1. McGraw-Hill/Irwin Copyright © 2011 The McGraw-Hill Companies, All Rights Reserved. Driving Forces, Porter’s 5 Forces, Market Positioning Maps, and SWOT Analysis

2. 3-2 External Environmental Factors Shaping A Company’s Choice of Strategy

3. 3-3 The Concept of Driving Forces Driving Forces are powerful external influences acting to reshape the industry landscape and alter competitive conditions.

4. 3-4 Common Driving Forces  Changes in long-term industry growth rate  Increasing globalization of the industry  Changes in who buys the product and how they use it  Product innovation  Technological change  Entry or exit of major firms

5. 3-5 Analyzing Driving Forces 1.Identify forces likely to reshape industry competitive conditions Changes likely to take place within next 1 – 3 years Usually no more than 3 - 4 factors qualify as real drivers of change

6. 3-6 Analyzing Driving Forces 2.Assess impact of driving forces on industry attractiveness Are the driving forces causing demand for product to increase or decrease? Are the driving forces acting to make competition more or less intense? Will the driving forces lead to higher or lower industry profitability? 3.Determine what strategy changes are needed to prepare for impact of driving forces

7. 3-7 Driving Forces – Example (Apparel) ForceComments Summarize information from the following link, then discuss how your business will deal with each force: http://subscriber.hoovers.com/H/industr y360/overview.html?industryId=1161 http://subscriber.hoovers.com/H/industr y360/overview.html?industryId=1161

8. 3-8 Porter’s Five Forces One of the most common frameworks for assessing the structure of an industry.

9. 3-9 The Five Forces  Buyer Power  Supplier Power  Threat of New Entrants  Threat of Substitutes  Rivalry

10. 3-10 Porter’s Five Forces Model of Competition

11. 3-11 Porter’s Five Forces – Example (Fast Food) ForceHigh/ Moderate/ Low Comments Buyer Power Supplier Power Threat of New Entrants Threat of Substitutes Rivalry Summarize information from the following link, then discuss how your business will deal with each force: http://360.datamonitor.com/Product?pid=D6CAB00E- E2FD-4777-B325-4512D1A78F14 http://360.datamonitor.com/Product?pid=D6CAB00E- E2FD-4777-B325-4512D1A78F14

12. 3-12 Market Positioning Maps One of the most common ways of comparing competitors in an industry. Important to have DIFFERENTIABLE X & Y Axes.

13. 3-13 Common X/Y Axis Criteria  Price  Product selection / product features  Distribution network  Resource bases  Business model

14. 3-14 Market Positioning Maps – Example (Student Housing) Make sure to make multiple maps with multiple competitors per map

15. 3-15 Taking Inventory of a Company’s Strengths, Weaknesses, Opportunities and Threats  S W O T represents the first letter in S trengths W eaknesses O pportunities T hreats  For a company’s strategy to be well- conceived, it must be Matched to its resource strengths and weaknesses Aimed at capturing its best market opportunities and defending against external threats to its well- being

16. 3-16 Identifying Resource Weaknesses and Competitive Deficiencies  A weakness is something a firm lacks, does poorly, or a condition placing it at a disadvantage in the marketplace  Resource weaknesses relate to Inferior or unproven skills, expertise, or intellectual capital Deficiencies in competitively important physical, organizational, or intangible assets Missing or competitive inferior capabilities in key areas

17. 3-17 Identifying External Threats to Profitability and Competitiveness  Technological change  Entry of new competitors  Burdensome regulations  Unfavorable demographic shifts  Rise in interest rates  Adverse shifts in foreign exchange rates

18. 3-18 SWOT – Example (Micro- Brewery) COMPANY: Bramkamp Brewing Co. Strengths Minimum overhead Custmomizability Small production runs Weaknesses Lack of capital Lack of brand recognition/legitimacy Opportunities Carve out local ultra-micro niche Build core base of local repeat customers & opinion leaders Threats Quality control issues Liability issues Lack of partners for “protecting” & consolidating local market inroads Do SWOT analyses for own company and multiple competitors. Make sure to describe briefly how your own company will address each of your own SWOT’s.