Скачать презентацию The General Environment Firms can t generally control the Скачать презентацию The General Environment Firms can t generally control the

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The General Environment Firms can’t generally control the GENERAL ENVIRONMENT they face SO. . The General Environment Firms can’t generally control the GENERAL ENVIRONMENT they face SO. . . . Gather all the information you can Understand each segment And the implications on selection and implementation of strategies WHY ? Try to identify the opportunities & threats that exist in the environment

Segments of the General Environment Economics - change in GDP - interest rates - Segments of the General Environment Economics - change in GDP - interest rates - exchange rates - capital market trends - consumer confidence - unemployment rates - personal savings rates - business savings rates - governmental deficits - trade deficits/surpluses - inflation rates

Segments of the General Environment Demographics - population size - income distribution - ethnic Segments of the General Environment Demographics - population size - income distribution - ethnic mix - geographic distribution - age structure - immigration

Segments of the General Environment Socio-Cultural - % of women in the workforce - Segments of the General Environment Socio-Cultural - % of women in the workforce - workforce diversity - attitudes about quality of work life - concerns about the physical environment - shifts in work/career preferences - shifts in preferences regarding product/service characteristics Globalization - important political events - critical government movements - newly industrialized countries - different cultures & institutional attributes

Segments of the General Environment Technological - product innovation - process innovation - knowledge Segments of the General Environment Technological - product innovation - process innovation - knowledge applications - new communication technologies - focus of private & government-supported R&D expenditures Political/Legal - political stability - is government friend or foe of business ? - anti-trust laws - taxation - labour training incentives & educational policies - de-regulation/regulatory philosophies & policies - philosophies regarding government economic involvement/ownership

Industry Analysis Estimate the potential size of the market Number of customers and their Industry Analysis Estimate the potential size of the market Number of customers and their relative sizes Where is most of the competition coming from ? Number of competitors and their relative sizes Where is the industry in its life cycle ? What are the most popular strategies being used ? - is differentiation important ? - how about technology ? - is production capacity crucial ? - what are the capital requirements ? Some of the most recent trends in the industry Can we make a lot of money ?

How Attractive is the Industry ? Porter’s FIVE Forces + 1 This is an How Attractive is the Industry ? Porter’s FIVE Forces + 1 This is an attempt to determine if you can make a lot of money in this particular industry or not Threat of New Entrants If everybody can easily get into this industry, there will be too much competition and it will be very difficult to make huge profits WHAT MAKES IT DIFFICULT TO GET INTO AN INDUSTRY ? - the need to get in, in a big way (economies of scale required) - patent protection or proprietary technology - a sharp learning curve that puts new entrants at a huge disadvantage - strong existing brands that customers are loyal to - excessive capital requirements - access to the best suppliers/distributors is not possible - government/legal regulations or international trade restrictions

How Attractive is the Industry ? Cont’d. Porter’s FIVE Forces + 1 cont’d. Threat How Attractive is the Industry ? Cont’d. Porter’s FIVE Forces + 1 cont’d. Threat of Substitute Products/Services Substitutes are not competitors’ offerings; they are products/services in totally different industries that can be used by customers instead of yours. The more alternates there are, the easier it is for customers to switch if your industry tries to make too much money e. g. encrypted document electronic forwarding is a substitute to courier services Bargaining Power of Suppliers If you cannot switch suppliers easily, you are at their mercy and they will reduce your chances of making large profits WHAT GIVES SUPPLIERS POWER ? - a few large companies dominate the industry and behave similarly - no real substitutes to what you need - a specific supplier’s product is critical to your operation

How Attractive is the Industry ? Cont’d. Porter’s FIVE Forces + 1 cont’d. Bargaining How Attractive is the Industry ? Cont’d. Porter’s FIVE Forces + 1 cont’d. Bargaining Power of Buyers If a buyer is so important to your operation that you can’t afford to lose that customer, the customer can get so many concessions that you start to get squeezed and thus make less profits A BUYER GROUP IS POWERFUL WHEN. . - it purchases a large portion of a manufacturer’s output - the buyer could easily switch to another supplier - products are un-differentiated Rivalry Among Competitors In some industries, the participants tend to get along; in other industries, the participants will do anything to steal market share from other players. The more vicious the competition, the more downward pressure on profits IN A VICIOUS INDUSTRY, COMPETITORS. . - lower prices to the point where no one can make a decent profit - OR increase offerings and thus costs for which they don’t charge extra

How Attractive is the Industry ? Cont’d. Porter’s FIVE Forces + Conclusion 1 cont’d. How Attractive is the Industry ? Cont’d. Porter’s FIVE Forces + Conclusion 1 cont’d. THE PERFECT SCENARIO You can make the most profits when. . - it is really difficult for new players to enter the industry - there are no industries that offer close substitutes to your industry’s products or services - suppliers are at your mercy and not the other way around - there are many buyers who can’t switch easily - and you are in an industry where competitors tend to not compete aggressively The “Plus 1” Even if (and probably more accurately because) the industry is really attractive, where you are in the LIFE long this attractiveness will continue CYCLE can determine how

How Attractive is the Industry ? Cont’d. Porter’s FIVE Forces + 1 The “Plus How Attractive is the Industry ? Cont’d. Porter’s FIVE Forces + 1 The “Plus 1” cont’d. THE INDUSTRY LIFE CYCLE Check each market in which the company operates or wishes to operate Compare the growth trend of the industry with the country’s annual change in GDP

Key Success Factors – A better name would be. . Minimum Factors Necessary to Key Success Factors – A better name would be. . Minimum Factors Necessary to Avoid Failure Apply to the entire industry, NOT just a specific company They are NOT factors that give one company a competitive advantage over another –Shit just lets you survive If a company does not incorporate ALL of these factors into its operations it will not be a success Are typically determined by the economic and technological characteristics of a particular industry They are NOT the obvious characteristics of an industry e. g. one of the KSFs of the commercial airlines industry is NOT having airplanes There are usually between 1 and 4 KSFs in an industry How to Determine KSFs Compare firms that have been successful with firms that are struggling or have failed What do firms that are successful have in common ? What don’t struggling or failed firms do that successful firms do ?

Key Success Factors cont’d Examples: TECHNOLOGY RELATED DISTRIBUTION RELATED - Scientific research expertise - Key Success Factors cont’d Examples: TECHNOLOGY RELATED DISTRIBUTION RELATED - Scientific research expertise - Great network of distributors - Innovative processes - Access to key shelf space - Innovative products - Having company-owned retailer - Technological expertise - Low distribution costs MANUFACTURING RELATED - Fast deliveries - Production efficiency MARKETING RELATED - Quality - Great sales force - High utilization of fixed assets - Dependable service staff - Low cost plant locations - Accurate order filling - Access to skilled labour - Breadth of product line - High productivity - Merchandising skills - Low cost product design - Packaging - Manufacturing flexibility - Guarantees/Warranties

Key Success Factors cont’d Examples cont’d. : SKILLS RELATED OTHER - Superior talent - Key Success Factors cont’d Examples cont’d. : SKILLS RELATED OTHER - Superior talent - Great image/reputation/brand - Quality control know-how - Overall low cost - Design expertise - Convenient locations - Technical expertise - Pleasant, courteous employees - Ability to get from prototype to finished product quickly - Access to capital ORGANIZATIONAL RELATED - Superior MIS - Effective decision-making style - Experienced management and know-how - Patent protection

Competitors’ Analysis Focuses on each company against whom a firm DIRECTLY competes Each competitor Competitors’ Analysis Focuses on each company against whom a firm DIRECTLY competes Each competitor should be very interested in fully understanding the others’. . . - Objectives or goals - Assumptions about the environment and industry - Strengths and weaknesses - Strategies In gathering competitor intelligence, firms must be ethical - Obtain only publicly-available information e. g. court records, annual reports, etc. - Attend trade fairs and shows to see products and ask questions - Listen to or read speeches of top executives - Read brokers’ reports on the firms

Goals of Competitors’ Analysis You want to be able to predict how major competitors Goals of Competitors’ Analysis You want to be able to predict how major competitors will react to changes in the environment You want to be able to figure out how vulnerable competitors are to our alternative strategies Also what will they likely do to counter our strategic moves and how will that impact us ? Equally we want to determine how vulnerable we would be to strategic moves that we think competitors are capable of We want to understand how our products/services are positioned relative to the competition We want to try to figure out if our competitors are in the midst of changing their strategic behavior or direction

About-Faces Are Rare (But Can Happen) To understand where competitors may go next, you About-Faces Are Rare (But Can Happen) To understand where competitors may go next, you have to look at where they have been and their normal way to conduct business Categorize their objectives and strategies STRATEGIC SCOPE OF OPERATIONS - Local - Regional - National - Multi-country - Global STRATEGIC INTENT - Be dominant player - Overtake current leader - Be in the top five/ten - Overtake a specific rival - Maintain relative market share - Just survive

About-Faces Are Rare (But Can Happen) cont’d. MARKET SHARE OBJECTIVES - Aggressive expansion through About-Faces Are Rare (But Can Happen) cont’d. MARKET SHARE OBJECTIVES - Aggressive expansion through internal growth or acquiring market share - Grow at industry rate (hold your relative position) - Give up share to gain short-term profits COMPETITIVE POSITION - Has been getting stronger recently - Strong – no issues with maintaining current position - Stuck – “going nowhere” - Overtake a specific rival - Changing directions (going after a new market) - Losing ground - Retrenching to where it can defend its position STRATEGIC POSTURE - Mostly offensive -Aggressive risk-taker - Mostly defensive - Conservative follower - Analytical

Predicting What Rivals will do Next It is almost as important to build competitive Predicting What Rivals will do Next It is almost as important to build competitive profiles as it is to analyze your own strategic position Analyze: - Where they are in the industry - Their basic competitive approach - What their objectives are What needs to be done: - Study the current situation - Understand their strategic intent - Monitor how well rival is doing in the marketplace - Determine how much financial pressure rival is under

A Tool for Understanding the Playing Field STRATEGIC GROUP MAPPING Attempts to understand the A Tool for Understanding the Playing Field STRATEGIC GROUP MAPPING Attempts to understand the characteristics that define various groups of competitors - price/quality range - geographic coverage of operations - degree of vertical integration used - diversity of product line - dependence on distribution channels - level of service offered - etc. By selecting two characteristics at a time (those that make sense to combine) we can create a visual representation of our competitors by plotting these on a map Add additional information on the map that may be useful like visually representing the relative size of competitors or groups of competitors with similar strategic characteristics A number of combinations of the variables may be necessary to get a complete picture

Strategic Group Map Competitors in the Montreal Furniture Retail Market SMALL SPECIALTY HIGH Atwood’s Strategic Group Map Competitors in the Montreal Furniture Retail Market SMALL SPECIALTY HIGH Atwood’s Ethan Allen Gallery Germain Larivierre Denis Riel Morette’s Price/Quality Lida LARGE CHAINS Sears The Bay MEDIUM Leons KNOCK-DOWNS The Brick DISCOUNTERS IKEA Brault & Martineau Wal-Mart Idomo Mobilia Homesense Meubles en Gros Jason LOW Merchandise Mix Specialty Full Line Mass Merchandisers

Summarize Your Findings At the very least, summarize your analytical findings of the general Summarize Your Findings At the very least, summarize your analytical findings of the general environment and the industry To increase the use of your analysis, rank the opportunities from most important to least and the threats from the most threatening to the least To get the most out of your external analysis, relate each opportunity and threat to your current strategy

External Factor Evaluation (EFE) Matrix An EFE Matrix is simply a strategic report card; External Factor Evaluation (EFE) Matrix An EFE Matrix is simply a strategic report card; it attempts to rate a business’s current strategy (established to match SWOT at some time in the past) with the current external factors faced by the business First, understand clearly state the current business strategy Then, divide the factors that you identified as you analyzed the current external environment faced by the business into two groups – opportunities that the business can take advantage of and threats to the success or even survival of the business Third, rank each group from most important to least Now, we are ready to produce a report card

EFE Matrix Example Assume we are in the boutique hotel business and our strategy EFE Matrix Example Assume we are in the boutique hotel business and our strategy is to aggressively grow by opening 2 – 3 new hotels (converting existing buildings in major cities into luxury hotels) each year in major U. S. cities. Target market are affluent individuals or couples travelling either alone or as couples for business first and leisure. At this point in our analysis we are matching our strategy to the external environment we face regardless of what we feel the company is capable of doing. We have not yet reviewed the company’s strengths or weaknesses that will limit what this particular company is capable of doing within the current environmental setting. Let’s next start building the EFE Matrix report card by listing the results of our external analysis

EFE Matrix Example EXTERNAL ANALYSIS RESULTS Population group that travels the most is the EFE Matrix Example EXTERNAL ANALYSIS RESULTS Population group that travels the most is the 30 – 45 slice 30 – 45 year olds prefer smaller hotels to larger ones OPPORTUNITIES High immigrant population prefers to travel out of country Aging population want luxury hotel-like retirement homes Democrats, in power, tend to support small business 2008 financial melt-down dried up sources of capital THREATS Increased competition for older buildings from condo developers Industry consolidation due to being in later stages of growth Increased use of communication technology is reducing travel

EFE Matrix Example Assuming we have done a great job of analyzing the environment, EFE Matrix Example Assuming we have done a great job of analyzing the environment, our list of opportunities and threats should describe FULLY the environment that ALL companies in this industry face at this time If that is true, then the total of all these external factors should equal “ 1”. Anything that we have not listed should be so miniscule, that it does not change the results. In our example, we have identified 9 external factors that impact this industry at this time. If we felt that they all had equal impact on companies, each would have a weight of 0. 11 (1/9). But we should be able to say that they do not all have the same impact on the industry. An attempt should be made to put relative weights on each factor such that the total come to 1. Opportunities and threats do not have opposite values as they all describe the total environment

EFE Matrix Example EXTERNAL ANALYSIS RESULTS WEIGHT Population group that travels the most is EFE Matrix Example EXTERNAL ANALYSIS RESULTS WEIGHT Population group that travels the most is the 30 – 45 slice 30 – 45 year olds prefer smaller hotels to larger ones High immigrant population prefers to travel out of country . 08. 05 Democrats, in power, tend to support small business . 03 2008 financial melt-down dried up sources of capital THREATS . 10 Aging population want luxury hotel-like retirement homes OPPORTUNITIES . 20 . 25 Increased competition for older buildings from condo developers . 17 Industry consolidation due to being in later stages of growth . 09 Increased use of communication technology is reducing travel . 03

EFE Matrix Example Now we want to rate our current strategy to our latest EFE Matrix Example Now we want to rate our current strategy to our latest list of external analysis factors Remember our current strategy is to aggressively grow by opening 2 – 3 new hotels (converting existing buildings in major cities into luxury hotels) each year in major U. S. cities. Target market are affluent individuals or couples travelling either alone or as couples for business first and leisure. How effective is this strategy in taking advantage of each opportunity and in reducing the negative impact of current threats ? On a scale of 0 to 4, if the strategy is outstanding in dealing with the factor, we should allocate a score of A+ or 4; if it is totally ineffective, we should give it a score of F or 0. We allocate scores based on an outstanding range (4’s); above average scores (3’s); average scores (2’s); below average scores (1’s) and unacceptable scores ( 0 – 0. 9)

EFE Matrix Example EXTERNAL ANALYSIS RESULTS WEIGHT GRADE Population group that travels the most EFE Matrix Example EXTERNAL ANALYSIS RESULTS WEIGHT GRADE Population group that travels the most is the 30 – 45 slice . 10 3. 8 High immigrant population prefers to travel out of country . 08 0. 0 Aging population want luxury hotel-like retirement homes . 05 0. 0 Democrats, in power, tend to support small business . 03 2. 5 2008 financial melt-down dried up sources of capital THREATS 3. 8 30 – 45 year olds prefer smaller hotels to larger ones OPPORTUNITIES . 20 . 25 1. 5 Increased competition for older buildings from condo developers . 17 2. 5 Industry consolidation due to being in later stages of growth . 09 3. 0 Increased use of communication technology is reducing travel . 03 1. 5

EFE Matrix Example We multiply the relative importance of each factor of our external EFE Matrix Example We multiply the relative importance of each factor of our external evaluation by the effectiveness of our current strategy in dealing with each factor. Remember, effectiveness is always a positive number - if the strategy is outstanding at taking advantage of an opportunity it receives a score of 4; similarly if the strategy is outstandingly effective in reducing a threat, it also should receive a score of 4 We add up the weighted scores and come to an overall GPA and interpret that score using the same 0 to 4 scale (2. 5 being average) If the score is average or below, it means that our current strategy is not ideal in the current external circumstances and should be changed. If it is outstanding or above average, it may not need to be changed in terms of its relationship with the external environment BUT, this is only half the review we need to do. We next have to look internally to see if there are weaknesses or strengths that improve or reduce the effectiveness of our strategy

EFE Matrix Example EXTERNAL ANALYSIS RESULTS WEIGHT GRADE SCORE TOTAL Population group that travels EFE Matrix Example EXTERNAL ANALYSIS RESULTS WEIGHT GRADE SCORE TOTAL Population group that travels the most is the 30 – 45 slice 3. 8 . 76 2. 35 30 – 45 year olds prefer smaller hotels to larger ones . 10 3. 8 . 38 Below High immigrant population prefers to travel out of country . 08 0. 0 . 00 Aging population want luxury hotel-like retirement homes OPPORTUNITIES . 20 . 05 0. 0 . 00 New Strategy Democrats, in power, tend to support small business . 03 2. 5 . 08 2008 financial melt-down dried up sources of capital THREATS Average . 25 1. 5 . 38 Increased competition for older buildings from condo developers . 17 2. 5 . 43 Industry consolidation due to being in later stages of growth . 09 3. 0 . 27 Increased use of communication technology is reducing travel . 03 1. 5 . 05 Needed