Environment/External and internal Scanning Flashcards
Why does the Environment Matter?
- The environment provides resources that an organization needs in order to create goods and services. * needs to take in resources such as labor, money, and raw materials from outside its boundaries.
- The environment is a source of opportunities and threats for an organization.
- A earthquake is bad for almost all businesses - except the producers of construction materials for example.
- The environment shapes the various strategic decisions.
* Ex: Trying to aggressively grow the company in a recession may not be the wisest move.
Capabilities vs strategic resources
Strategic resources are what they have
Capabilities are what they can do.
what is Distinctive competence?
A set of activities that an organization performs especially well
Internal Anlysis: Explain VRIO
Value
Assesses whether a resource or capability provide value to customers
* Questions to Ask:
o Does this resource add value by increasing customer satisfaction or reducing costs?
o Does it help the firm take advantage of opportunities or reduce threats?
o How does this resource align with our overall business strategy?
o What about the company makes them so strong competitively? What do they have?
Rarity
Considers if the resource is unique or if few competitors possess it, making it a potential source of advantage.
* Questions to Ask:
o Is this resource scarce, or do many competitors have it?
o How easy would it be for competitors to acquire or replicate this resource?
o How does this rarity position us within our industry?
Imitability
Assesses how easily competitors can replicate or substitute the resource.
* Questions to Ask:
o Is this resource costly or difficult to imitate (in terms of time, money, or complexity)?
o Does it require specialized knowledge, technology, or processes that are hard to copy?
o Would a competitor need unique conditions (e.g., culture, geographic location) to replicate it?
* Imitable means that the resource can be copied.
Organization
Evaluates if the company is organized to capture the value of the resource or capability.
* Questions to Ask:
o Does our firm have the right structure, processes, and policies to fully leverage this resource?
o Do we have the right people, culture, and systems to support this resource?
o How effectively are we aligning this resource with our business goals?
what are unique reasources?
valuable to procure, difficult to copy, and challenging to integrate into an organizations, put a company in a much stronger position to be successful than resources that are readily available to all competitors.
- essentially, it checks off all VRIO boxes
Internal Analysis: What are the Primary activities of Value Chain Analysis?
(IOOMS)
Inbound Logistics:
* Supply Chain Management: The company’s supply chain ensures that ingredients are transported and stored efficiently, minimizing costs and waste. Centralized distribution centers are used to streamline operations and ensure consistency across all locations.
* Storage & Handling: Maintaining freshness is critical, so their logistics involve refrigerated storage for perishable items like dairy and pre-cooked items for sandwiches.
Operations:
* Franchise Model: Most Tim Hortons locations operate under a franchise model. The operations team ensures that each franchise follows consistent processes, from food preparation to customer service.
* Production & Food Preparation: Tim Hortons’ food preparation process is streamlined for efficiency. Items like coffee, baked goods, and sandwiches are prepared in-house, but many ingredients (like doughnuts and bread) are partially pre-cooked at a central facility and baked on-site.
* Quality Control: To maintain brand consistency, Tim Hortons uses standardized procedures for food safety and quality at each store.
Outbound Logistics:
* Retail Sales: Tim Hortons has over 4,000 locations, primarily in Canada, and also serves the U.S. and international markets. Each store functions as an end point for customers to purchase their food and beverages.
* Drive-Thru: A significant portion of Tim Hortons’ sales comes through drive-thru orders, which are optimized for speed and convenience, contributing to higher customer turnover and satisfaction.
Marketing & Sales:
* Brand Positioning: Tim Hortons is positioned as a community-friendly, affordable option that is “Canada’s coffee and doughnut shop.” It appeals to a broad customer base, emphasizing both convenience and a sense of local tradition.
* Loyalty Programs: The “Tims Rewards” loyalty program incentivizes repeat purchases, offering rewards on coffee, food, and seasonal promotions.
* Digital Marketing & App: Their mobile app enables digital ordering, personalized offers, and contactless payments, enhancing customer convenience and engagement.
* Seasonal Promotions: They consistently run promotional campaigns (e.g., Roll Up the Rim to Win), which create customer engagement and brand loyalty.
Service:
* Customer Service: Tim Hortons emphasizes fast and friendly service. The brand trains employees on customer service standards to ensure that they consistently deliver a positive experience.
* Post-Sales Service: Tim Hortons’ customer service extends through handling complaints via social media and feedback forms, as well as their app, where customers can voice concerns or ask for service recovery.
* Franchise Support: Tim Hortons provides extensive support to franchisees, from initial setup to ongoing operations and marketing, ensuring their stores meet corporate standards.
Inbound Logistics: Receiving and warehousing raw materials.
Operations: Transforming inputs into the final product.
Outbound Logistics: Delivering the product to customers.
Marketing & Sales: Persuading customers to buy.
Service: Post-sale support to maintain product value.
Internal Analysis: What are the Support Activities of VCA?
FHTP
Firm Infrastructure:
o Management: Tim Hortons’ corporate structure supports the franchise network. It involves strategic decision-making regarding store locations, expansion, and partnerships. The company also engages in continuous brand development and market expansion.
o Financial Management: Efficient cost control and financial management support the company’s competitive pricing while maintaining profitability.
o Legal & Regulatory Compliance: The company ensures compliance with health and safety regulations, environmental laws, and franchising laws in various countries.
Human Resource Management:
o Employee Training: Tim Hortons invests in training programs for staff and franchise owners. Training includes customer service, food preparation, and health & safety standards.
o Franchisee Training & Development: Franchisees receive training in operational procedures, financial management, and brand standards, which helps maintain consistency across all locations.
o Retention Programs: Tim Hortons focuses on employee engagement and reducing turnover, offering competitive wages and career advancement opportunities within its franchise system.
Technology Development:
o Digital Innovation: The Tim Hortons app is central to its technology development, offering features like mobile ordering, loyalty rewards, and payment processing. The app is constantly updated to improve customer experience and streamline operations.
o Operational Technology: Tim Hortons uses point-of-sale (POS) systems that integrate with their digital platforms, providing real-time data on sales and customer preferences. This data informs their decision-making in terms of inventory management, marketing campaigns, and customer engagement.
o Food Technology: The company invests in technology to improve its menu offerings, like using sustainable packaging, improving the quality of their coffee blends, and developing new products like plant-based alternatives.
Procurement:
o Supplier Relationships: Tim Hortons maintains strong relationships with suppliers, negotiating favorable terms for bulk purchasing. They ensure that suppliers adhere to quality standards, particularly for coffee beans and other raw materials.
o Ethical Sourcing: They focus on sustainable practices, particularly in coffee sourcing, working with international partners to ensure ethical production methods.
o Packaging & Sustainability: Procurement also includes selecting sustainable packaging solutions to align with growing consumer demand for environmentally friendly products.
Firm Infrastructure — Supports the entire business structure.
Human Resource Management — Manages people and talent.
Technology Development — Drives innovation and efficiency.
Procurement — Ensures quality resources and materials.
What are Porter’s 5 Forces
Competitive Rivalry:
- Number of competitors: A high number of similar firms intensifies rivalry.
- In slow-growth markets, firms compete more aggressively for market share.
- Product or service differentiation: Lack of differentiation increases competition as firms vie on price alone.
- Fixed costs and exit barriers: High fixed costs or difficulty exiting the market leads to intense competition as firms fight to cover costs.
Threat of New Entrants:
- Barriers to entry: High costs, strong brand loyalty, or regulatory requirements can deter new competitors.
- Economies of scale: Large, established firms with cost advantages make it harder for new entrants to compete.
- Access to distribution channels: Limited access can prevent new entrants from reaching customers.
- Product differentiation: Unique offerings by incumbents can reduce attractiveness for new competitors.
Bargaining Power of Suppliers:
- Fewer suppliers increase their power due to limited options.
- When there are fewer substitutes, suppliers have more power.
- If the buyer represents a small portion of the supplier’s revenue, the supplier holds more power.
- Unique or high-quality goods give suppliers more control over pricing and terms.
Bargaining Power of Buyers:
- Number of buyers: Fewer buyers mean more power as each has greater leverage.
- Ignorance / Ambiguity of goods: When buyers are uninformed, it weakens their bargaining power.
- Low switching costs: Buyers can switch to a competitor’s product easily, increasing their power.
- Buyer volume: If a buyer purchases in large volumes, they have more negotiating leverage.
Threat of Substitutes:
- Availability of close substitutes: More substitutes give customers more alternatives, increasing this threat.
- Switching costs for buyers: High costs keep customers from switching, reducing the threat.
- Buyer inclination to substitute: If buyers see substitutes as equal or better, they are more likely to switch.
- Relative price-performance of substitutes: If substitutes are cheaper and offer similar performance, customers may switch.
What characteristics should you look for to decide if there’s high rivalry?
- competitors are numerous or are roughly equal in size and power
- the growth rate of the industry is slow: shortage of new customers lead firms to compete to steal other customer’s
- fixed costs in the industry is high
- exit barriers are high: firm must stay and fight than leave
- excess capacity exists in the industry: too much product is available, firm must work hard to earn sales
- capcity must be expanded in large increments to be efficient
- the product is perishable: firms need to sell their wares before they spoil
What is PESTEL?
PEST analysis is a tool used to organize factors within the general environment and identify how these factors influence industries.
Political Factors
* Government Policies: Trade policies, tariffs, subsidies, or regulations that impact business.
* Political Stability: Government stability, likelihood of regime changes, political turmoil.
* Tax Policy: Corporate tax rates, tax incentives, and their changes.
* Trade Restrictions and Tariffs: Import/export tariffs, trade restrictions, embargoes.
* Labor Laws: Minimum wage laws, working conditions, labor union policies.
* Environmental Regulations: Rules for pollution, waste management, sustainability.
* Corruption and Bureaucracy: Level of corruption, bureaucratic processes, ease of doing business.
* Intellectual Property Protection: Strength of IP laws and enforcement.
Economic Factors
* Economic Growth Rate: Country’s GDP growth, regional economic growth rates.
* Exchange Rates: Currency stability, foreign exchange fluctuations.
* Inflation Rates: Consumer price index (CPI), inflation stability or fluctuations.
* Interest Rates: Influence on consumer borrowing and spending, investment attractiveness.
* Unemployment Rates: Labor availability, wage trends.
* Consumer Confidence and Spending: Trends in consumer purchasing power and behavior.
* Disposable Income: Average consumer income after taxes and essentials.
Sociocultural Factors
* Demographics: Age distribution, gender, income levels, ethnic makeup.
* Cultural Attitudes and Trends: Society’s values, cultural preferences, lifestyle shifts.
* Health and Safety Consciousness: Public focus on health, safety, and well-being.
* Education Level: Workforce education level, literacy rates, and access to higher education.
* Attitudes Towards Work and Leisure: Work-life balance, job satisfaction, and leisure priorities.
* Population Growth Rate: Changes in population size and its economic implications.
Technological Factors
* Research and Development Activity: Innovation rate, funding in R&D.
* Technology Infrastructure: Internet availability, mobile networks, tech ecosystems.
* Automation and AI: Advancements in robotics, AI, and their applications in industries.
* Cybersecurity: Standards for data protection, cybersecurity laws, breach risks.
* Rate of Technological Change: Speed of tech advancements, emerging technologies.
* Access to Technology: Public accessibility to tech resources, digital divide.
* Intellectual Property Rights in Tech: Protection of tech-related IP rights.
* tech influences = how science improves products and services
Environmental Factors
* Climate and Weather: Climate change impact, natural disaster risks, seasonal patterns.
* Sustainability: Emphasis on renewable resources, carbon footprint reduction.
* Waste Management and Recycling: Local and international waste management practices.
* Environmental Regulations: Government policies on pollution, emissions.
* Green Consumerism: Public demand for sustainable, eco-friendly products.
* Energy Consumption and Costs: Access to clean energy, fuel prices, energy policies.
* Biodiversity: Consideration for biodiversity in operations, impact on ecosystems.
Legal Factors
* Employment Laws: Regulations on minimum wage, benefits, working hours.
* Consumer Protection Laws: Rights for product safety, truth in advertising.
* Health and Safety Laws: Occupational health standards, workplace safety requirements.
* Data Protection Laws: Laws for data privacy (e.g., GDPR).
* Antitrust Laws: Regulations preventing monopolies and promoting competition.
* Industry-Specific Regulations: Sector-specific laws, like finance or healthcare regulations.
* Intellectual Property Laws: Enforcement of copyrights, patents, trademarks.
Define BCG Matrix
BCG Matrix: help a business consider growth opportunities by reviewing its portfolio of products to decide where to invest, to discontinue, or develop products
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Stars
High growth, high market share products. These products have a strong competitive position and a high potential for generating revenue but also require significant investment to sustain growth.
* Example: A technology company’s latest smartphone model with high sales and a growing market presence. -
Cash Cows
Low growth, high market share products. These products generate steady revenue and require little investment, as they are in mature markets. Profits from cash cows are often used to fund other products in the portfolio.
* Example: A well-established brand of toothpaste that dominates the market with minimal marketing needs. -
Question Marks (or Problem Children)
High growth, low market share products. These are often newer products that are in a growing market but haven’t yet achieved dominance. They may require heavy investment to increase market share, with uncertain prospects.
* Example: A new line of health supplements in a competitive and fast-growing market. -
Dogs
Low growth, low market share products. These typically represent mature products that neither generate significant revenue nor require much investment. Companies may choose to divest or discontinue these products.
* Example: An outdated model of a laptop in a saturated market, with declining sales.
what is SWOT analysis
SWOT Analysis is a strategic planning tool used to evaluate an organization’s internal and external factors:
Strengths (Internal):
What the company does well or its key advantages (e.g., strong brand, skilled workforce, resources).
Weaknesses (Internal):
Areas where the company lacks or underperforms (e.g., outdated technology, limited reach, high costs).
Opportunities (External):
External factors that the company can exploit for growth (e.g., market trends, new technologies, regulatory changes).
Threats (External):
External risks that could negatively impact the company (e.g., competition, economic downturns, changing consumer behavior).
SWOT helps in strategic decision-making by identifying areas to focus on, improve, or defend against.
What is Strategic Mapping?
Strategic mapping: involves visualizing and analyzing a university’s position relative to its competitors or internal goals.
This helps in identifying strategic priorities and areas for improvement.
