Week 3 - Analysisng the external enviroment

Question 1

What are the different levels of enviromental analysis?

Answer 1

1) Macro -( PESTLE + scenario planning)
2) Micro industry (industry life cycle, five forces, strategic groups, market segmets)
3) Company

Question 2

Give examples of political factors

Answer 2

• Changes in Government
• Controls on merger and acquisitions policies
• Use of subsidies and/or nationalisation

Question 3

Give examples of legal factors

Answer 3

• Employment law and regulations
• Health and Safety
• Product safety and arising liability

Question 4

what are the key drivers of change?

Answer 4

They are the enviromental factors that are likely to have and huge impact on the success or failure of the strategy.

• They vary by industy or sector.
• Helps managers focus on the PESTLE factors that are most important and need to be addressed most urgently.
• Should be balanced for all factors

Question 5

what is a mega trend?

Answer 5

large-scale changes that are slow to form but influence many other activities over decades to come.

Question 6

what is an inflexion point?

Answer 6

when trends shift sharply upwards or downwards.

Question 7

what is a weak signal?

Answer 7

Advanced signs of future trends that may help to identify inflexion points – often unstructured and fragmented bits of information.

Question 8

what is the purpose of a PESTLE?

Answer 8

Identify specific factors which impact on the industry, market and organisation in question.

Identify opportunities and threats

Question 9

Examples of threat of new entrants

Answer 9

• Economies of scale
• Capital requirement of entry
• Access to distribution channels
• Cost advantages (early mover, experience curve)
• Expected retaliation
• Legislation or government action
• Differentiation of product

Question 10

Examples of threat of substitutes (substitution offers similar benefits to an industry’s products or service)

Answer 10

• Product-for-product (email replaces post/fax)
• Substitution of need (new products render old
  obsolete/ superfluous)
• Generic substitution (compete against other
  consumer products)
• Doing without
• How available are substitutes?

Question 11

Examples of Customer Power

Answer 11

• Concentration of buyers (high volume)
• High number of small suppliers (competition)
• Alternative sources of supply (choice)
• Component or material cost is high - shopping
  around squeezes suppliers
• Low switching costs
• Backward integration - buyer purchases supplier

Question 12

Examples of supplier Power

Answer 12

• Concentrated not fragmented suppliers
• High switching costs
• Powerful supplier brand
• Forward integration - supplier purchases buyer
  to satisfy own price needs
• Fragmented customer base (low bargaining
  power)

Question 13

Examples of competitve Rivalry

Answer 13

• Who are the competitors?
• How many are there?
• Is the market saturated?
• What are their competitive advantages?
• Is there ‘history’? E.G. BA and Virgin, Coke and
  Pepsi.
• How do they define their target markets?
• How are they responding to opportunities and
  threats in their target markets?

Question 14

What are some of the implications of the 5 forces?

Answer 14

• The forces may have a different impact on different organisations.
• Defining the ‘right’ industry - Applying the model at the most appropriate level
• Converging industries – particularly in the high tech arenas
• Complementary organisations – which enhance the attractiveness of a business to customers or suppliers.

Question 15

What is a value net?

Answer 15

a map of organisations in a business environment demonstrating opportunities for value-creating cooperation as well as competition.

Question 16

What is an uncontested market space? give exampes

Answer 16

An uncontested market space is one where companies produce products or services that with no direct competition.

1) Blue ocean - new market spaces where competition is minimised - (market space not being servced)
2) Red Ocean - where industry is already defined and rivalry is intense.

Question 17

What is a strategy Canvas?

Answer 17

compares competitors according to their performance in order to establish the extent of differentiation

Question 18

Describe the stages of the industry life cycle

Answer 18

• Development - early adopter (Few comptitors)
• Growth - trail of new product (Entry of competition, fight for market share, undifferientiated product)
• Maturity - saturation of users, repeat purchase reliance (fight for share, emphasis on efficiency and low cost)
• Decline - drop-off usage (exit fo some competitors)

Question 19

Name some criticisms of the life cycle approach.

Answer 19

• The duration of some lifecycles are difficult to determine
• Some industries miss stages or cannot be clearly identified
• Companies can actually change the shape of the curve
• At each stage the nature of competition might be different

Question 20

What are scenario annalysis ?

Answer 20

Scenarios- are plausible views of how the environment of an organisation might develop in the future based on key drivers of change about which there is a high level of uncertainty.

• Builds on PESTEL analysis
• Offers more than a single view..
• Scenario analysis is used in industries with long planning horizons
• Presents different possibilities and help prevent mangers from closing thier minds to alternatives.

Question 21

What are the stages of scenario planning?

Answer 21

Stage 1: define the scope (scope refers to the subjetc of the scenario and and the time span)
Stage 2 : Define the key drivers for chnage (Scenario planning deals with uncertainity and not risk) (Uncertainity cannot be quantified with possibilities)
Stage 3: Develop scenarios
Stage 4: identifying impacts of alternative scenarios on organisation (contingency plans)
Stage 5: Establishing early warning systems.

Effective scenario building can help build strategies that are robust in the face of enviromental change.

Question 22

What is an industry

Answer 22

It’s a group of firms producing products and service that are the same.

Question 23

What is a market?

Answer 23

Is a group of customers for specific products or services that are the same. Eg: geographical market

Question 24

What is hyper competition ?

Answer 24

• breaks out in oligopolistic industires
• rivals tend to invest heavily in destablising innovtion, expensive marketing and aggressibe price cuts with negative effects on profit. eg: mobile phone industry

Question 25

what is comparative industry analysis?

Answer 25

it can be used to analyse five forces criteria today and for a future date,

Question 26

How can competitors relative positions be analysed

Answer 26

By using strategic canvas and identify blue ocean opportunities

Question 27

What are some of the features of a monopolistic industry?

Answer 27

• just one firm (no competition rivalry)
• power over buyers and suppliers - due to lack of choice
• some industries are monopolistic due to economies of scale eg: water
• network effects eg: FB many users already

Question 28

What is a perfectively competitive industry?

Answer 28

• Barriers to entry low
• many rivals - similar products
• information about competitors is freely avaliable
• unable to earn more profit than bare minimum
• focus on price

Question 29

What is a strategic group?

Answer 29

-Organisations within an industry or sector with similar strategic characteristics, following similar strategies or competing on similar bases.

Question 30

What are critical success factors (Csfe)

Answer 30

are factors that are valued by customers or provide significant cost advantages.

Question 31

what is value innovation?

Answer 31

creation of new market-space or creating new success factors with previously unrecognised customer wants.
- Blue ocean