Professional Documents
Culture Documents
of
1. 2. 3. 4. Environmental scanning Strategy formulation Strategy implementation Evaluation and control
Environmental Variables
Societal Environment
Economic Forces
Suppliers
Competitors
Societal Environment
Composed of general forces in environment
Task Environment
Composed of
Groups in environment that directly affect or are affected by the organizations operations (Often called industry)
Internal Analysis
An asset, competency, process, skill, or knowledge controlled by the corporation
Environmental Uncertainty
environment lies at the core of the macro environment. [Political, Economic, Social & Technological]
Macro-environment
Economic
GDP trends Interest rates Money supply Inflation rates Unemployment levels Wage/price controls Devaluation/revaluation Energy availability and cost Disposable and discretionary income
Technological
Total government spending for R&D Total industry spending for R&D Focus of technological efforts Patent protection New products New developments in technology transfer from lab to marketplace Productivity improvements through automation
Political-Legal
Antitrust regulations Environmental protection laws Tax laws Special incentives Foreign trade regulations Attitudes toward foreign companies Laws on hiring and promotion Stability of government
Sociocultural
Lifestyle changes Career expectations Consumer activism Rate of family formation Growth rate of population Age distribution of population Regional shifts in population Life expectancies Birth rates
Market Analysis Community Analysis Competitor Analysis Supplier Analysis Interest Group Analysis Selection of Strategic Factors Opportunities Threats Governmental Analysis
Strategic Factors
Those strategic issues with high probability of occurrence and high probable impact on corporation
High Priority
Medium Priority
High Priority
Medium Priority
Low Priority
Medium Priority
Low Priority
Low Priority
The The
Relative
Prefect Information
Information Flow
Imperfect Information
One Firms High barriers No Potential for Differentiation Imperfect Information Flow
Porters model is one of the better ways in defining industry environment five forces are bargaining power buyers bargaining power of suppliers threat of substitutes threat of potential entrants industry rivalry
More on Porter
He was the first to assert that industry profitability is not a function of technology or product attributes but of industry structure
Strategies emanate from imbalances Ability to influence industry structure determines competitive strength
Profitability breakup : industry 19%, Positioning 32% Economic Profit = (price-costs)*sales volume-(cost of capital* capital invested) Or profit =f (price, costs, volume, interest rates, capital stock)
Other Stakeholders
Industry Competitors
Substitutes
Barriers to entry
Determinants
Buyers propensity to substitute [Availability & willingness] Price Performance Characteristics of substitute
Affects price
Large volume buyer Commodity vs. product Low switching costs Product earns low profits Credible threat of backward integration Purchases are significant part of cost of production
Affects costs
Low elasticity of substitution Differentiated product and high switching costs Credible threat of forward integration
Environmental Scanning
Explore the local environment Extrapolate Change Drivers Decide on Level of Uncertainty and Importance Generate Impacts Outline Skeletal Scenarios Find Leverage Points for change Create Preferred Vision
Understanding the Critical Indicators STEEP: Social, Technological, Economic, Environmental, Political Finding local factors of change
What new technologies are we using at work and home? What new businesses are moving into the town? And which are leaving?
System Structure
What Change Drivers are most critical to the focus of inquiry? Which are most uncertain to predict? Which are most probable?
Importance-Uncertainty Matrix
Traditional Strategic Planning Management Importance
Scenario Planning
Uncertainty
Generating Impacts
Bulletpoint the baseline scenario Baseline means before intervention Tells the story of the system
Stories have always been used to store community learning Stories convey the experience of the workshop to others Using ancient tools of storytelling
Is one scenario more desirable? Is one area of the range of futures more desirable? Are there similar leverage points across scenarios?
Industry Analysis
1. Examine possible shifts in societal variable globally.
2. Identify uncertainties in each of the six forces of the task environment. 3. Make a range of plausible assumptions about future trends. 4. Combine assumptions into internally consistent scenarios. 5. Analyze the industry situation under each scenario. 6. Determine sources of competitive advantage under each scenario. 7. Predict competitors behavior under each scenario. 8. Select most likely scenario to use in strategy formulation.