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What Tools Are Useful in Identifying Opportunities and Threats?

What Tools Are Useful in Identifying Opportunities and Threats?. Objective. Improve your ability to identify opportunities and threats by scanning, monitoring, forecasting, and assessing the business environment . Industry Environment. Owners Suppliers Governments Special interest groups

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What Tools Are Useful in Identifying Opportunities and Threats?

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  1. What Tools Are Useful in Identifying Opportunities and Threats?

  2. Objective Improve your ability to identify opportunities and threats by scanning, monitoring, forecasting, and assessing the business environment

  3. Industry Environment • Owners • Suppliers • Governments • Special interest groups • Employees • Customers • Competitors • Creditors • Communities • Trade associations Internal Business Structures Culture, Resources Environmental Dimensions Economic Sociocultural Demographic Political/Legal Global Societal Environment Technological

  4. Segments of the Societal Environment • Demographic • Population, age, income distribution • Economic • Growth in GDP, currency exchanges rates, inflation, interest, budget surplus/deficit, personal and business savings rates • Political/legal • Antitrust laws, tax laws, labor laws, deregulation philosophies, environmental philosophies

  5. Segments of the General Environment • Sociocultural • Position on “family farms,” attitudes toward GMO’s, quality of work/life, value for rural communities • Technological • Product innovations, applications of knowledge, focus of private and government supported R&D • Global • Important political events; critical global markets; different cultural, political, and institutional attributes; trade surplus/deficit

  6. Industry Analysis: The Five Forces Threat of New Entrants Bargaining Power of Suppliers Bargaining Power Of Buyers Industry Competitors Rivalry Among Existing Firms Threat of Substitute Products or Services

  7. Industry Analysis: Modified Five Forces Threat of New Entrants Other Stakeholders Bargaining Power of Suppliers Bargaining Power Of Buyers Industry Competitors Rivalry Among Existing Firms Threat of Substitute Products or Services

  8. Buyers/Customers • Who are they? • Who will they be? • Who should they be? • Are we serving specific segments? • What are the specific needs of our customers? • What important/anticipated changes will take place for our customers?

  9. Power of Buyers • Buyers affect an industry by their ability to force down prices, bargain for higher quality or more services, and play competitors against each other. • Factors to consider about buyer: • Buyer purchases a large portion of seller’s product • Alternative suppliers are plentiful • Switching costs are low • There is potential to integrate backwards • Low margins make bargain hunting necessary • Product is high percentage of buyer’s cost

  10. Threat of Substitute Products or Services • Product that can satisfy the same need as another product. • Examples might be: • Chicken for pork or beef • Wheat for corn in feed rations • Chemicals for mechanical weed control • Consider • Switching costs • Product-service bundle

  11. Industry Rivalry & Our Competitors • Who are they? • What drives our competitors? • What are their vision, mission, goals, and objectives? • What are our competitors currently doing? • What is the competitor’s view of itself and the future of the industry? • What are our competitors’ capabilities? • Where do we hold an advantage over our competitors?

  12. Rivalry Among Firms • Amount of direct competition among businesses in the industry • Factors to consider: • Number of competitors • Diversity of rivals • Rate of industry growth • Product characteristics • Height of exit barriers • Amount of fixed costs

  13. Threat of New Entrants • Potential for new comers to the industry • Factors to consider: • Economies of scale • Capital requirements • Access to distribution channels • Product differentiation

  14. Power of Suppliers • Suppliers affect an industry by their ability to raise prices or reduce the quality of purchased goods and services. • Factors to consider: • Dominated by a few large companies • Buyer only buys small portion of suppliers goods and services • Product or service is unique (high switching costs) • Substitutes are not readily available

  15. Other Stakeholders • Include • Local units of government • Community organizations • Special interest groups • Creditors • Can influence: • Cost of doing business • Risk • Environmental regulations/requirements

  16. Competitive Actions to the Five Forces • Positioning • Identify skills and abilities that our business must have. • Influencing • Changing the forces in the industry. • Anticipating & exploiting change • Examine the forces, forecast the magnitude of each underlying cause, determine likely profit picture of the industry and then craft a strategy.

  17. Assessing Current Position The bottom-line: Analyzing the dimensions of the external environment with respect to your firm, your competitors, and your customers will help identify potential opportunities for improvement and potential threats to success.

  18. Strategic Business Planning for Commercial Producers

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