Environmental Scanning and Industry Analysis for Sustainable Business Growth

Environmental Scanning and Industry Analysis for Sustainable Business Growth
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This article focuses on the importance of environmental scanning and industry analysis for sustainable business growth. It covers the degree of environmental uncertainty, complexity and change that organizations face. It also highlights the significance of monitoring, evaluating, and disseminating information from both external and internal environments to ensure the long-term health of the firm.

About Environmental Scanning and Industry Analysis for Sustainable Business Growth

PowerPoint presentation about 'Environmental Scanning and Industry Analysis for Sustainable Business Growth'. This presentation describes the topic on This article focuses on the importance of environmental scanning and industry analysis for sustainable business growth. It covers the degree of environmental uncertainty, complexity and change that organizations face. It also highlights the significance of monitoring, evaluating, and disseminating information from both external and internal environments to ensure the long-term health of the firm.. The key topics included in this slideshow are environmental scanning, industry analysis, sustainable business growth, degree of uncertainty, degree of complexity,. Download this presentation absolutely free.

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1. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 1 Lecture 3 Environmental Scanning and Industry Analysis

2. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 2 Environments Environmental uncertainty: degree of complexity degree of change The degree of complexity plus the degree of change existing in an organizations external environment.

3. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 3 Environments Environmental scanning: The monitoring, evaluating, and disseminating of information from the external and internal environments to key people within the corporation to avoid strategic surprise and ensure the long- term health of the firm.

4. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 4 External Environment External Environmental Variables: Societal\community environment Societal\community environment : General forces that do not directly touch on the short-run activities but often influence its long-run decisions .

5. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 5 External Environment External Environmental Variables: Task environment Task environment : Those elements or groups that directly affect the corporation and, in turn, are affected by it. The task environment is the industry within which that firm operates .

6. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 6 External Environment External Environmental Variables: Industry analysis Industry analysis : An in-depth examination of key factors within a corporations task environment.

7. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 7 External Environment Societal environment forces Societal environment forces : Economic forces Regulate the exchange of materials, money, energy, and information Technological forces Generate problem-solving inventions

8. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 8 External Environment Societal environment forces Societal environment forces : Political-legal forces Allocate power, provide laws and regulations Socio-cultural forces Regulate values, mores\traditions, and customs

9. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 9 Societal Environment Important Variables 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

10. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 10 External Environment Socio-cultural Trends Increasing environmental awareness Growth of the seniors market Decline of the mass market Changing pace and location of life Changing household composition Increasing diversity of workforce and markets

11. Discussion Discuss how a development in a corporation's societal environment can affect the corporation through its task environment? What can a corporation do to ensure that information about strategic environmental factors gets to the attention of strategy makers? Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 11

12. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 12 Workforce Diversity Heterogeneous workforce in terms of gender, race, ethnicity, and age. workforce is getting older In US Asians and Hispanics are an increasingly large percentage of workforce melting pot approach versus celebration of differences Prentice Hall, 2002 2- 12 2- 12

13. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 13 External Environment External Strategic Factors Factors influencing the choice of the strategic factors: Personal values of managers Functional experience of managers Success of current strategies Strategic myopia/ shortsightedness Willingness to reject unfamiliar as well as negative information

14. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 14 External Environment Issues Priority Matrix Identify likely trends: Societal and task environments Strategic environmental issues Assess probability of trends occurring Low to High Ascertain\find likely impact of trends on the corporation Low to High

15. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 15 Issues Priority Matrix High Priority High Priority High Priority Medium Priority Medium Priority Medium Priority Probable Impact on Corporation Low Priority Low Priority Low Priority Low Medium High Medium High Low Probability of Occurrence

16. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 16 External Environment External Strategic Factors Defined: Key environmental trends that are judged to have both a medium to high probability of occurrence and a medium to high probability of impact on the corporation. Those environmental trends judged to be a corporations strategic factors are then categorized as opportunities and threats and are included in strategy formulation.

17. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 17 Industry Analysis Industry A group of firms producing a similar product or service, such as soft drinks, health services or financial services.

18. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 18 Industry Analysis

19. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 19 Industry Analysis Porters approach: Porters approach: Assess the six forces -- Threat of new entrants Rivalry among existing firms Threat of substitute products Bargaining power of buyers Bargaining power of suppliers

20. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 20 Industry Analysis Threat of New Entrants -- Threat of New Entrants -- Barriers to entry: Previous experience with retaliation to new entry. Economies of Scale Product Differentiation Capital Requirements Switching Costs to another suppler Access to Distribution Channels Cost Disadvantages Independent of Size: established firms may have, proprietary product technology, favorable access to raw material, learning curve. Government Policy

21. Chapter 3 Wheelen/Hunger 21 The threat of new entry (competitors). New entries expand industry s productive capacity. Unless the market grows, a new entries intensifies the fight for market share . The result is prices go down which, lowering industry profitability. Developed by Prof. Dr. Majed El-Farra

22. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 22 Industry Analysis Rivalry Among Existing Firms -- Rivalry Among Existing Firms -- Intense rivalry related to: Number of competitors Rate of Industry Growth Produce or Service Characteristics Amount of Fixed Costs Capacity Height of Exit Barriers Diversity of Rivals

23. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 23 Industry Analysis Threat of Substitute Products/Services Threat of Substitute Products/Services Substitute Products: Those products that appear to be different but can satisfy the same need as another product. To the extent that switching costs are low, substitutes can have a strong effect on an industry.

24. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 24 Industry Analysis Bargaining Power of Buyers -- Bargaining Power of Buyers -- Buyer is powerful when: Buyer purchases large proportion of sellers products Buyer has the potential to integrate backward Alternative suppliers are plentiful Changing suppliers costs very little Purchased product represents a high percentage of a buyers costs Buyer earns low profits Purchased product is unimportant to the final quality or price of a buyers products

25. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 25 Industry Analysis Bargaining Power of Suppliers -- Bargaining Power of Suppliers -- Supplier is powerful when: Supplier industry is dominated by a few companies but sells to many Its product is unique and/or has high switching costs Substitutes are not readily available Suppliers are able to integrate forward and compete directly with present customers Purchasing industry buys only a small portion of the suppliers goods.

26. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 26 Industry Analysis Industry Evolution Industry Evolution most industries evolve through a series of stages from growth to decline. Fragmented Industry No firm has large market share and each firm serves only a small piece of the total market in competition with others . Consolidated Industry Dominated by a few large firms, each of which struggles to differentiate its products from the competition.

27. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 27 Continuum\range 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

28. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 28 Industry Analysis Global Industries Global Industries Classifying Industry primarily multidomestic or primarily global based on: Pressure for coordination Within the multinationals in that industry Pressure for local responsiveness On the part of Individual country market. If the pressure for coordination with multinationals is strong and the pressure for local responsiveness is weak within a particular industry, the industry is global.

29. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 29 Industry Analysis Strategic Groups Strategic Groups Defined: A set of business units or firms that pursue similar strategies with similar resources.

30. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 30 Strategic group analysis Aims to identify organizations with similar strategic characteristics, following similar strategies or competing on similar bases.

31. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 31 Some characteristics for identifying strategic groups To measure how org. are differ based on the following characteristics: 1- The extent of product diversity. 2- Extent of geographical coverage. 3- Number of market segment served. 4- Distribution channels used. 5- Number of branding. 6- Product quality. 7- Technological leadership. 8- R&D capability. 9- Cost position. 10- Utilization of capacity. 11- Separate company, or relationship with parent. 12- Relationship to influence groups, e.g., government. 13- Size of organization.

32. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 32 Why strategic group analysis is important? Identify who most direct competitor. On what basis the competitors are competing on. It raises the question of how possible to move from one group to another.

33. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 33 Industry Analysis Strategic Types Strategic Types it is used to analyze the level of competitive intensity within a particular industry. Defined: Category of firms based on a common strategic orientation and a combination of structure, culture, and processes consistent with that strategy.

34. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 34 Industry Analysis Strategic Types Strategic Types Categorized by one of four general strategic orientations: Defenders Companies with a limited product line; focus on improving efficiency of current operations

35. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 35 Industry Analysis Strategic Types Strategic Types (continued) Prospectors: Companies with fairly broad product lines; focus on product innovation and market opportunities.

36. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 36 Industry Analysis Strategic Types Strategic Types (continued) Analyzers: Corporations that operate in at least two different product-market areas one stable and one variable.

37. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 37 Industry Analysis Strategic Types Strategic Types (concluded) Reactors: Corporations that lack a consistent strategy-structure-culture relationship.

38. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 38 Industry Matrix Key Success Factors Weight Company A Rating Company A Weighted Score Company B Rating Company B Weighted Score 1 2 3 4 5 6 Total 1.00 Source: T. L. Wheelen and J. D. Hunger, Industry Matrix. Copyright 2001 by Wheelen and Hunger Associates. Reprinted by permission.

39. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 39 Industry Analysis Forecasting Techniques: Forecasting Techniques: Extrapolation: the extension of present trends into the future. It rest on the assumption that the world change slowly. Time-series methods are used. Brainstorming Expert opinion Statistical modeling Scenario writing: upon a series of historical data plus informed hunches from key people

40. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 40 External Factor Analysis Summary (EFAS) External Factors Impact on company company Response rate Response Rate Comments 1 2 3 4 5 1.00 Opportunities Threats Total Weighted Score Notes: 1. List opportunities and threats (510) in column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2 based on that factors probable impact on the companys 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 companys response to that factor. 4. Multiply each factors weight times its rating to obtain each factors 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.

41. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 41 External Factor Analysis Summary (EFAS) Maytag Example External Factors Weight Rating Weighted Score Comments 1.00 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 .20 .10 .05 .05 .10 .10 .10 .15 .05 .10 4 5 1 2 2 4 4 3 1 2 .80 .50 .05 .10 .20 .40 .40 .45 .05 .20 Acquisition of Hoover Maytag quality Low Maytag presence Will take time Maytag weak in this channel Well positioned Well positioned Hoover weak globally Questionable Only Asian presence is Australia 3.15 1 2 3 4 5

42. OT to IUG Societal factors 1. Increasing donor 2. Increase competion T 3. Closing boarders. 4. Political conflict T 5. Studying outside T 6. Local conservitive value. 7. Technology development 8. Database threats. 9. Women prefer to continue eduction 10. Unemployment rate T 11. Automation Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 42

43. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 43 Review How can a decision maker identify external strategic factors in a corporation's external international environment?

44. Developed by Prof. Dr. Majed El-Farra Chapter 3 Wheelen/Hunger 44 Group discussion What are the forces driving industry competition in the airline industry? The first part of the exercise evaluate each of the current forces driving industry competition. indicate whether they marked high, medium, or low for each force. which of these forces are changing and why. evaluate the future level of competitive intensity in the airline industry. Would they invest or look for a job in this industry?

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