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External Environment for Strategic Management

Learn to analyze general, industrial, and competitive environments, identify competitive forces, and strategic groups in strategy. Understand market segmentation, growth opportunities, market channels, and industrial life cycles.

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External Environment for Strategic Management

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  1. The External Environment for Strategy Strategic Management Lecture 2 義守大學企管系四年級B班 2009.09.30

  2. Key Objectives • Understand how to explain the firm’s external environment • Describe the general, industrial, and competition environment • Identify the firm’s five competitive forces • Explain the environmental dimensions • Define the strategic groups • Describe how firms need to know about their competitors

  3. External Environment • Three Possible Environmental Analysis Layers • General Environments • Dimensions in the broader society that influence an industry and the firms within it • Industry Environments • The set of factors that directly influences a firm and its competitive actions and competitive responses • Competitor Environments • Gather and interpret information about their competitors

  4. External Environment • Another Four Environmental Dimensions • Market Segmentation • How to segment the possible market, and identify the possible source of customer • Growth Opportunities • The possible growth space in the specific product-market line • Market Channel Modes • The Possible Channel to Access the Customer • Industrial Life Cycle • How a industry evolve

  5. Segments of the General Environments • Demographic Segment • Population Size, Age Structure, Geographic Distribution, Ethnic Mix, Income Distribution • Economic Segment • Recession, Booming, GNP, GDP, Average Income • Political/ Legal Segment • The Government Policy • Socio-cultural Segment • Customer Taste, Degree of Openness, Value • Technological Segment • Global Segment • Economic or Trade Region

  6. Industry Environment • Definition of Industry • Importance of Industry Environment Analysis • Five Forces Model within a Specific Industry • Threat of New Entrants • Rivalry among Competing Firms • Bargaining Power of Suppliers • Threat of Substitute Products • Bargaining Power of Buyers

  7. Five Forces Model—Threat of New Entrants • How to Identify a Competitor? • Possible Threat from New Entrants • High Entry Barrier Increase the Returns for Existing Firms • How to Prevent the New Entrance? • Establish Barrier to Entry • Retaliation

  8. Five Forces Model—Threat of New Entrants • Possible Sources of Barriers to Entry • Economic of Scale • Product Differentiation • Capital Requirements • Switching Costs • Access to Distribution Channels • Cost Disadvantages Independent of Scale • Government Policy

  9. Five Forces Model—Bargaining Power of Suppliers • Sources of Suppliers’ Bargaining Power • Fewer • Non-substitute • Non-significant • Critical • Higher Switch Cost • Credible Threat • Possible Methods to Lower the Bargaining Power of Suppliers

  10. Five Forces Model—Bargaining Power of Buyers • Sources of Buyers’ Bargaining Power • Large Portion • Significant Portion for Annual Revenues • lower Switch Cost • Undifferentiated/ Standardized Products • Possible Methods to Lower the Bargaining Power of Buyers

  11. Five Forces Model—Threat of Substitute Products • Definition of Substitute Products • Possible Source of Substitute Products • Differentiating Products along Dimensions that Customers Value • Price • Quality • Service • Location…

  12. Five Forces Model—Intensity of Rivalry among Competitors • Possible Sources of Higher Intensity of Rivalry • Numerous or Equally Balanced Competitors • Slow Industry Growth • High Fixed Costs/ High Storage Costs • Lack of Differentiation/ Low Switching Costs • High Strategic Stakes • High Exit Barriers

  13. Competitor Analysis • Understanding a Competitors from • Scale, growth, profit • Mission, commitment • Organizational factors • Cost structure • Past strategies • Resources and competencies • How to Response the Competitor’s Action

  14. Market Segmentation • Importance of Market Segmentation • Market Diversity • Limited Resources • Monopolistic Advantage • Market Transformation • The Possible Variables for Segmentation • Customer Characteristics • Demography, Life Style and Personality, Geography • Product Characteristics • Interest, Purpose, Brand Identity v.s. Price Sensitivity

  15. Market Segmentation • The Principle of Market Segmentation • Market Boundary • Inside similarity v.s. Outside Dissimilarity • Measurability • Quantity v.s Quality • Accessibility • The possible channel to access the customers • Feasibility • The resource and executive ability of the firms

  16. Market Channel • The Channel Dimension • Channel Length • Degree of Spread • The Players in the Channel • The link between Upstream and Downstream • Typology

  17. Market Channel • The Influential Factors in Channel Analysis • The Market Characteristics • The Cost associated with the Channel • The Value-added of the Channel • The product Characteristics • The Competition in the Channel

  18. Industry Life Cycle • Product Life Cycle Analysis • According the growth rate of the product’s sales volume • Introduction stage, growth stage, maturity stage, decline stage • TheEvolution of an industry does not always follow the S curve • Industry characteristics, Industrial structure, The speed of innovation and technological Change… do matter

  19. Growth Opportunity • The Possible Driving Force for Growth • The Quantity and Frequency of the Product • The New Use of the product • The Degree of the Maturity of the Product (可改良空間） • The Potential Segmentation in the Market （尚未被重視） • The Potential Cost Cutting Possibility • Standardization （是否出現標準規格） • The Substituted Product • The Growth and Decline of the Customer • The Demand Trend

  20. Growth Opportunity • The Risk in Growth or Booming Market • Over-Crowded Competition • The Growth Rate is over-predicted • A Powerful and Competitive New Entrant • The Key successful factor is changed • The Resource Limitation • The Channel Limitation

  21. Discussions (I) • What is the Driver for New Economy • Globalization • Technological innovation • Internet • Are There the Sixth Force for Analyzing the Competitive Environment? • Governmental policy • Culture, value • …

  22. Discussions (II) • How the Concept of Boundary-less Company may Influence the Competitive Environment? • The Nature of competitiveness • The Nature of management • The Possible Inter-organizational relationships • Co-option, competing & cooperation, • Strategic alliance • Business group

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