EnvironmentalScanning andIndustry AnalysisChapter 4Learning Objectives Recognize aspects of an organization’s environmentthat can influence its long-term decisions Identify the aspects of an organization’s environmentthat are most strategically important Conduct an industry analysis to understand thecompetitive forces that influence the intensity ofrivalry within an industry Understand how industry maturity affects industrycompetitive forces Categorize international industries based on theirpressures for coordination and local responsivenessCopyright © 2015 Pearson Education, Inc.4-2Learning Objectives Construct strategic group maps to assess thecompetitive positions of firms in an industry Identify key success factors and develop anindustry matrix Use publicly available information to conductcompetitive intelligence Know how to develop an industry scenario Be able to construct an EFAS Table thatsummarizes external environmental factorsCopyright © 2015 Pearson Education, Inc.4-3Environmental ScanningEnvironmental scanning the monitoring, evaluation, and dissemination ofinformation relevant to the organizationaldevelopment of strategyCopyright © 2015 Pearson Education, Inc.4-4Identifying ExternalEnvironmental VariablesNatural environment includes physical resources, wildlife and climatethat are an inherent part of existence on Earth form an ecological system of interrelated lifeCopyright © 2015 Pearson Education, Inc.4-5Identifying ExternalEnvironmental VariablesSocietal environment mankind’s social system that includes generalforces that do not directly touch on the short-runactivities of the organization, but that caninfluence its long-term decisions economic, technological, political-legal andsocioculturalCopyright © 2015 Pearson Education, Inc.4-6Identifying ExternalEnvironmental VariablesTask environment those elements or groups that directly affect acorporation and, in turn, are affected by it government, local communities, suppliers,competitors, customers, creditors, unions, specialinterest groups/trade associationsCopyright © 2015 Pearson Education, Inc.4-7Identifying ExternalEnvironmental VariablesIndustry analysis an in-depth examination of key factors within acorporation’s task environmentCopyright © 2015 Pearson Education, Inc.4-8Scanning the Societal Environment:STEEP AnalysisSTEEP Analysis monitoring trends in the societal and naturalenvironments sociocultural, technological, economic, ecologicaland political-legal forcesCopyright © 2015 Pearson Education, Inc.4-9Some Important Variables in theSocietal EnvironmentCopyright © 2015 Pearson Education, Inc.4-10Current U.S. GenerationsCopyright © 2015 Pearson Education, Inc.4-11Current Sociocultural TrendsIncreasing environmental awarenessGrowing health consciousnessExpanding seniors marketImpact of MillennialsCopyright © 2015 Pearson Education, Inc.4-12Current Sociocultural TrendsDeclining mass marketChanging pace and location of lifeChanging household compositionIncreasing diversity of workforce and marketsCopyright © 2015 Pearson Education, Inc.4-13Technological BreakthroughsPortable information devicesElectronic networkingAlternative energy sourcesPrecision farmingVirtual personal assistantsGenetically altered organismsSmart, mobile robotsCopyright © 2015 Pearson Education, Inc.4-14Categories of RiskRegulatoryriskSupply chainriskProduct andtechnologyriskLitigation riskReputationalriskPhysical riskCopyright © 2015 Pearson Education, Inc.4-15Some Important Variables inInternational Societal EnvironmentsCopyright © 2015 Pearson Education, Inc.4-16Scanning External EnvironmentCopyright © 2015 Pearson Education, Inc.4-17Forces Driving Industry CompetitionCopyright © 2015 Pearson Education, Inc.4-18Threat of New EntrantsThreat of new entrants new entrants to an industry bring new capacity, adesire to gain market share and substantialresourcesEntry barrier an obstruction that makes it difficult for acompany to enter an industryCopyright © 2015 Pearson Education, Inc.4-19Barriers to EntryEconomies of scaleProduct differentiationCapital requirementsSwitching costsAccess to distribution channelsCost disadvantages due to sizeGovernment policiesCopyright © 2015 Pearson Education, Inc.4-20Rivalry among Existing FirmsIn most industries, corporations are mutuallydependent.A competitive move by one firm can beexpected to have a noticeable effect on itscompetitors and thus may cause retaliation.Copyright © 2015 Pearson Education, Inc.4-21Rivalry among Existing FirmsNumber ofcompetitorsAmount offixed costsRate ofindustrygrowthProduct orservicecharacteristicsCapacityHeight of exitbarriersDiversity ofrivalsCopyright © 2015 Pearson Education, Inc.4-22Threat of SubstituteProducts or ServicesSubstitute product a product that appears to be different but cansatisfy the same need as another product The identification of possible substitute productsmeans searching for products that can performthe same function, even though they have adifferent appearance.Copyright © 2015 Pearson Education, Inc.4-23The Bargaining Power of BuyersBargaining power of buyers ability of buyers to force prices down, bargain forhigher quality and play competitors against eachother Large purchases, backward integration,alternative suppliers, low cost to changesuppliers, product represents a high percentageof buyer’s cost, buyer earns low profits, product isunimportant to buyerCopyright © 2015 Pearson Education, Inc.4-24The Bargaining Power of SuppliersBuyers affect an industry through their abilityto force down prices, bargain for higherquality or more services and play competitorsagainst each other.Copyright © 2015 Pearson Education, Inc.4-25The Bargaining Power of SuppliersA buyer or a group of buyers is powerful if someof the following factors hold true: Industry is dominated by a few companies Unique product or service Substitutes are not readily available Ability to forward integrate Unimportance of product or service to theindustryCopyright © 2015 Pearson Education, Inc.4-26Relative Power of Other StakeholdersGovernmentLocal communitiesCreditorsTrade associationsSpecial interest groupsUnionsShareholdersCopyright © 2015 Pearson Education, Inc.4-27Industry EvolutionFragmented industry no firm has a large market share and each firmonly serves a small piece of the total market incompetition with other firmsConsolidated industry domination by a few large firms, each struggles todifferentiate products from its competitionCopyright © 2015 Pearson Education, Inc.4-28Categorizing International IndustriesMulti-domestic industries specific to each country or group of countriesGlobal industries operate worldwide with multinational companiesmaking only small adjustments for countryspecific circumstancesRegional industries multinational companies primarily coordinatetheir activities within regionsCopyright © 2015 Pearson Education, Inc.4-29Continuum ofInternational IndustriesCopyright © 2015 Pearson Education, Inc.4-30Strategic GroupsStrategic group a set of business units or firms that pursue similarstrategies with similar resourcesCopyright © 2015 Pearson Education, Inc.4-31Mapping Strategic Groups in theU.S. Restaurant Chain IndustryCopyright © 2015 Pearson Education, Inc.4-32Strategic Types Defenders focus on improving efficiency Prospectors focus on product innovation and marketopportunities Analyzers focus on at least two different product market areas Reactors lack a consistent strategy-structure-culturerelationshipCopyright © 2015 Pearson Education, Inc.4-33HypercompetitionMarket stability is threatened by shortproduct life cycles, short product designcycles, new technologies, frequent entry byunexpected outsiders, repositioning byincumbents and tactical redefinitions ofmarket boundaries as diverse industriesmerge.Copyright © 2015 Pearson Education, Inc.4-34Using Key Success Factors to Createan Industry MatrixKey success factors variables that can significantly affect the overallcompetitive positions of companies within anyparticular industryCopyright © 2015 Pearson Education, Inc.4-35Industry MatrixIndustry matrix summarizes the key success factors within aparticular industryCopyright © 2015 Pearson Education, Inc.4-36Competitive IntelligenceCompetitive intelligence a formal program of gathering information on acompany’s competitors also called business intelligenceSources of competitive intelligence: Information brokers Internet Industrial espionage Investigatory servicesCopyright © 2015 Pearson Education, Inc.4-37Useful Forecasting TechniquesExtrapolationBrainstormingExpertopinionDelphitechniqueStatisticalmodelingPredictionmarketsCross impactanalysisCopyright © 2015 Pearson Education, Inc.4-38Synthesis of External Factors—EFASCopyright © 2015 Pearson Education, Inc.4-39Copyright © 2015 Pearson Education, Inc.4-40المملكة العربية السعوديةوزارة التعليمالجامعة السعودية اإللكترونيةKingdom of Saudi ArabiaMinistry of EducationSaudi Electronic UniversityCollege of Administrative and Financial SciencesAssignment 1Strategic Management (MGT 401)Due Date: 05/10/2024 @ 23:59Course Name: Strategic ManagementStudent’s Name:Course Code: MGT 401Student’s ID Number:Semester: FirstCRN:Academic Year:2024-25-1stFor Instructor’s Use onlyInstructor’s Name:Students’ Grade:Marks Obtained/Out of 10Level of Marks: High/Middle/LowGeneral Instructions – PLEASE READ THEM CAREFULLY••••••••The Assignment must be submitted on Blackboard (WORD format only) via allocatedfolder.Assignments submitted through email will not be accepted.Students are advised to make their work clear and well presented, marks may be reducedfor poor presentation. This includes filling your information on the cover page.Students must mention question number clearly in their answer.Late submission will NOT be accepted.Avoid plagiarism, the work should be in your own words, copying from students or otherresources without proper referencing will result in ZERO marks. No exceptions.All answered must be typed using Times New Roman (size 12, double-spaced) font. Nopictures containing text will be accepted and will be considered plagiarism).Submissions without this cover page will NOT be accepted.Learning Outcomes:CLO1- Recognize the basic concepts and terminology used in Strategic Management.CLO2-Describe the different issues related to environmental scanning, strategy formulation, andstrategy implementation in diversified organizationsCLO5-Demonstrate how executive leadership is an important part of strategic management .Assignment Question(s): (2.5 marks for each question)1. Why is strategic management important for a corporation’s competitive advantage?2. How does strategic management typically evolve in a corporation? Give examples3. Why does a corporation need a board of directors? What is the relationship betweencorporate governance and social responsibility? Give examples from the actualmarket.4. Choose any corporation from the Saudi market and discuss the forces driving itsindustry competition (review chapter 4-slide 18).Notes:– Your answers MUST include at least four scholarly peer-reviewed references, using a properreferencing style (APA). Remember that these scholarly references can be found in the SaudiDigital Library (SDL).– Make sure to support your statements with logic and argument, citing all sources referenced.Answers1. Answer-2. Answer-
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