Chapter 4 - The organisational ecosystem: External environmental analysis Flashcards
Why has the business environment become more volatile?
Changing technology
Unpredictable demand
Globalisation
Development of high-growth, emerging economies
Geopolitical impact
Demographics
Customer Empowerment
Social Change
Digital technology
Automation
Sustainability
What is the purpose of an environmental analysis?
Identification of threats and opportunities
Assessment of competition
Identification of strengths and weaknesses
Meeting stakeholder needs
What does PESTEL analyse?
General macro-environment, identifying key drivers of change and hence sources of risk.
Why is PESTEL good?
Good at identifying whether a market is growing/declining and why
Can be used to generate ideas for a position analaysis
What does PESTEL stand for?
Political
Economic
Social
Technological
Environmental
Legal
What does Porter’s five forces examine?
Organisations industry
Determine profit potential, both for the industry as a whole and for individual firms/SBUs.
An individual firm can better margins than competitors if it can deal more effectively with key forces.
What are the limitations of the 5 forces model
Dynamic industries: may find little benefit from industry analysis
Outsider-in vs inside-out: difficult to apply for competence based businesses
Role of government: Some analysts add this as a 6th force
Collaboration: model assumes business operate idependently
NFP
What is the industry ife cycle analysis?
Looks at the industry as a whole that the organisation operates in, or can be used to assess individual products or divisions with the organisations
What are the four stages in the industry/product life cycle?
Introduction
Growth
Maturity
Decline
When is price skimming appropriate?
When the product is known to have a price-inelastic demand
When is penetration pricing appropriate?
Where the demand is thought to be price-elastic and when gaining market share is seen as more important than fast recovery of development costs
What are some considerations in the product life cycle?
Offer a range of products at various stages of the life cycle
Competencies need to change
Life cycles are difficult to predict, can change quickly and will vary from one product to another
Management anticipation of decline can cause decline
SWOT varies across the life cycle
Strategies will need to change as the organisation progresses
What is the usefulness of the life cycle model?
Improved strategic planning
Improved budgeting
Proactive approach
What is competitor analysis?
Set of activities which examines the comparative postition of competing enterprises within a given strategic sector.
Seeks to:
Provide an understanding of the company’s competitive advantage/disadvantage
Help generate insights into competitors strategies
Give an informed basis for developing future strategies to sustain/establish advantages over competitors
What are the three purposes of competitor analysis that Grant highlights?
Forecast competitors’ future strategies and decisions
Predict ocompetitors’ likely reactions to a firm’s strategic intiatives
Determine how competitor behaviour can be influenced to make it more favourable for the organisation
What are the 3 steps to competitor analysis?
Identify Competitors
Analyse competitors
Develop cometitor response profiles
What are the four types of competitors?
Brand competitors
Industry competitors
Form competitors
Generic competitors
What is a brand competitor?
Sell similar products to the same customers we serve
What is a industry competitor?
Sell similar products but in different segments
What is a form competitor?
Sell products that satisfy the same need as ours though technically very different
What is a generic competitor?
Compete for the same income
What are the four types of competitor response profiles?
Laid back: does not respond
Selective: Reacts to attack in only selected markets
Tiger: always responds aggressively
Stochastic: No predictable pattern exists
Why would we enter a foreign market?
Pressure from shareholders to increase ROCE
Saturated domestic markets making home expansion difficult
Opportunities as emerging markets arise with increases in economic income and spending power
Trade barriers coming down
What are the risks arising from entering global markets?
Marketing mix adaptations
Cultures vary
Varying cost structures
Different competitive levels
Exchange rate volatility
Different economic situations
Political involvement
Political situation
Entry requirements
