Week 11 / Chapter 11: Operating Environment Flashcards
Crossan, Rouse, Rowe, and Maurer (2016). Strategic analysis and action (9th Ed.)
Crossan, Rouse, Rowe, and Maurer (2016). Strategic analysis and action (9th Ed.)
CSR
Corporate Social Responsibility
Identify Stakeholders
Identify stakeholders
External stakeholders
Customers, competitors, suppliers, the community, government, and a variety of interest groups
Internal stakeholders
Employees, unions, the management team, members of the Board of Directors, investors, and shareholders
Define stakeholder interest
Asking questions such as:
1) What would be best for each stakeholder group
2) Could you possibly deliver this?
3) At what expense?
Finding alliances and commonalities among the stakeholder groups
1) Do stakeholders interests align?
2) What are the dominant or recurring position taken
Porter and Kramer suggest using the ___________ for stakeholder interest
Value chain
Human resource management
Focusses on employment practices and issues such as compensation, safe working conditions, and discrimination
Compare strategy to stakeholder’s interests
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?
Take action to align strategy and stakeholder interests
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
Jeffery Harrison and Carson St. John list of tactics for managing and partnering with external stakeholders
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
Mitchell, Agle, and Wood provide a stakeholder typology on three key attributes:
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
Who is not a stakeholder
Anyone without power, legitimacy, or urgency
1/3 = low salience 2/3 = moderate salience 3/3 = high salience
Expectant stakeholder
Possess 2/3 attributes
Grundy, T. (2006). Rethinking and reinventing Michael Porter’s five forces model
Grundy, T. (2006). Rethinking and reinventing Michael Porter’s five forces model
Why is Porter’s not used by everyone?
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
Porter’s five forces
- The bargaining power of the buyers.
- Entry barriers.
- Rivalry.
- Substitutes.
- The bargaining power of the suppliers.
There are, however, several limitations to
Porter’s framework, such as:
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.
Suggestions for further analysis
include:
- The model can be prioritized within a force
field analysis format. - The individual forces can be broken down
at a micro level. - The framework can be transformed into a
more dynamic model, both at the industry
level and at a more micro, transactional
level. - The five forces analysis needs to be applied,
segment by segment, across the business.
‘onion’ model
format, the key domains that need to be
thought through, within the overall competitive climate, beginning with:
PEST factors
growth drivers
Porter’s five competitive forces
competitive position.
Porter’s five competitive forces are therefore
both _______ with the other
subsystems in the external environment,
rather than being relatively stand-alone.
highly interdependent
Taking the bargaining power of buyers first, this appears to be a function of:
Importance — in terms of value added.
Urgency — in terms of lead times to consumption.
Discretion and emotion.
Urgency
can be measured
according to the lead times required to satisfy
the need.
Discretion
is defined as being the
extent to which customers have to fulfil a
need or not
These entry barriers can be usefully broken
down into the following ingredients:
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?
Competitive rivalry is also a function of the following:
Commitment to the market. The number of players. Their strategy and disposition. Their similarity to or difference from one another.
Examines supplier power. These four micro forces
can be summarized as follows:
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.
_________ can be explored at a macro and a
micro level
Competitive dynamics
At a macro level
these can be seen
impacting dynamically over the industry cycle,
for example for the bargaining power of the
buyers and entry barriers
The ‘industry mind-set’
The perceptions, expectations and
assumptions about the industry — now and
future’.
‘from–to’ analysis
represents a
negative shift in forces and one significant
enough to cause a decline in margins.
Pearce, Robinson (2015) Strategic management ((14th ed.)
Pearce, Robinson (2015) Strategic management ((14th ed.)
Operating environment (aka competitive or task environment)
Factors in the immediate competitive situation that affect a firm’s success in acquiring needed resources
Completed operating environment
Desktop
Stakeholder Analysis Questions
- Who are our stakeholders?
- What are their interests and claims?
- What opportunities and threats do our stakeholders pose?
- What economic, legal, ethical and philanthropic responsibilities do we have to our stakeholders?
- What should we do to effectively address their concerns?
- How can we reconcile differing stakeholder interests?
Access to personnel is affected by 4 factors:
Firm’s reputation as an employer
Local employment rates
Availability of people with the needed skills
Its relationship with labor unions
Local Communities & Government
Interested in: Job creation, training and expansion Tax baseRegulations as well as local bylaws Local sources of supply Environment Community activities and support
Grundy’s Suggestions
- Use a wider range of analytical frameworks
- Explicitly explore the interdependencies of the 5 forces
- Map impact of forces using vector analysis to assess industry attractiveness
- Consider micro-forces of direct stakeholders in the operating environment
- Consider impact of time on forces of change within and across industries
Grundy’s vector analysis
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.
Grundy’s Micro-Force Analysis
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
