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Presented By:- Dharm Jeeta Singh

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1 Presented By:- Dharm Jeeta Singh
Presentation The External Environment: Opportunities, Threats, and Industry Competition, and Competitor Analysis Presented By:- Dharm Jeeta Singh SIMT

2 The External Environment
Sociocultural General Industry Environment Threat of new entrants Power of suppliers Power of buyers Product substitutes Intensity of rivalry General Demographic Economic Global Competitor Environment Political/Legal Environment Environment Technological 4/16/2017 General SIMT

3 External Environmental Analysis
A continuous process which includes Scanning: Identifying early signals of environmental changes and trends Monitoring: Detecting meaning through ongoing observations of environmental changes and trends Forecasting: Developing projections of anticipated outcomes based on monitored changes and trends Assessing: Determining the timing and importance of environmental changes and trends for firms’ strategies and their management 4/16/2017 SIMT

4 External Environmental Analysis
Analysis of general environment Analysis of industry environment Analysis of competitor environment The External Environment The External Environment Strategic Intent Strategic Mission 4/16/2017 SIMT

5 General Environment Sociocultural segment Women in the workplace
Workforce diversity Attitudes about quality of worklife Concerns about environment Shifts in work and career preferences Shifts in product and service preferences 4/16/2017 SIMT

6 General Environment Economic segment Inflation rates Interest rates
Trade deficits or surpluses Budget deficits or surpluses Personal savings rate Business savings rates Gross domestic product 4/16/2017 SIMT

7 General Environment Political/Legal Segment Antitrust laws
Taxation laws Deregulation philosophies Labor training laws Educational philosophies and policies 4/16/2017 SIMT

8 General Environment Technological Segment Product innovations
Applications of knowledge Focus of private and government-supported R&D expenditures New communication technologies 4/16/2017 SIMT

9 General Environment Global Segment Important political events
Critical global markets Newly industrialize countries Different cultural and institutional attributes 4/16/2017 SIMT

10 General Environment Demographic Segment Population size Age structure
Geographic distribution Ethnic mix Income distribution 4/16/2017 SIMT

11 Industry Environment A set of factors that directly influences a company and its competitive actions and responses. Interaction among these factors determine an industry’s profit potential. Threat of new entrants Power of suppliers Power of buyers Product substitutes Intensity of rivalry 4/16/2017 SIMT

12 Five Forces Model of Competition
Five Forces of Competition Rivalry Among Competing Firms Threat of New Entrants Threat of Substitute Products Bargaining Power of Suppliers Bargaining Power of Buyers 4/16/2017 SIMT

13 Threat of New Entrants Barriers to entry Economies of scale
Product differentiation Capital requirements Switching costs Access to distribution channels Cost disadvantages independent of scale Government policy Expected retaliation 4/16/2017 SIMT

14 Bargaining Power of Suppliers
A supplier group is powerful when: it is dominated by a few large companies satisfactory substitute products are not available to industry firms industry firms are not a significant customer for the supplier group suppliers’ goods are critical to buyers’ marketplace success effectiveness of suppliers’ products has created high switching costs suppliers are a credible threat to integrate forward into the buyers’ industry 4/16/2017 SIMT

15 Bargaining Power of Buyers
Buyers (customers) are powerful when: they purchase a large portion of an industry’s total output the sales of the product being purchased account for a significant portion of the seller’s annual revenues they could easily switch to another product the industry’s products are undifferentiated or standardized, and buyers pose a credible threat if they were to integrate backward into the seller’s industry 4/16/2017 SIMT

16 Threat of Substitute Products
Product substitutes are strong threat when: customers face few switching costs substitute product’s price is lower substitute product’s quality and performance capabilities are equal to or greater than those of the competing product 4/16/2017 SIMT

17 Intensity of Rivalry Intensity of rivalry is stronger when competitors: are numerous or equally balanced experience slow industry growth have high fixed costs or high storage costs lack differentiation or low switching costs experience high strategic stakes have high exit barriers 4/16/2017 SIMT

18 High Exit Barriers Common exit barriers include:
specialized assets (assets with values linked to a particular business or location) fixed costs of exit such as labor agreements strategic interrelationships (relationships of mutual dependence between one business and other parts of a company’s operation, such as shared facilities and access to financial markets) emotional barriers (career concerns, loyalty to employees, etc.) government and social restrictions 4/16/2017 SIMT

19 Strategic Groups Strategic group: a group of firms in an industry following the same or similar strategy along the same strategic dimensions. The strategy followed by a strategic group differs from strategies being implemented by other companies in the industry. 4/16/2017 SIMT

20 Competitor Environment
Competitor intelligence is the ethical gathering of needed information and data about competitors’ objectives, strategies, assumptions, and capabilities what drives the competitor as shown by its future objectives what the competitor is doing and can do as revealed by its current strategy What the competitor believes about itself and the industry, as shown by its assumptions What the the competitor may be able to do, as shown by its capabilities 4/16/2017 SIMT

21 Competitor Analysis Future Objectives: Future objectives
How do our goals compare with our competitors’ goals? Where will the emphasis be placed in the future? What is the attitude toward risk? 4/16/2017 SIMT

22 Competitor Analysis Current Strategy: Future objectives
How are we currently competing? Does this strategy support changes in the competitive structure? Current strategy 4/16/2017 SIMT

23 Competitor Analysis Assumptions: Future objectives
Do we assume the future will be volatile? Are we operating under a status quo? What assumptions do our competitors hold about the industry and themselves? Current strategy Assumptions 4/16/2017 SIMT

24 Competitor Analysis Capabilities: Future objectives
What are our strengths and weaknesses? How do we rate compared to our competitors? Current strategy Assumptions Capabilities 4/16/2017 SIMT

25 Competitor Analysis Response: Future objectives Response
Current strategy Response: What will our competitors do in the future? Where do we hold an advantage over our competitors? How will this change our relationship with our competitors? Assumptions Capabilities 4/16/2017 SIMT

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