Strategic Management Concepts: A Competitive Advantage Approach, Concepts and Cases PDF

Strategic Management Concepts: A Competitive Advantage Approach, Concepts and Cases Seventeenth Edition Chapter 3 The External Assessment Copyright © 2020, 2017, 2015 Pearson Education,...

Strategic Management Concepts: A Competitive Advantage Approach, Concepts and Cases Seventeenth Edition Chapter 3 The External Assessment Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Learning Objectives (1 of 2) 3.1 Describe the nature and purpose of an external assessment in formulating strategies. 3.2 Identify and discuss 10 external forces that impact organizations. 3.3 Explain Porter’s Five-Forces Model and its relevance in formulating strategies. Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Learning Objectives (2 of 2) 3.4 Describe key sources of information for identifying opportunities and threats. 3.5 Discuss forecasting tools and techniques. 3.6 Explain how to develop and use an External Factor Evaluation (EFE) Matrix. 3.7 Explain how to develop and use a Competitive Profile Matrix (CPM). Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Figure 3.1 A Comprehensive Strategic- Management Model Source: Fred R. David, “How Companies Define Their Mission,” Long Range Planning 22, no. 1 (February 1989): 91. See also Anik Ratnaningsih, Nadjadji Anwar, Patdono Suwignjo, and Putu Artama Wiguna, “Balance Scorecard of David’s Strategic Modeling at Industrial Business for National Construction Contractor of Indonesia,” Journal of Mathematics and Technology, no. 4 (October 2010): 20. Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved External Audit External audit – focuses on identifying and evaluating trends and events beyond the control of a single firm – reveals key opportunities and threats confronting an organization so that managers can formulate strategies to take advantage of the opportunities and avoid or reduce the impact of threats Focus evaluate Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved The Purpose of an External Audit The external audit is aimed at identifying key variables that offer actionable responses Firms should be able to respond either offensively or defensively to the factors by formulating strategies that take advantage of external opportunities or that minimize the impact of potential threats. Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Key External Forces External forces can be divided into five broad categories: 1. economic forces 2. social, cultural, demographic, and environmental (SCDE) forces 3. political, governmental, and legal forces 4. technological forces 5. competitive forces Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Figure 3.2 Relationships Between Key External Forces and an Organization Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved  tahun dan specific sebagainya. ↑ The AQCD Test When identifying and prioritizing key external factors in strategic planning, the following 4 factors are important: – Actionable – Quantitative – Comparative – Divisional The AQCD is a measure of the quality of an external factor. Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Which one passed AQCD test? 1.Online retail grocery shopping grew from 12% to 16% in 2018 2.Consumer’s average disposable income increased greatly in 2018. Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Economic Forces (1 of 2) Shift to service economy Availability of credit Level of disposable income Propensity of people to spend Interest rates Inflation rates GDP trends Consumption patterns Unemployment trends Value of the dollar Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Economic Forces (2 of 2) Import/Export factors Demand shifts for different goods and services Income differences by region and consumer group Price fluctuations Foreign countries’ economic conditions Monetary and Fiscal policy Stock market trends Tax rate variation by country and state European Economic Community (EEC) policies Organization of Petroleum Exporting Countries (OPEC) policies Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Social, Cultural, Demographic, and Environmental (SCDE) Forces SCDE forces impact strategic decisions on virtually all products, services, markets, and customers. These forces are shaping the way people live, work, produce, and consume. - immigrant - > emmigrant Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Key SCDE Variables (1 of 3) Population changes by race, age, and geographic area Regional changes in tastes and preferences Number of marriages Number of divorces Number of births Number of deaths Immigration and emigration rates Social Security programs Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Key SCDE Variables (2 of 3) Life expectancy rates Per capita income Social media pervasiveness Attitudes toward retirement Energy conservation Attitudes toward product quality Attitudes toward customer service Pollution control Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Key SCDE Variables (3 of 3) Attitudes toward foreign peoples Energy conservation Social programs Number of churches Number of church members Social responsibility issues Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved  Political, Governmental, and Legal Forces Local, state, and federal laws, as well as regulatory agencies and special-interest groups, can have a major impact on the strategies of small, large, for-profit, and nonprofit organizations.. , clearly Spell out property Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Political, Government, and Legal Variables (1 of 2) Natural environmental regulations Protectionist actions by countries Changes in patent laws Equal employment opportunity laws Level of defense expenditures Unionization trends Antitrust legislation Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Political, Government, and Legal Variables (2 of 2) USA versus other country relationships Political conditions in countries Global price of oil changes Local, state, and federal laws Import-export regulations Tariffs, particularly on steel and aluminum Local, state, and national elections Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Technological Forces (1 of 3) New technologies such as: the Internet of Things 3D printing the cloud mobile devices biotech threat : competitors analytics autotech of Al Emergence Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Technological Forces (2 of 3) robotics and artificial intelligence are fueling innovation in many industries, and impacting strategic-planning decisions. Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Technological Forces (3 of 3) Many firms now have a Chief Information Officer (CIO) and a Chief Technology Officer (CTO) who work together to ensure that information needed to formulate, implement, and evaluate strategies is available where and when it is needed Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Competitive Forces An important part of an external audit is identifying rival firms and determining their strengths, weaknesses, capabilities, opportunities, threats, objectives, and strategies Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Obtaining Competitive Intelligence (1 of 2) Legal and ethical ways to obtain competitive intelligence: 1. Reverse-engineer rival firms’ products. 2. Use surveys and interviews of customers, suppliers, and distributors of rival firms. 3. Analyze rival firm’s Form 10-K. 4. Conduct fly-over and drive-by visits to rival firm operations. 5. Search online databases. 6. Contact government agencies for public information about rival firms. Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Obtaining Competitive Intelligence (2 of 2) 7. Monitor relevant trade publications, magazines, and newspapers. 8. Purchase social-media data about customers of all firms in the industry. 9. Hire top executives from rival firms. Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Key Questions About Competitors (1 of 3) 1. What are the strengths and weaknesses of our major competitors? 2. What products and services do we offer that are unique in the industry? 3. What are the objectives and strategies of our major competitors? 4. How will our major competitors most likely respond to current economic, SCDE, political, governmental, legal, technological, and competitive trends affecting our industry? Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Key Questions About Competitors (2 of 3) 5. How vulnerable are the major competitors to our new strategies, products, and services? 6. How vulnerable is our firm to successful counterattack by our major competitors? 7. How does our firm compare to rivals in mastering the social-media conversation in this industry? 8. To what extent are new firms entering and old firms leaving this industry? 9. What key factors have resulted in our present competitive position in this industry? Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Key Questions About Competitors (3 of 3) 10. How are supplier and distributor relationships changing in this industry? Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Competitive Intelligence Programs Competitive intelligence (CI) a systematic and ethical process for gathering and analyzing information about the competition's activities and general business trends to further a business's own goals Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Figure 3.3 The Five-Forces Model of Competition (1 of 2) Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved The Five-Forces Model of Competition (2 of 2) 1. Identify key aspects or elements of each competitive force that impact the firm. 2. Evaluate how strong and important each element is for the firm. 3. Decide whether the collective strength of the elements is worth the firm entering or staying in the industry. Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved The Five-Forces Model (1 of 6) ! -most important Rivalry among competing firms – Most powerful of the five forces – Focus on competitive advantage of strategies over other firms Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Table 3.5 The Five-Forces Model 1. When the number of competing firms is high 2. When competing firms are of similar size & 3. When competing firms have similar capabilities 4. When demand for the industry’s products is changing rapidly 5. When price cuts are common in the industry 6. When consumers can switch brands easily 7. When barriers to leaving the market are high 8. When barriers to entering the market are low 9. When fixed costs are high among competing firms 10. When products are perishable or have short product life cycles Conditions That Cause High Rivalry Among Competing Firms Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved The Five-Forces Model (3 of 6) Potential Entry of New Competitors – Barriers to entry are important – Quality, pricing, and marketing can overcome barriers Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Barriers to Entry (1 of 2) & go to larger production Need to gain economies of scale quickly more advance technology ( Need to gain technology and specialized know-how Lack of experience Strong customer loyalty Strong brand preferences Large capital requirements orang tengah yang alan - nautar barang Lack of adequate distribution channels ↳ Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Barriers to Entry (2 of 2) Government regulatory policies Tariffs Lack of access to raw materials Possession of patents Undesirable locations Counterattack by entrenched firms Potential saturation of the market Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved The Five-Forces Model (4 of 6) Potential development of substitute products – Pressure increases when:  Prices of substitutes decrease  Consumers' switching costs decrease When the price of substitute more less Es consumer's cost of can reduce living Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved The Five-Forces Model (5 of 6) Bargaining Power of Suppliers is increased when (there are): – Few suppliers – Few substitutes – Costs of switching raw materials is high Backward integration is gaining control or ownership of suppliers ↳ control ownerships suppliers materials > coffee Starbucks raw - - * tanam biji coffee sendivi Jadi biji coffee yang besar * pengelvaran Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved The Five-Forces Model (6 of 6) Bargaining power of consumers – Customers being concentrated or buying in volume affects intensity of competition – Consumer power is higher where products are standard or undifferentiated Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Conditions Where Consumers Gain Bargaining Power 1. If buyers can inexpensively switch 2. If buyers are particularly important 3. If sellers are struggling in the face of falling consumer demand 4. If buyers are informed about sellers' products, prices, and costs 5. If buyers have discretion in whether and when they purchase the product Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Sources of External Information (1 of 2) Unpublished sources include customer surveys, market research, speeches at professional and shareholders' meetings, television programs, interviews, and conversations with stakeholders. Published sources of strategic information include periodicals, journals, reports, government documents, abstracts, books, directories, newspapers, and manuals. Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Sources of External Information (2 of 2) IBISWorld Lexis-Nexis Academic Lexis-Nexis Company Dossier Mergent Online PrivCo Regional Business News S&P NetAdvantage Value Line Investment Survey U.S. Securities and Exchanges Commission Company Annual Reports On-Line (CAROL) Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Forecasting Tools and Techniques Forecasts e assumption/prediction – educated assumptions about future trends and events – no forecast is perfect Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Making Assumptions Assumptions – Best present estimates of the impact of major external factors, over which the manager has little if any control, but which may exert a significant impact on performance or the ability to achieve desired results. Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved  - Industry Analysis: The External Factor Evaluation (EFE) Matrix Summarize and evaluate these factors: Social Political Cultural Governmental Demographic Legal Economic Technological Environmental Competitive Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved EFE Matrix Steps 10 threats X- opportunities 1. List 20 key external factors > 10 2. Weight from 0.0 to 1.0 3. Rate the effectiveness of current strategies from 1-4 4. Multiply weight * rating > - rating 1-4 only 1 Poor 5. Sum weighted scores - 2- average ↓ 3 above average - 4- well formula : weight X rating Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Table 3.8 EFE Matrix for a Local 10- Theater Cinema Complex (1 of 2) Key External Factors Weight Rating Weighted Score Opportunities 1. Two new neighborhoods 0.09 1 0.09 developing within 3 miles 2. TDB University is expanding 0.08 4 0.32 6% annually 3. Major competitor across town 0.08 3 0.24 recently closed 4. Demand for going to cinemas 0.07 2 0.14 growing 10% 5. Disposable income among 0.06 3 0.15 citizens up 5% in prior year 6. Rowan County is growing 8% 0.05 3 0.15 annually in population 7. Unemployment rate in county 0.03 2 0.06 declined to 3.1% Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Table 3.8 EFE Matrix for a Local 10- Theater Cinema Complex (2 of 2) Key External Factors Weight Rating Weighted Score Threats 8. Trend toward healthy eating 0.12 4 0.48 eroding concession sales 9. Demand for online movies and 0.06 2 0.12 DVDs growing 10% 10. Commercial property adjacent 0.06 3 0.18 to cinemas for sale 11. TDB University installing an on- 0.04 3 0.12 campus movie theater 12. County and city property taxes 0.08 2 0.6 increasing 25% 13. Local religious groups object to 0.04 3 0.12 R-rated movies 14. Movies rented at local Red 0.08 2 0.16 Box’s up 12% 15. Movies rented last quarter from 0.06 1 0.06 Time Warner up 15% Total 1.00 2.58 Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Industry Analysis: Competitive Profile Matrix (CPM) Identifies firm's major competitors and their strengths & weaknesses in relation to a sample firm's strategic positions Critical success factors include internal and external issues Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Table 3.10 An Example Competitive input Stage > - EFE Profile Matrix highestcompetitoras CPM Swots ! Buat improvement ↑ · Note: The ratings values are as follows: 1 = response is poor, 2 = response is average, 3 = response is above average, 4 = response is superior. As indicated by the total weighted score of 2.20, Company 3 is performing worst. Only 8 critical success factors are included for simplicity; in actuality, however, this is too few. The template asks that 12 factors be included and to tailor factors to a given industry. Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Figure 3.4 How to Gain and Sustain Competitive Advantages Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved Copyright Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved