exploring corporate strategy 8e, © pearson education 2008 2-1 the focus of part 1: the strategic...
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2-1Exploring Corporate Strategy 8e, © Pearson Education 2008
The Focus of Part 1: The Strategic Position
How to analyse an organisation’s position in the external environment
How to analyse the determinants of strategic capability
How to understand an organisation’s purposes, taking into account corporate governance, stakeholder expects and business ethics
How to address the role of history and culture in determining an organisation’s position
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The Strategic Position2: The Environment
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2-3Exploring Corporate Strategy 8e, © Pearson Education 2008
Learning Outcomes (1)
Analyse the broad macro-environment of organisations in terms of political, economic, social, technological, environmental and legal factors
Identify key drivers in this macro-environment and use these key drivers to construct alternative scenarios with regard to environmental change
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2-4Exploring Corporate Strategy 8e, © Pearson Education 2008
Learning Outcomes (2)
Use five forces analysis in order to define the attractiveness of industries and sectors for investment and to identify their potential for change
Identify strategic groups, market segments, and critical success factors, and use them in order to recognise strategic gaps and opportunities in the market
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2-5Exploring Corporate Strategy 8e, © Pearson Education 2008
Exhibit 2.1 Layers of the business environment
The Organisation
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2-6Exploring Corporate Strategy 8e, © Pearson Education 2008
The Macro-Environment
PESTEL
Scenarios
Key drivers
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2-7Exploring Corporate Strategy 8e, © Pearson Education 2008
PESTEL Framework
Political Economic
Technological
Environmental Legal
Social
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2-8Exploring Corporate Strategy 8e, © Pearson Education 2008
The PESTEL Framework
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2-9Exploring Corporate Strategy 8e, © Pearson Education 2008
What Are Key Drivers for Change?
Key drivers for change are environmental factors that are likely
to have a high impact on the success or failure of strategy.
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2-10Exploring Corporate Strategy 8e, © Pearson Education 2008
What is a Scenario?
Scenarios are detailed and plausible views of how the business
environment of an organisation might develop in the future based on key
drivers for change about which there is a high level of uncertainty.
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2-11Exploring Corporate Strategy 8e, © Pearson Education 2008
Industries and Sectors
Competitive forces
Competitive cycles
Industry life cycle
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2-12Exploring Corporate Strategy 8e, © Pearson Education 2008
Exhibit 2.2 The Five Forces Framework
Competitive rivalry
Potential entrants
Buyers
Substitutes
Suppliers
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2-13Exploring Corporate Strategy 8e, © Pearson Education 2008
The Threat of Entry: Barriers to Entry
Scale and experience
Access to supply and distribution channels
Expected retaliation
Legislation or government action
Differentiation
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Why Are Substitutes a Threat?
Substitutes can reduce demand for a particular class of products as customers switch to alternatives.
• Price/performance ratio
• Extra-industry effects
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2-15Exploring Corporate Strategy 8e, © Pearson Education 2008
The Power of Buyers
Are buyers concentrated?
What are the costs of switching?
Does backward vertical integration exist?
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2-16Exploring Corporate Strategy 8e, © Pearson Education 2008
The Power of Suppliers
Are suppliers concentrated?
What are the costs of switching?
Does forward vertical integration exist?
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2-17Exploring Corporate Strategy 8e, © Pearson Education 2008
Degree of Competitive Rivalry
Competitor balance
Industry growth rate
High fixed costs
High exit barriers
Low differentiation
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2-18Exploring Corporate Strategy 8e, © Pearson Education 2008
Managerial Implications
Which industries should we enter or leave?
What influence can we exert?
How are competitors differently affected?
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2-19Exploring Corporate Strategy 8e, © Pearson Education 2008
Other Issues in a Five Forces Analysis
Define the ‘right’ industry
Determine whether industries are converging
Identify complementary products
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Exhibit 2.3 The Industry Life Cycle
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Exhibit 2.4 Cycles of Competition
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2-22Exploring Corporate Strategy 8e, © Pearson Education 2008
What is Hypercompetition?
Hypercompetition occurs where the frequency, boldness and
aggressiveness of dynamic movements by competitors
accelerate to create a condition of constant disequilibrium and change.
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Exhibit 2.5 Comparative Industry Structure Analysis
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2-24Exploring Corporate Strategy 8e, © Pearson Education 2008
Competitors and Markets
Strategic groups
Strategic customers
Market segments
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What are Strategic Groups?
Strategic groups are organisations within an industry
with similar strategic characteristics, following similar
strategies or competing on similar bases.
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2-26Exploring Corporate Strategy 8e, © Pearson Education 2008
Characteristics for Identifying Strategic Groups
Scope of activities
Extent of product diversity
Extent of geographic coverage
Number of segments served
Distribution channels
Resource commitment
Extent of branding
Marketing effort
Extent of vertical integration
Product quality
Technological leadership
Organisational size
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Benefits of Identifying Strategic Groups
Understanding competition
Analysis of strategic opportunities
Analysis of mobility barriers
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What is a Market Segment?
A market segment is a group of customers who have similar needs
that are different from customer needs in other parts of the market.
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Exhibit 2.7 Some Bases of Market Segmentation
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Managerial Issues in Market Segmentation
How do customer needs vary by market?
What is the relative market share within market segments?
How can market segments be identified and ‘serviced’?
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What is a Strategic Customer?
A strategic customer is the person(s) at whom the strategy is primarily addressed because they
have the most influence over which goods or services are purchased.
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2-32Exploring Corporate Strategy 8e, © Pearson Education 2008
What are Critical Success Factors?
Critical success factors (CSFs) are those product features with which a organisation must outperform the
competition because they are particularly valued by a group of
customers.
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2-33Exploring Corporate Strategy 8e, © Pearson Education 2008
Types of Opportunity
In substituteindustries
In other strategicgroups
In targetingbuyers
For complementaryproducts
In new market segments
Over time
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Case Example: The European Brewing Industry
Complete a PESTEL analysis of the European brewing industry.
Complete a five forces analysis for the industry.