CHAPTER 4 Environmental Scanning and Industry Analysis 1

CHAPTER 4 Environmental Scanning and Industry Analysis 1

Environmental Scanning Societal environment -–Political-legal forces –Economic forces –Sociocultural forces –Technological forces 2

Societal Environment Political-legal Forces -–Allocate power; provide laws and regulations Economic Forces -–Regulate exchange of materials, money, energy and information 3

Societal Environment Sociocultural Forces -–Regulate values, mores, and customs of society Technological Forces -–Generate problem-solving inventions 4

Task Environment Task environment -–Elements or groups that directly affect a corporation and are affected by it 5

Task Environment Industry Analysis -–In-depth examination of key factors within a corporation’s task environment 6

Variables in Societal Environment 7

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 8

Scanning the Task Environment 9

External Strategic Factors Strategic myopia -–Willingness to reject unfamiliar as well as negative information 10

Issues Priority Matrix 11

Analyzing the Task Environment 12

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 13

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 14

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 15

Industry Evolution Fragmented Industry – –No dominant industry 16

Industry Evolution Consolidated Industry – –Dominated by a few large firms 17

Strategic Groups 18

Strategic Types General Types – • Defenders • Prospectors • Analyzers • Reactors 19

Competitive Intelligence Called business intelligence Gathering information on a company’s competitors 20

Forecasting Techniques -–Extrapolation –Brainstorming –Expert opinion –Delphi technique –Statistical modeling –Scenario writing 21

Synthesis of External Factors -- EFAS 22