Week 3 - Analysisng the external enviroment Flashcards
What are the different levels of enviromental analysis?
1) Macro -( PESTLE + scenario planning)
2) Micro industry (industry life cycle, five forces, strategic groups, market segmets)
3) Company
Give examples of political factors
- Changes in Government
- Controls on merger and acquisitions policies
- Use of subsidies and/or nationalisation
Give examples of legal factors
- Employment law and regulations
- Health and Safety
- Product safety and arising liability
what are the key drivers of change?
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
what is a mega trend?
large-scale changes that are slow to form but influence many other activities over decades to come.
what is an inflexion point?
when trends shift sharply upwards or downwards.
what is a weak signal?
Advanced signs of future trends that may help to identify inflexion points – often unstructured and fragmented bits of information.
what is the purpose of a PESTLE?
Identify specific factors which impact on the industry, market and organisation in question.
Identify opportunities and threats
Examples of threat of new entrants
- 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
Examples of threat of substitutes (substitution offers similar benefits to an industry’s products or service)
- 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?
Examples of Customer Power
- 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
Examples of supplier Power
- 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)
Examples of competitve Rivalry
- 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?
What are some of the implications of the 5 forces?
- 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.
What is a value net?
a map of organisations in a business environment demonstrating opportunities for value-creating cooperation as well as competition.
What is an uncontested market space? give exampes
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.
What is a strategy Canvas?
compares competitors according to their performance in order to establish the extent of differentiation
Describe the stages of the industry life cycle
- 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)
Name some criticisms of the life cycle approach.
- 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
What are scenario annalysis ?
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.
What are the stages of scenario planning?
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.
What is an industry
It’s a group of firms producing products and service that are the same.
What is a market?
Is a group of customers for specific products or services that are the same. Eg: geographical market
What is hyper competition ?
- 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
what is comparative industry analysis?
it can be used to analyse five forces criteria today and for a future date,
How can competitors relative positions be analysed
By using strategic canvas and identify blue ocean opportunities
What are some of the features of a monopolistic industry?
- 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
What is a perfectively competitive industry?
- 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
What is a strategic group?
-Organisations within an industry or sector with similar strategic characteristics, following similar strategies or competing on similar bases.
What are critical success factors (Csfe)
are factors that are valued by customers or provide significant cost advantages.
what is value innovation?
creation of new market-space or creating new success factors with previously unrecognised customer wants.
- Blue ocean
