1. Dr. Djoko Poernomo, M.Si Dosen Matakuliah Manajemen Stratejik Program Studi Magister Ilmu Administrasi Fakultas Ilmu Sosial dan Ilmu Politik Universitas Jember 7 Maret 2015

2. Chapter 2 The External Environment:
Opportunities, Threats, Industry Competition, and Competitor Analysis
Michael A. Hitt
R. Duane Ireland
Robert E. Hoskisson 1

3. Key Words of Chapter 1 Strategic Competitiveness
Sustainable Competitive Advantage
Above Average Returns
Core Competence
Stakeholders

4. What we will learn in Chapter2
Importance of understanding what is happening outside of the firm
How that can affect the firm’s ability to achieve strategic competitiveness.
Importance of firm’s management cope with these changes of environment

5. Key words of chapter 2 General Environment Industry Environment
Opportunity
Threat
Industry and Strategic Group

6. GE Values Have a passion for excellence and hate bureaucracy.
Are open to ideas from anywhere and committed to Work-Out.
Live quality and drive cost and speed for competitive advantage.
Have the self-confidence to involve everyone and behave in a boundaryless fashion.
Create a clear, simple,reality-based vision and communicate it to all constituencies.
Have enormous energy and the ability to energize others.
Stretch, set aggressive goals and reward progress, yet understand accountability and commitment.
See change as opportunity, not threat.
Have global brains and build diverse and global team.

7. GE’s expansion in Japanese Market
GE Capital Edison Life
Acquisition of former Toho Life
Acquisition of Lake
Purchase of 80 % of Ryoshin Leasing
1998.8
GE Capital Leasing-1999
Acquisition of Nihon Leasing

8. The Strategic Management Process Strategy Formulation
Chapter 3
Internal
Environment
Chapter 2
External
Strategic Intent
Strategic Mission
The Strategic
Management
Process
Strategic
Outcomes
Actions
Strategic
Inputs
Strategy Formulation
Strategy Implementation
Chapter 4
Business-Level
Strategy
Chapter 5
Competitive
Dynamics
Chapter 6
Corporate-Level
Chapter 8
International
Chapter 9
Cooperative
Strategies
Chapter 7
Acquisitions &
Restructuring
Chapter 10
Corporate
Governance
Chapter 11
Structure
& Control
Chapter 12
Strategic
Leadership
Chapter 13
Entrepreneurship
& Innovation
Strategic
Competitiveness
Above Average
Returns
Feedback 10

9. Components of the General Environment
Economic
Demographic
Sociocultural
Competitive
Environment
Industry Environment
Political/Legal
Global
Technological 10

10. Components of the General Environment10

11. External Environmental Analysis
The external environmental analysis process should be conducted on a continuous basis. This process includes four activities:
Scanning
Monitoring
Forecasting
Assessing
Identifying early signals of environmental changes and trends
Detecting meaning through ongoing observations of environmental changes and trends
Developing projections of anticipated outcomes based on monitored changes and trends
Determining the timing and importance of environmental changes and trends for firms' strategies and their management 10

12. Bargaining Power of Suppliers
Porter’s Five Forces
Model of Competition
Threat of New Entrants
Threat of New Entrants
Bargaining Power of Suppliers
Rivalry Among Competing Firms in Industry
Bargaining Power of Buyers
Threat of Substitute Products 23

13. Porter’s Five Forces Model of Competition
Threat of New Entrants 11

14. Threat of New Entrants Economies of Scale Product Differentiation
Government Policy
Economies of Scale
Product Differentiation
Capital Requirements
Switching Costs
Access to Distribution Channels
Cost Disadvantages Independent of Scale
Barriers to Entry
Expected Retaliation 12

15. Bargaining Power of Suppliers
Porter’s Five Forces
Model of Competition
Threat of New Entrants
Threat of New Entrants
Bargaining Power of Suppliers 14

16. Bargaining Power of Suppliers
Suppliers are likely to be powerful if:
Suppliers exert power in the industry by:
* Threatening to raise
prices or to reduce quality
Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases
Supplier industry is dominated by a few firms
Suppliers’ products have few substitutes
Buyer is not an important customer to supplier
Suppliers’ product is an important input to buyers’ product
Suppliers’ products are differentiated
Suppliers’ products have high switching costs
Supplier poses credible threat of forward integration 15

17. Bargaining Power of Buyers
Porter’s Five Forces
Model of Competition
Threat of New Entrants
Threat of New Entrants
Bargaining Power of Buyers
Bargaining Power of Suppliers 17

18. Bargaining Power of Buyers
Buyer groups are likely to be powerful if:
Buyers are concentrated or purchases are large relative to seller’s sales
Purchase accounts for a significant fraction of supplier’s sales
Products are undifferentiated
Buyers face few switching costs
Buyers’ industry earns low profits
Buyer presents a credible threat of backward integration
Product unimportant to quality
Buyer has full information
Buyers compete with the supplying industry by:
* Bargaining down prices
* Forcing higher quality
* Playing firms off of
each other 18

19. Bargaining Power of Suppliers Bargaining Power of Buyers
Porter’s Five Forces
Model of Competition
Threat of New Entrants
Threat of New Entrants
Bargaining Power of Suppliers
Bargaining Power of Buyers
Threat of Substitute Products 20

20. Threat of Substitute Products
Keys to evaluate substitute products:
Products with similar function limit the prices firms can charge
Products with improving price/performance tradeoffs relative to present industry products
Example:
Electronic security systems in place of security guards
Fax machines in place of overnight mail delivery 21

21. Rivalry Among Existing Competitors
Intense rivalry often plays out in the following ways:
Jockeying for strategic position
Using price competition
Staging advertising battles
Making new product introductions
Increasing consumer warranties or service
Occurs when a firm is pressured or sees an opportunity
Price competition often leaves the entire industry worse off
Advertising battles may increase total industry demand, but may be costly to smaller competitors 25

22. Rivalry Among Existing Competitors
Cutthroat competition is more likely to occur when:
Numerous or equally balanced competitors
Slow growth industry
High fixed costs
Lack of differentiation or switching costs
High storage costs
Capacity added in large increments
High strategic stakes
High exit barriers
Diverse competitors 26

23. Rivalry Among Existing Competitors
High exit barriers are economic, strategic and emotional factors which cause companies to remain in an industry even when future profitability is questionable.
Specialized assets
Fixed cost of exit (e.g., labor agreements)
Emotional barriers
Government and social restrictions
Strategic interrelationships 27

24. Effects of Entry Barriers and Exit Barriers on Industry Profits
Low
High
Low
Entry Barriers
High 28

25. Effects of Entry Barriers and Exit Barriers on Industry Profits
Low
High
Low, Stable Returns
Low
Entry Barriers
High 29

26. Effects of Entry Barriers and Exit Barriers on Industry Profits
Low
High
Low, Stable Returns
Low
Entry Barriers
High, Stable Returns
High 30

27. Effects of Entry Barriers and Exit Barriers on Industry Profits
Low
High
Low, Stable Returns
Low, Risky Returns
Low
Entry Barriers
High, Stable Returns
High 31

28. Effects of Entry Barriers and Exit Barriers on Industry Profits
Low
High
Low, Stable Returns
Low, Risky Returns
Low
Entry Barriers
High, Stable Returns
High, Risky Returns
High 32

29. Problems of Industry Analysis
Boundary of Industry blurred
Technology advance
New competitors from other indutry
Bookstore from internet company

30. Strategic Group
A group of firms in an industry following the same or similar strategy
Have a proper barriers of entry
Automobile
Mercedes., BMW, Jaguar vs. Toyota, Ford
Home Electronics
Funai , Aiwa, Sanyo vs. Sony, Panasonic

31. Competitor Analysis
The follow-up to Industry Analysis is effective analysis of a firm’s Competitors
Competitive
Environment
Industry Environment 33

32. Competitor Analysis Response Assumptions
What assumptions do our competitors hold about the future of industry and themselves?
Response
What will our competitors do in the future?
Current Strategy
Does our current strategy support changes in the competitive environment?
Where do we have a competitive advantage?
Future Objectives
How do our goals compare to our competitors’ goals?
How will this change our relationship with our competition?
Capabilities
How do our capabilities compare to our competitors? 38

33. Competitor Analysis Future Objectives What Drives the competitor?
How do our goals compare to our competitors’ goals?
Where will emphasis be placed in the future?
What is the attitude toward risk? 34

34. Competitor Analysis Future Objectives Current Strategy
What is the competitor doing?
How do our goals compare to our competitors’ goals?
What can the competitor do?
Current Strategy
Where will emphasis be placed in the future?
How are we currently competing?
What is the attitude toward risk?
Does this strategy support changes in the competitive structure? 35

35. Competitor Analysis Future Objectives Current Strategy Assumptions
How do our goals compare to our competitors’ goals?
Where will emphasis be placed in the future?
What is the attitude toward risk?
What does the competitor believe about itself and the industry?
Current Strategy
How are we currently competing?
Does this strategy support changes in the competition structure?
Assumptions
Do we assume the future will be volatile?
What assumptions do our competitors hold about the industry and themselves?
Are we assuming stable competitive conditions? 36

36. Competitor Analysis Future Objectives Current Strategy Assumptions
How do our goals compare to our competitors’ goals?
Where will emphasis be placed in the future?
What is the attitude toward risk?
What are the competitor’s capabilities?
Current Strategy
How are we currently competing?
Does this strategy support changes in the competition structure?
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?
Assumptions
Capabilities
What are my competitors’ strengths and weaknesses?
How do our capabilities compare to our competitors? 37

37. Competitor Analysis Future Objectives Response Current Strategy
How do our goals compare to our competitors’ goals?
Where will emphasis be placed in the future?
What is the attitude toward risk?
Response
What will our competitors do in the future?
Current Strategy
How are we currently competing?
Does this strategy support changes in the competition structure?
Where do we have a competitive advantage?
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?
Assumptions
How will this change our relationship with our competition?
Capabilities
What are my competitors’ strengths and weaknesses?
How do our capabilities compare to our competitors? 38

38. How Nintendo Reshaped the Video Game Landscape after their sales declined in 1985
Customers
Kid’s, Parents
Toys”R”Us, WalMart,others
Control supply of game cartridges
Competitors
Atari, Commodore and others
TV, books, sports
Develop cheap hardware and hit games
to start virtuous curve
Move down experience curve
Bring in outside game developers
and require exclusively
Complementors
Acclaim, Electronic Arts and others
“Sideways-integrate” into software
Business
Limit number of titles per year per license
To keep developers symmetric
Suppliers
Ricoh, Sharp and others(microchips)
Marvel, Disney and others(game characters)
Use trailing-edge technology
Develop the Mario characters internally