CHAPTER 4 Environmental Scanning and Industry Analysis THOMAS L. WHEELEN J. DAVID HUNGER Prentice Hall 2006

Societal environment -- Environmental Scanning Societal environment -- Economic forces - Regulate exchange of materials, money, energy and information Technological forces - Generate problem-solving inventions Political-legal forces - Allocate power; provide laws and regulations Sociocultural forces - Elements or groups that directly affect a corporation and are affected by it Prentice Hall, Inc. © 2008 Prentice Hall 2006

Variables in Societal Environment Prentice Hall, Inc. © 2008 Prentice Hall 2006

Task environment -- Industry Analysis -- Elements or groups that directly affect a corporation and are affected by it Industry Analysis -- In-depth examination of key factors within a corporation’s task environment Prentice Hall, Inc. © 2008 Prentice Hall 2006

Demographic Trends Prentice Hall, Inc. © 2008 Prentice Hall 2006

8 Current Trends – Increasing environmental awareness Transformational Sociocultural Trends 8 Current Trends – Increasing environmental awareness Growing health consciousness Expanding seniors market Impact of the Generation Y boomlet Declining mass market Changing pace and location of life Changing household composition Increasing diversity of workforce & market Prentice Hall, Inc. © 2008 Prentice Hall 2006

International Societal Environments Prentice Hall, Inc. © 2008 Prentice Hall 2006

Scanning the Task Environment Prentice Hall, Inc. © 2008 Prentice Hall 2006

WARNING! Strategic myopia -- External Strategic Factors WARNING! Strategic myopia -- Willingness to reject unfamiliar as well as negative information Prentice Hall, Inc. © 2008 Prentice Hall 2006

A “Portfolio” of Issues Issues Priority Matrix A “Portfolio” of Issues Prentice Hall, Inc. © 2008 Prentice Hall 2006

Analyzing the Task Environment Prentice Hall, Inc. © 2008 Prentice Hall 2006

Threat of New Entrants – Economies of scale Product differentiation Porter’s Approach to Industry Analysis Threat of New Entrants – Economies of scale Product differentiation Capital requirements Switching costs Access to distribution channels Cost disadvantages Government policy Prentice Hall, Inc. © 2008 Prentice Hall 2006

Rivalry Among Existing Firms – Number of competitors Porter’s Approach to Industry Analysis Rivalry Among Existing Firms – Number of competitors Rate of industry growth Product or service characteristics Amount of fixed costs Capacity Height of exit barriers Diversity of rivals Prentice Hall, Inc. © 2008 Prentice Hall 2006

Threat of Substitute Products or Services Bargaining Power of Buyers Porter’s Approach to Industry Analysis Threat of Substitute Products or Services Bargaining Power of Buyers Bargaining Power of Suppliers Relative Power of Other Stakeholders Prentice Hall, Inc. © 2008 Prentice Hall 2006

Consolidated Industry – Dominated by a few large firms Industry Evolution Fragmented Industry – No dominant industry Consolidated Industry – Dominated by a few large firms Prentice Hall, Inc. © 2008 Prentice Hall 2006

Overall customer care market shares for 2009 Executive summary Overall customer care market shares for 2009 The customer care market generated USD2.118 billion in revenue in 2009, 3.1% higher than the USD2.055 billion in 2008. The revenue for 2008 is higher than was reported last year (USD1.186 billion) because it was restated. The difference came primarily from a restatement of the size of the customer care market in China, of which we gained substantial visibility this year. Customer care is more consolidated than many other BSS and OSS markets, and two vendors, Oracle and Amdocs, clearly dominate. However, 50 suppliers command revenue of several million dollars in this market. Two vendors, Huawei and AsiaInfo, dominate the Chinese market and there are many other smaller, geographically focused suppliers. The customer care market is driven by greater competition in the emerging markets, the increasingly complex services and service bundles being offered by CSPs, the strong desire of consumers for instant service, the increasing need of CSPs to offer many new services quickly and the need to reduce customer support costs. Figure 1: Customer care market shares by revenue, worldwide, 2009 [Source: Analysys Mason, 2010]

Overall service fulfilment market shares for 2009 Executive summary Overall service fulfilment market shares for 2009 Figure 1: Service fulfilment market shares by revenue, worldwide, 2009 [Source: Analysys Mason, 2010] The service fulfilment market generated USD2.233 billion in revenue in 2009, up by 2.8% from USD2.173 billion in 2008. This represents slightly more growth than we forecasted last year (2.3%). Service fulfilment continues to be a very fragmented market. The top-six vendors accounted for only 44% of the market, while more than 30 other vendors achieved over USD10 million in revenue. The service fulfilment market grew more than some other areas of BSS/OSS since it is considered to be related to revenue generation. Growth in the service fulfilment market was driven by network evolution towards optical/packet technology, the push towards instant availability for complex service bundles, the need to operate in uncertain and changing business environments, deregulation of broadband and mobile in growth markets and the increasing desire to meet the needs of SMEs.

Continuum of International Industries International Risk Assessment Continuum of International Industries Prentice Hall, Inc. © 2008 Prentice Hall 2006

Strategic Groups Prentice Hall, Inc. © 2008 Prentice Hall 2006

Competitive Matrix Company Size Service Quality Monitoring Viewpoint Ericsson Network IQ™ IBM Tivoli Netcool Customer Experience Management SW Large (>$100M) OSI (SRIT) Service Assurance Nokia Mobile Quality Analyzer Agilent + Teradata Customer Experience Management System Medium ($10M-$100M) TTI Netrac™ Company Size Arantech touchpoint™ Nexus Netview Small (<$10M) Network Service Customer Service Quality Monitoring Viewpoint 1 February 2008 Proprietary - Mortensen Consulting Group and DAX Technologies

General Types of Strategies – Strategic Types General Types of Strategies – Defenders – hold on; cost & market share Prospectors – create; innovation Analyzers – portfolio; large companies Reactors – watch what happens, try to react quickly and effectively Prentice Hall 2006

Gathering information on a company’s competitors Competitive Intelligence Competitive Intelligence is often called business intelligence Gathering information on a company’s competitors Product/offering – features, functionality, pricing, targets, etc. Company – size, profitability, margins, target markets, apparent strategy, etc. Prentice Hall, Inc. © 2008 Prentice Hall 2006

Forecasting Techniques -- Extrapolation – from the past to the future Brainstorming – informed people mapping out possibilities Expert opinion – buy reports or commission a study Delphi technique – structured polling technique; ‘The Wisdom of Crowds” Statistical modeling – projecting past patterns into the future Scenario planning – a formal technique for mapping out futures, of various probabilities Prentice Hall 2006

Synthesis of External Factors -- EFAS Prentice Hall, Inc. © 2008 Prentice Hall 2006