PESTLE & PORTER copia.docx

PESTLE ANALYSIS & PORTER’S FIVE FORCES PESTLE ANALYSIS Environmental influences can be classified according to: - the source (political, economic, social, technological, legal, environmental): PESTLE framework - the proximity to the firm: macro-environment vs. microenvironment The macroenvironm...

PESTLE ANALYSIS & PORTER’S FIVE FORCES PESTLE ANALYSIS Environmental influences can be classified according to: - the source (political, economic, social, technological, legal, environmental): PESTLE framework - the proximity to the firm: macro-environment vs. microenvironment The macroenvironment influences the industry in which the firm operates, in terms of threats and opportunities. The profitability in an industry is driven by the industry structure and the competitive forces. P: Political factors These factors determine the extent to which a government may influence the economy or a certain industry. For example, a government may impose a new tax or duty due to which entire revenue generating structures of organizations might change. They include: Main effects: - The stability of a political system can affect the appeal of a particular local market. - Governments view business organizations as a critical vehicle for social reform. - Governments pass legislation, which impacts the relationship between the firm and its customers, suppliers, and other companies. - The government is liable for protecting the public interest. - Government actions influence the economic environment. - Government is a major consumer of goods and services. E: Economic factors These factors are determinants of an economy’s performance and directly impact firms. They include Interest rates Exchange rates Recession Inflation Taxes Demand / Supply S: Social factors These factors scrutinize the social environment of the market and affect the customers’ needs and the market size. They include: T: Technological factors These factors refer to the existence, availability, and development of technology.pertain to innovations in technology that may affect the operations of the industry and the market favorably or unfavorably. This refers to automation, research and development, and the amount of technological awareness that a market possesses. Examples: L: Legal factors Legal factors are external factors which refer to how the law affects the way businesses operate and customers behave. Legal factors can decide whether or not there is a business behind selling a certain product (perhaps drugs, or sharp objects), and can also affect the mechanisms through which a company stocks their inventory or interacts with the customer. E: Environmental factors These factors include all those that influence or are determined by the surrounding environment. This aspect of the PESTLE is crucial for certain industries particularly for example tourism, farming, agriculture, etc. Factors of a business environmental analysis include but are not limited to: climate weather geographical location global changes in climate environmental offsets PORTER’S FIVE FORCES ANALYSIS Porter’s five forces analysis takes into consideration five forces used to shape the strategy. The intensity of the rivalry or existing competitors related to the pov of the company the less the rivalry, the better for the company The threat of potential entrants to the market The bargaining power (potere di negoziazione) of suppliers of raw material to the organization = the negotiation between a specific company and its suppliers of raw materials The bargaining power of buyers of the organization’s products and services = the customer satisfaction if the bargaining power of buyers is higher, it increases the competiveness of the industry The threat of substitute products being developed and introduced to the market if the threat is high, it’s better for the market The five forces analysis are used to help an organization decide whether it wishes to enter, expand or leave a particular market segment. For the industry is great to have strong forces because it increases the competitors. So, from a market perspective, it means that the market is more competitive and if it is so, the profits tend to go down. For the company if these five forces are stronger it means that the profitability of that company is lower. So, if the five forces are stronger, the market is less attracted for the company because from a company perspective it’s less profitable. BUSINESS MODEL CANVAS Business model canvas can be used to describe, challenge, design and invent business model in a more thematical way. The business model canvas is composed of 9 building blocks: Customer segment - which customers are you serving in your business, who you are targeting. Value proposition - a set of products and services that will help the customer to get the job done; what you are offering. Channels - how the customers want to be reached (ex. through which channel they want to communicate with the company, through which channel they want to receive the goods). The channel can be both physical (store = direct channel) than digital (web = indirect channel). Customer relationships the company establish - it can be personal or automated but personalized. The customers relationships block can also be used to describe how the company get keep and grow customers. Revenue streams - what are people or companies that you’re serving really willing to pay for and how do they want to pay for something that they buy (ex. Subscriptions, licensing fee and through which price mechanism) This is the right-hand part of the business model canvas - the part that shows which value the company is creating, for whom and how the company is delivering that and how the company is capturing value for itself as an organization. Key resources - which resources do the company really need to create the value that it is promising on the right-hand side (ex. factories, brand, intellectual properties, server) Key activities - what is it that the company really need to do and to be good at, which activities do the company need to excel at and that are crucial in the business model (ex. marketing and sales, R&D, managing servers) Key partners - who are the key partners that can leverage the business model and make it more powerful. Cost structure - the company can sketch out what the core costs are. This is the left-hand side of the business model canvas - the part that shows how the company is going to do it, what the company need to create value. All those elements are useful to create, deliver and capture value and are important to succeed in business. The business model canvas provides a clear picture and better understanding of all the pieces of the business model, whether it is one that is already in place or one that is being created. BLUE OCEAN STRATEGY CANVAS To understand strengths and weaknesses of their goods and services relative to their rivals from the customers point of view in order to decide how to change the value proposition To win in the marketplace consistently In the work of Blue Ocean strategy, the Strategy Canvas was introduced as a tool that helps companies understand how they compete on the factors customers consider when they choose between offerings. A strategy canvas is essentially a graph that shows how companies compare to each other on the key customers buying criteria. How to build a basic strategy canvas Identify the factors that customers consider when choosing among options (x-axis). These are sometimes referred to as products attributes or the customers buying criteria. Determine how important are these factors to customers. This allows the company to arrange the factors from most to least important. This information can also be used to segment customers into groups with similar preferences (for the y-axis rate the performance of companies on each of these factors). Insights: A basic strategy canvas helps us discover and learn 4 strategic facts: What is not adding value Where the company is over investing Which offerings are insufficient to customer’s demand Which key customer needs aren’t met well or could be met in a new way Supercharged strategy canvas The basic strategic canvas can be revved up with additional information; therefore, the new and supercharged strategic canvas includes not only traditional competitive factors (ex. product features), but also influential emotional and social ones. How to build a souped-up strategy canvas Identify the functional factors your product or service fulfills (ex. price, comfort, reliability, service, post-sale support, quality) Identify the influential emotional factors of your product that may be equally or more important product specs (ex. design, brand image, ease of customization) Identify the social factors of your product (ex. ability to meet new people through the company community, personal reputation) Another useful approach to gain insights into competitive positioning is to ask what customers hire the product to do - for functional, emotional or social jobs. This approach may lead to a different view of the competitive dynamic in an industry. As a company, in order to win in the marketplace, use a basic strategy canvas to - understand your position - protect the ways that you offer unique value to your customers - shed unnecessary expenses - come up with new ways to offer unique value to customers Moreover, using a supercharged strategy canvas the company can map a path to overtake its competitors.