargaining Power of SuppliersBargaining Power of SuppliersA supplier group is powerful when:A supplier group is powerful when:
it is dominated by a few large companiesit is dominated by a few large companies satisfactory substitute products are not available satisfactory substitute products are not available
to industry firmsto industry firms industry firms are not a significant customer for industry firms are not a significant customer for
the supplier groupthe supplier group suppliers’ goods are critical to buyers’ suppliers’ goods are critical to buyers’
marketplace successmarketplace success effectiveness of suppliers’ products has created effectiveness of suppliers’ products has created
high switching costshigh switching costs suppliers are a credible threat to integrate suppliers are a credible threat to integrate
forward into the buyers’ industryforward into the buyers’ industry
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Bargaining Power of BuyersBargaining Power of Buyers Buyers (customers) are powerful when:Buyers (customers) are powerful when:
they purchase a large portion of an industry’s they purchase a large portion of an industry’s total outputtotal output
the sales of the product being purchased the sales of the product being purchased account for a significant portion of the seller’s account for a significant portion of the seller’s annual revenuesannual revenues
they could easily switch to another productthey could easily switch to another product the industry’s products are undifferentiated or the industry’s products are undifferentiated or
standardized, and buyers pose a credible threat standardized, and buyers pose a credible threat if they were to integrate backward into the if they were to integrate backward into the seller’s industryseller’s industry
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Threat of Substitute ProductsThreat of Substitute Products Product substitutes are strong threat Product substitutes are strong threat
when:when: customers face few switching costscustomers face few switching costs substitute product’s price is lowersubstitute product’s price is lower substitute product’s quality and performance substitute product’s quality and performance
capabilities are equal to or greater than those of capabilities are equal to or greater than those of the competing productthe competing product
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Intensity of RivalryIntensity of Rivalry Intensity of rivalry is stronger when competitors:Intensity of rivalry is stronger when competitors:
are numerous or equally balancedare numerous or equally balanced experience slow industry growthexperience slow industry growth have high fixed costs or high storage costshave high fixed costs or high storage costs lack differentiation or low switching costslack differentiation or low switching costs experience high strategic stakesexperience high strategic stakes have high exit barriershave high exit barriers
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High Exit BarriersHigh Exit BarriersCommon exit barriers include:Common exit barriers include:
specialized assets (assets with values linked to specialized assets (assets with values linked to a particular business or location)a particular business or location)
fixed costs of exit such as labor agreementsfixed costs of exit such as labor agreements strategic interrelationships (relationships of strategic interrelationships (relationships of
mutual dependence between one business and mutual dependence between one business and other parts of a company’s operation, such as other parts of a company’s operation, such as shared facilities and access to financial markets)shared facilities and access to financial markets)
emotional barriers (career concerns, loyalty to emotional barriers (career concerns, loyalty to employees, etc.)employees, etc.)
government and social restrictionsgovernment and social restrictionsClick Here Return to Discussion Questions
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Discussion Question 4Discussion Question 4
What is a strategic group and why is it an important concept?
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Strategic GroupsStrategic Groups
Strategic group: a group of firms in an Strategic group: a group of firms in an industry following the same or similar industry following the same or similar strategy along the same strategic strategy along the same strategic dimensionsdimensions
The strategy followed by a strategic The strategy followed by a strategic group differs from strategies being group differs from strategies being implemented by other companies in implemented by other companies in the industrythe industry
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Discussion Question 5Discussion Question 5
How do you conduct a competitor analysis?
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Competitor EnvironmentCompetitor EnvironmentCompetitor intelligenceCompetitor intelligence is the ethical is the ethical gathering of needed information and gathering of needed information and data about competitors’ objectives, data about competitors’ objectives, strategies, assumptions, and capabilitiesstrategies, assumptions, and capabilities what drives the competitor as shown by its what drives the competitor as shown by its future future
objectivesobjectives what the competitor is doing and can do as what the competitor is doing and can do as
revealed by its revealed by its current strategycurrent strategy What the competitor believes about itself and the What the competitor believes about itself and the
industry, as shown by its industry, as shown by its assumptionsassumptions What the the competitor may be able to do, as What the the competitor may be able to do, as
shown by its shown by its capabilitiescapabilities
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Competitor AnalysisCompetitor Analysis
Future Objectives:Future objectivesFuture objectives How do our goals compare
with our competitors’ goals?
Where will the emphasis be placed in the future?
What is the attitude toward risk?
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Competitor AnalysisCompetitor Analysis
Current strategyCurrent strategy
Current Strategy: How are we currently
competing? Does this strategy support
changes in the competitive structure?
Future objectivesFuture objectives
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Competitor AnalysisCompetitor Analysis
AssumptionsAssumptions
Assumptions: Do we assume the future
will be volatile? Are we operating under a
status quo? What assumptions do our
competitors hold about the industry and themselves?
Current strategyCurrent strategy
Future objectivesFuture objectives
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Competitor AnalysisCompetitor Analysis
CapabilitiesCapabilities
Capabilities: What are our strengths
and weaknesses? How do we rate compared
to our competitors?
AssumptionsAssumptions
Current strategyCurrent strategy
Future objectivesFuture objectives
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Competitor AnalysisCompetitor Analysis
ResponseResponse
Response: What will our competitors
do in the future? Where do we hold an
advantage over our competitors?
How will this change our relationship with our competitors?
CapabilitiesCapabilities
AssumptionsAssumptions
Current strategyCurrent strategy
Future objectivesFuture objectives