Week 2 - strategic competitive analysis

Question 1

Define the business environment and the levels that comprise it.

MIC

Answer 1

Business environment - internal and external factors that influence a company’s operating situation.

Macro environment - Broad environmental factors that impact on all organisations.

Industry - orgs producing the same products or services.
• Types - monopoly, oligopoly, hyper competitive, perfect competitive
• Five forces = attractiveness

Competitors and markets
The nature of competitors and markets affects business.
• Strategic groups- distinguished by org activities or resource committment
• Customers- can be segmented using different interests & critical success factors.

Question 2

What are the components of a Pestel analysis

PESTEL

Answer 2

PESTEL provides a comprehensive list of influences on the possible success or failure of particular strategies”

1. “Politics highlights the role of governments;
2. Economics refers to macro-economic factors such as exchange rates, business cycles and differential economic growth rates around the world;
3. Social influences include changing cultures and demographics, for example ageing populations in many Western societies;
4. Technological influences refer to innovations such as the internet, nano-technology or the rise of new composite materials;
5. Environmental stands specifically for ‘green’ issues, such as pollution and waste;
6. Legal embraces legislative constraints or changes, such as health and safety legislation or restrictions on company mergers and acquisitions.”

Question 3

A porters 5 forces identifies the attractiveness (profit potential) of an industry and so which to enter or where to exert influence to make atttractive. ID parts.

Answer 3

Threat of entry
Threat of substitutes
Bargaining power of substitutes.
Bargaining power of buyers
Rivalry between competitors.

Question 4

List the generic types of industry

MOPH

Answer 4

Monopolistic - 1 firm, no competitive rivalry

Oligopoly - few firms, limited rivalry, power over buyers & suppliers

Perfectly competitive industries - many rivals, similar products, free info

Hypercompetitive industries - creates constant disequilibrium and change.

Question 5

Competitive forces change over time. List the approaches to understanding change in industry structures.

CCC

Answer 5

Competition life cycle - development (low) growth (low), shake out (increasing), maturity (strong buyers), decline (extreme rivalry).

Comparative industry structure analysis - radar plot 5 forces over time. Small area, large competition

Competition cycles - move and counter move

Question 6

Within ‘competitors and markets’ strategic groups can be mapped on to two-dimensional charts. How is this useful.

FAI

Answer 6

Focus on direct competitors
Analyse mobility barriers
ID blue ocean opportunities

Question 7

Define blue and rec ocean thinking

Answer 7

Blue Oceans are new market spaces where competition is minimised.

‘Red Oceans’ are where industries are already well defined and rivalry is intense

blue ocean thinking involves finding and creating market spaces by identifying critical success factors and exploiting new factors.

Question 8

Define corporate governence and why it is important

Answer 8

Corporate governance - the structures and systems of control by which managers are held accountable to stakeholders

Become prominent for 3 reasons:

1. separation of ownership and management
2. Corporate failures and scandals
3. stakeholders demand accountability

Question 9

Define the governance chain

GSSRRR

Answer 9

Shows roles and relationships of different groups involved in the governance of an organisation.

Guards against agency problems, clarifying:
Responsibility
Role of institutional investors
Role of boards
Shareholders
Scrutiny and control

Question 10

Describe the shareholder model of corporate governence

Answer 10

Considers:
profit  sole responsibility
Shareholders have primacy
Share trading maximises profit
Share trading the mechanism for approval / disapproval.

board acts in a single tier to drive strategy.

Question 11

Describe the stakeholder model of corporate governence.

Answer 11

Considers:
Orgs responsible to stakeholders

Board acts in a dual tier.
Management plan and control
Supervisory board represents stakeholders

Question 12

Corporate governance usually takes the form of a board. Describe it’s nature

Answer 12

Board represents stakeholders best by:

Independent operation
Competent representation
time for duties
Measured behaviour
.

Question 13

Corporate social responsibility offers competitive advantage and has an impact on reputation. Define CSR and list it’s 4 forms

LETS

Answer 13

Behave ethically, contribute economically improving quality of life of workers and stakeholders.

• Laissez-faire - compliance, profit, taxes, jobs
• Enlightened self-interest - profit + stakeholders makes good business sense.
• Social shapers - profit secondary
• Triple bottom line - orgs to be measured in people, profit, environment

Question 14

Stakeholders can be classified in terms of relationship with the organisation and how they might affect the success or failure of a strategy. List the 5 types:

ESTIC

Answer 14

• Economic stakeholders eg suppliers, competitors, distributors.
• Social/political stakeholders - influence the strategy or the context in which strategy is developed eg gov
• Technological stakeholders - influence the diffusion of new technologies and the adoption of industry standards eg early adopters
• internal - different levels / gropus in the hierarchy
• Community stakeholders - affected by what an organisation does

Question 15

List stakeholder mapping

Answer 15

Stakeholder mapping - assess power and influence to set political priorities.

Map using matrix. Interest (x) vs Power (y).