1. Chapter 2 The Competitive Environment: Assessing Industry Attractiveness

2. External Environment
External environments are uncontrollable, multifaceted. They frame your firm’s opps/threats, your strategic options.
You must understand what elements are critical, how do they affect you, where are they now, and where are they likely to be in the future?
They don’t affect everyone in the same way.
2 levels:
Macro- broad, general, all encompassing, affects all industries
Industry or competitive environment

3. Macro-Environment
Demographic – characteristics of the people in an area or market
Political – focuses primarily on governmental activities – regulation, policies, taxation, support of business or industries, stability
Social/Cultural – attitudes, values, lifestyles, aspirations
Technological – technological developments that may have an impact on your industry or firm; product or process
Global – What has caused it? What does it mean? What opportunities and threats does it present? What risks and competition exist? What are some of the implementation and control issues involved?

4. Competitive Environment
More specific and focused than macro. Looking at the specific industry a firm competes in and its characteristics or properties.
Porter’s Five Forces Model of Competition is perhaps the most widely used framework. Exhibit 2-1, p. 44.
Threat of New Entrants – Barriers to entry
Bargaining Power of Customers
Bargaining Power of Suppliers
Competing Rivalry among existing sellers
Potential Product Substitutes
Question becomes: What do you do about each force? Each has strategic implications.

5. Strategic Groups
Groups of firms in a single industry that pursue similar strategies
Or compete in the same niche
Understanding SG will help identify who your specific competition is
It is more important to look at the competition within groups rather than the competition between groups
Groups do shift, firms change focus, customer needs change
Look at Honda and Toyota

6. Information Gathering
Main issues revolve around ethical data gathering
Data storage
Data interpretation
Data dissemination
How do you make sense of it all?