Environmental Uncertainty 3.1 Environmental Uncertainty p. 53 Environmental Uncertainty Degree of complexity Degree of change 57

Some Important Variables in the Societal Environment 3.2 Some Important Variables in the Societal Environment (Table 3.1) p. 55 Some Important Variables in the Societal Environment Economic GDP trends Interest rates Money supply Inflation rates Unemployment levels Wage/price controls Devaluation/revaluation Energy availability and cost Disposable and discretionary income Technological Total government spending for R&D Total industry spending for R&D Focus of technological efforts Patent protection New products New developments in technology transfer from lab to marketplace Productivity improvements through automation Political-Legal Antitrust regulations Environmental protection laws Tax laws Special incentives Foreign trade regulations Attitudes toward foreign companies Laws on hiring and promotion Stability of government Sociocultural Lifestyle changes Career expectations Consumer activism Rate of family formation Growth rate of population Age distribution of population Regional shifts in population Life expectancies Birth rates 58

GIVE AN EXAMPLE IN EACH CATEGORY OF SOCIETAL ENVIRONMENT ECONOMIC TECHNOLOGICAL POLITICAL-LEGAL SOCIOCULTURAL

Scanning the External Environment 3.3 Scanning the External Environment (Fig. 3.1) p. 60 Scanning the External Environment Analysis of Societal Environment Economic, Sociocultural, Technological, Political-Legal Factors Market Analysis Community Competitor Analysis Analysis Supplier Analysis Selection of Strategic Factors Interest Group Governmental Analysis Analysis • Opportunities • Threats 59

Strategic Issues and Strategic Factors 3.4 Strategic Issues and Strategic Factors p. 59 Strategic Issues and Strategic Factors Strategic Issues Trends likely to affect future environment Strategic Factors Those strategic issues with high probability of occurrence and high probable impact on corporation 60

Critical Success Factors and Strategic Group 3.4 Strategic Issues and Strategic Factors p. 59 Critical Success Factors and Strategic Group Critical Success factors are: those strategic factors that you must do correctly to succeed with a strategy. Strategic Group are: those business units pursuing similar strategies with similar resources. 60

Issues Priority Matrix 3.5 Issues Priority Matrix (Fig. 3.2) p. 61 Issues Priority Matrix High Priority Medium Probable Impact on Corporation Low Probability of Occurrence Source: Adapted from L. L. Lederman, “Foresight Activities in the U.S.A.: Time for a Reassessment?” Long Range Planning (June 1984), p. 46. Copyright © 1984 by Pergamon Press, Ltd. Reprinted with permission. 61

Forces Driving Industry Competition 3.6 Forces Driving Industry Competition (Fig. 3.3) p. 62 Forces Driving Industry Competition Threat of New Entrants Bargaining Power of Suppliers of Buyers Relative of Unions, Governments, etc. Potential Threat of Substitute Products or Services Industry Competitors Rivalry Among Existing Firms Other Stakeholders Buyers Substitutes Suppliers Source:  Adapted/reprinted with permission of The Free Press, an imprint of Simon & Schuster, from Competitive Strategy: Techniques for Analyzing Industries and Competitors by Michael E. Porter. Copyright © 1980 by The Free Press. 62

Some Barriers to Entry: 3.7 Some Barriers to Entry p. 62–63 Some Barriers to Entry: Economies of Scale Product Differentiation Capital Requirements Switching Costs Access to Distribution Channels Cost Disadvantages Independent of Size Government Policy 63

Rivalry Among Existing Firms 3.8 Rivalry Among Existing Firms p. 63 Rivalry Among Existing Firms Intense Rivalry is Related To: Number of Competitors Rate of Industry Growth Product or Service Characteristics Amount of Fixed Costs Capacity Height of Exit Barriers Diversity of Rivals 64

Continuum of International Industries 3.9 Continuum of International Industries (Fig. 3.4) p. 67 Continuum of International Industries Multidomestic Industry in which companies tailor their products to the specific needs of consumers in a particular country. Retailing Insurance Banking Global Industry in which companies manufacture and sell the same products, with only minor adjustments made for individual countries around the world. Automobiles Tires Television sets 65

Mapping Strategic Groups in the U.S. Restaurant Chain Industry 3.10 Mapping Strategic Groups in the U.S. Restaurant Chain Industry (Fig. 3.5) p. 69 Mapping Strategic Groups in the U.S. Restaurant Chain Industry Product-Line Breadth High Low Limited Menu Full Menu Arby's Wendy's Domino's Dairy Queen Hardee's Taco Bell Burger King McDonald's Shoney's Denny's Country Kitchen Kentucky Fried Chicken Pizza Hut Long John Silver's Ponderosa Bonanza Perkins International House of Pancakes Red Lobster Olive Garden ChiChi's Price 66

Strategic Types Defenders Prospectors Analyzers Reactors 3.11 Strategic Types p. 68 Strategic Types Defenders Prospectors Analyzers Reactors 67

Industry Matrix 3.12 Industry Matrix (Table 3.3) p. 71 Company A Rating Company A Weighted Score Company B Rating Company B Weighted Score Strategic Factors Weight 1 2 3 4 5 6 Total 1.00 Source: T. L. Wheelen and J. D. Hunger, “Industry Matrix.” Copyright © 1997 by Wheelen and Hunger Associates. Reprinted by permission. 68

The Role of Forecasting Environmental Scanning Present Trends and Fashions Forecasting Future Trends and Fashions Assumptions for Strategic Planning and Decision Making 69

Popular Forecasting Techniques 3.14 Popular Forecasting Techniques p. 73–74 Popular Forecasting Techniques Extrapolation Brain storming Expert opinion Statistical modeling Scenario writing 70

3.15 Industry Scenarios p. 75 Industry Scenarios 1. Examine possible shifts in societal variable globally. 2. Identify uncertanties in each of the six forces of the task environment. 3. Make a range of plausible assumptions about future trends. 4. Combine assumptions into internally consistent scenarios. 5. Analyze the industry situation under each scenario. 6. Determine sources of competitive advantage under each scenario. 7. Predict competitors’ behavior under each scenario. 8. Select most likely scenario to use in strategy formulation. 71

External Factor Analysis Summary (EFAS) 3.16 External Factor Analysis Summary (EFAS): Blank p. 76 External Factor Analysis Summary (EFAS) External Strategic Factors Rating Weighted Score Weight Comments 1 2 3 4 5 Opportunities Threats Total Weighted Score 1.00 Notes: 1. List opportunities and threats (5–10 each) in column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2 based on that factor’s probable impact on the company’s strategic position. The total weights must sum to 1.00. 3. Rate each factor from 5 (Outstanding) to 1 (Poor) in Column 3 based on the company’s response to that factor. 4. Multiply each factor’s weight times its rating to obtain each factor’s weighted score in Column 4. 5. Use Column 5 (comments) for rationale used for each factor. 6. Add the weighted scores to obtain the total weighted score for the company in Column 4. This tells how well the company is responding to the strategic factors in its external environment. Source: T. L. Wheelen and J. D. Hunger, “External Strategic Factors Analysis Summary (EFAS).” Copyright © 1991 by Wheelen and Hunger Associates. Reprinted by permission. 72

External Factor Analysis Summary (EFAS): Maytag as Example 3.17 External Factor Analysis Summary (EFAS): Maytag as Example (Table 3.4) p. 76 External Factor Analysis Summary (EFAS): Maytag as Example External Strategic Factors Rating Weighted Score Weight Comments Opportunities • Economic integration of European Community • Demographics favor quality appliances • Economic development of Asia • Opening of Eastern Europe • Trend to “Super Stores” Threats • Increasing government regulations • Strong U.S. competition • Whirlpool and Electrolux strong globally • New product advances • Japanese appliance companies Total Scores 1 .20 .10 .05 .15 2 4 5 1 2 3 3 .80 .50 .05 .10 .20 .40 .45 4 Acquisition of Hoover Maytag quality Low Maytag presence Will take time Maytag weak in this channel Well positioned Hoover weak globally Questionable Only Asian presence is Australia 5 1.00 3.15 73