Week 11 / Chapter 11: Operating Environment

Question 1

Crossan, Rouse, Rowe, and Maurer (2016). Strategic analysis and action (9th Ed.)

Answer 1

Crossan, Rouse, Rowe, and Maurer (2016). Strategic analysis and action (9th Ed.)

Question 2

CSR

Answer 2

Corporate Social Responsibility

Question 3

Identify Stakeholders

Answer 3

Identify stakeholders

Question 4

External stakeholders

Answer 4

Customers, competitors, suppliers, the community, government, and a variety of interest groups

Question 5

Internal stakeholders

Answer 5

Employees, unions, the management team, members of the Board of Directors, investors, and shareholders

Question 6

Define stakeholder interest

Answer 6

Asking questions such as:

1) What would be best for each stakeholder group
2) Could you possibly deliver this?
3) At what expense?

Question 7

Finding alliances and commonalities among the stakeholder groups

Answer 7

1) Do stakeholders interests align?

2) What are the dominant or recurring position taken

Question 8

Porter and Kramer suggest using the ___________ for stakeholder interest

Answer 8

Value chain

Question 9

Human resource management

Answer 9

Focusses on employment practices and issues such as compensation, safe working conditions, and discrimination

Question 10

Compare strategy to stakeholder’s interests

Answer 10

Following questions such as: What are the likely consequences for your actions ?
What reactions will your stakeholder have?
What is your personal feeling about the issue
How do you weigh the position of others
How do you set priorities? What are the effects?

Question 11

Take action to align strategy and stakeholder interests

Answer 11

Given the previous analysis, assess whether the strategic choice benefits each stakeholder. If not, assess whether the stakeholder can be brought on side, and how

Question 12

Jeffery Harrison and Carson St. John list of tactics for managing and partnering with external stakeholders

Answer 12

1) Generic social issues that do not significantly affect a company’s operations
2) Value chain social impacts that have a significant effect on a company and
3) Social dimensions of competitive context that have a significant impact on the underlying drivers of a company’s competitiveness

Question 13

Mitchell, Agle, and Wood provide a stakeholder typology on three key attributes:

Answer 13

1) The stakeholder’s power to influence the firm
2) The legitimacy of the stakeholder’s relationship with the firm
3) The urgency of the stakeholder’s claim on the firm

Question 14

Who is not a stakeholder

Answer 14

Anyone without power, legitimacy, or urgency

1/3 = low salience 
2/3 = moderate salience 
3/3 = high salience

Question 15

Expectant stakeholder

Answer 15

Possess 2/3 attributes

Question 16

Grundy, T. (2006). Rethinking and reinventing Michael Porter’s five forces model

Answer 16

Grundy, T. (2006). Rethinking and reinventing Michael Porter’s five forces model

Question 17

Why is Porter’s not used by everyone?

Answer 17

1) Porter’s framework is relatively abstract and
highly analytical.

2) Whilst Porter’s original framework
explained the criteria for assessing each of
the five competitive forces, he did so in the
language of micro-economic theory, rather
than in terms of its practicalities.

3) His model was highly prescriptive and
somewhat rigid, leaving managers, and
indeed teachers in business schools, generally inhibited from being playful, flexible
and innovative in how they applied this
powerful framework

4) Whilst the framework does help to simplify
micro economics, its visual structure is relatively difficult to assimilate and its logic is
somewhat implicit

Question 18

Porter’s five forces

Answer 18

1. The bargaining power of the buyers.
2. Entry barriers.
3. Rivalry.
4. Substitutes.
5. The bargaining power of the suppliers.

Question 19

There are, however, several limitations to

Porter’s framework, such as:

Answer 19

1) It tends to over-stress macro analysis, i.e.
at the industry level, as opposed to the
analysis of more specific product-market
segments at a micro level.

2) It oversimplifies industry value chains: for
example, invariably ‘buyers’ may need to be
both segmented and also differentiated
between channels, intermediate buyers and
end consumers.

3) It fails to link directly to possible management action: for example, where companies
have apparently low influence over any of
the five forces, how can they set about
dealing with them?

4) It tends to encourage the mind-set of an
‘industry’ as a specific entity with ongoing
boundaries. This is perhaps less appropriate
now where industry boundaries appear to
be far more fluid.

5) It appears to be self-contained, thus not
being specifically related, for example, to
‘PEST’ factors, or the dynamics of growth in
a particular market.

6) It is couched in economic terminology, which
may be perceived to be too much jargon from
a practicing manager’s perspective and indeed,
it could be argued that it is over-branded.

Question 20

Suggestions for further analysis

include:

Answer 20

1. The model can be prioritized within a force
   field analysis format.
2. The individual forces can be broken down
   at a micro level.
3. The framework can be transformed into a
   more dynamic model, both at the industry
   level and at a more micro, transactional
   level.
4. The five forces analysis needs to be applied,
   segment by segment, across the business.

Question 21

‘onion’ model
format, the key domains that need to be
thought through, within the overall competitive climate, beginning with:

Answer 21

PEST factors
growth drivers
Porter’s five competitive forces
competitive position.

Question 22

Porter’s five competitive forces are therefore
both _______ with the other
subsystems in the external environment,
rather than being relatively stand-alone.

Answer 22

highly interdependent

Question 23

Taking the bargaining power of buyers first, this appears to be a function of:

Answer 23

Importance — in terms of value added.
Urgency — in terms of lead times to consumption.
Discretion and emotion.

Question 24

Urgency

Answer 24

can be measured
according to the lead times required to satisfy
the need.

Question 25

Discretion

Answer 25

is defined as being the
extent to which customers have to fulfil a
need or not

Question 26

These entry barriers can be usefully broken

down into the following ingredients:

Answer 26

Physical: is it possible to get access to customers or to resources?
Information: to what extent is it possible to
acquire knowledge not only about the
‘what’ of the industry, but also about its
‘how’? (The latter being bound up in tacit
competences.)
Economic: what will it actually cost to enter
the market?
Psychological: is this a market where it is
comfortable to be?

Question 27

Competitive rivalry is also a
function of the following:

Answer 27

Commitment to the market.
 The number of players.
 Their strategy and disposition.
 Their similarity to or difference from one
another.

Question 28

Examines supplier power. These four micro forces

can be summarized as follows:

Answer 28

Unique knowledge — if the supplier(s) has
some unique capability this will obviously
enhance their power.

Size and number — where there are a very
small number of very large suppliers this
will obviously increase their power

Resource scarcity — where resources are
scarce and preferably permanently, this
again will help promote supplier power.

Forward integration — the supplier’s
capacity to integrate forward in the industry
chain will improve their competitive power.

Question 29

_________ can be explored at a macro and a

micro level

Answer 29

Competitive dynamics

Question 30

At a macro level

Answer 30

these can be seen
impacting dynamically over the industry cycle,
for example for the bargaining power of the
buyers and entry barriers

Question 31

The ‘industry mind-set’

Answer 31

The perceptions, expectations and
assumptions about the industry — now and
future’.

Question 32

‘from–to’ analysis

Answer 32

represents a
negative shift in forces and one significant
enough to cause a decline in margins.

Question 33

Pearce, Robinson (2015) Strategic management ((14th ed.)

Answer 33

Pearce, Robinson (2015) Strategic management ((14th ed.)

Question 34

Operating environment (aka competitive or task environment)

Answer 34

Factors in the immediate competitive situation that affect a firm’s success in acquiring needed resources

Question 35

Completed operating environment

Answer 35

Desktop

Question 36

Stakeholder Analysis Questions

Answer 36

1. Who are our stakeholders?
2. What are their interests and claims?
3. What opportunities and threats do our stakeholders pose?
4. What economic, legal, ethical and philanthropic responsibilities do we have to our stakeholders?
5. What should we do to effectively address their concerns?
6. How can we reconcile differing stakeholder interests?

Question 37

Access to personnel is affected by 4 factors:

Answer 37

Firm’s reputation as an employer
Local employment rates
Availability of people with the needed skills
Its relationship with labor unions

Question 38

Local Communities & Government

Answer 38

Interested in:
Job creation, training and expansion
Tax baseRegulations as well as local bylaws
Local sources of supply
Environment
Community activities and support

Question 39

Grundy’s Suggestions

Answer 39

1. Use a wider range of analytical frameworks
2. Explicitly explore the interdependencies of the 5 forces
3. Map impact of forces using vector analysis to assess industry attractiveness
4. Consider micro-forces of direct stakeholders in the operating environment
5. Consider impact of time on forces of change within and across industries

Question 40

Grundy’s vector analysis

Answer 40

Visual representation of forces impacting industry players (or individual company)
Competitive forces
Driving forces

Vector represents:
Direction: Favorable or unfavorable
Length: Higher importance/priority/impact have longer arrows

Use as many different vectors as needed to represent forces and gain new insights
May create multiple vectors to represent different buyer categories, entry barriers, etc.

Question 41

Grundy’s Micro-Force Analysis

Answer 41

Micro Competitive Forces

Using Porter’s criteria to determine power/threat is just a starting point
Other conditions can amplify the effects of the criteria
Rotate forces into “middle” position to understand the interdependence/potential impact of all other forces
Analyze from POV of organization not overally industry