industry dynamics and change presentation.ppt
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© 2008 Knud Jensen, Rein Petersen, Neil Wolff 1
Knud JensenTed Rogers School of Management, Ryerson University
Industry Dynamics and Change
© 2008 Knud Jensen, Rein Petersen, Neil Wolff 2
Understanding how to grow requires an in-depth
understanding and clarification of the external environment in which the organization exists.
Industry Dynamics and Change
© 2008 Knud Jensen, Rein Petersen, Neil Wolff 3
Information is Important
Information about the following is important:
Industry
Market
Industry structure
Competitors
Buyers/consumers
Technology
© 2008 Knud Jensen, Rein Petersen, Neil Wolff 4
The Big Three
1. Where are we currently?
2. Where do we want to go?
3. How do we get there?
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The Why of Why?
Asking why? – questions basic beliefs and gets to the real cause of problems, issues, roadblocks, etc.
Challenges lead to insight Toyota’s 5 whys
© 2008 Knud Jensen, Rein Petersen, Neil Wolff 6
More QuestionsExternally Focused Questions:
How and at what pace is the company’s market evolving?
What factors are driving market change and what impact will they have?
What are competitors up to? In what ways are competitive conditions growing stronger or weaker?
What does the changing market and competitive landscape mean for the company’s business over the next five years and beyond?
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THE OBJECTIVES OF THE INFORMATION MUST ALWAYS BE KEPT IN MIND:
1. To develop a deep understanding of where the company is now with respect to the external environment.
2. To clarify the complex forces impacting on the company.
Industry Dynamics and Change
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We need to understand magnitudes, market limitations, and most important, prospects for future growth.
Example:
Size and 2 – 5 years historical growth
Simple growth trends can generate a lot of discussion
Industry Dynamics and Change
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Complexity:
You may be part of one industry
You may be part of several industries (via products/services, customers, suppliers)
Industry Dynamics and Change
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Tools For The Industry:
Boundaries (What is your sandbox?)
Industry structure
Driving forces
Key success factors
Competitor analysis
Maps
Industry Dynamics and Change
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Rivalry amongst competing sellers
Threat of new competitors
Threat of substitute products
Supplier bargaining power
Buyer bargaining power
Analyzing Competitive Forces
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Driving forces are variables that have the capacity to change not only demand, but also the very nature of an industry.
Driving forces should be identified for your industry.
Changes result in:
Buyer behaviour modification
Structural change
Competitive reaction
Product portfolios
Disruptions
Driving Forces
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Demographics
Technology
Innovations, inventions
Social and cultural changes
New products/services
Changes in buyer attitudes
Government regulations, policy, changes in law
Typical Driving Forces
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Strategic Group Map Illustration
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Identify competitive characteristics that differentiate firms in your industry. Choose two possible axes that you consider appropriate. Some possible axes to consider are:
Price/Quality (high, medium, low) Geographic coverage (local, national, international) Degree of vertical integration (none, partial, full) Product-line breadth (wide, average, low) Use of distribution channels (narrow, average, low) Degree of service offered (no-frills, limited, full)
Strategic Group Map
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Complete Your Own Map
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Think about what it takes to be successful in your industry
There are “must have” and there are “nice to have”
Identify the gap or gaps that exist between your success factors and those in the industry
If you want to grow, you have to fill the gaps
KSFs are not stable and they are not equal, but they are necessary
Key Success Factors (KSFs)
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A summary of the characteristics of strengths, weaknesses, opportunities, and threats
Strengths:
Something we do well
Valuable know-how
Competitive capability
Attributes
Ventures, alliances
SWOT
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A summary of the characteristics of strengths, weaknesses, opportunities, and threats con’t
Weaknesses:
Something we do poorly
A disadvantage
A deficiency in expertise or competence
Lack of assets (physical, human, intangible)
Missing capabilities
SWOT
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A summary of the characteristics of strengths, weaknesses, opportunities, and threats con’t
Opportunities:
Best prospects
Competitive advantage
New customers, markets, products
Change in industry structure
SWOT
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A summary of the characteristics of strengths, weaknesses, opportunities, and threats con’t
Threats:
Competitive behaviour
New product/service
Demographics
Technology
SWOT
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A summary of the characteristics of strengths, weaknesses, opportunities, and threats con’t
Growing From SWOT Analysis:
Build on the organization’s strengths
Recognize weaknesses and correct, where possible
Take advantage of opportunities – this is what drives
growth Recognize threats to the organization and take steps to
minimize the effects
SWOT
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“Before executives can chart a new strategy, they must reach common understanding of the company’s current position.”
W. Chan Kim andRenee Mauborgne