Environmental Analysis - University of St Andrews
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Transcript Environmental Analysis - University of St Andrews
Strategic Analysis.
Environmental Analysis
Mikkeli 2005
Compiled by Rulzion Rattray
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The Environment & Decisions
Complex
Organic Extreme
Static
Mechanistic Extreme
Turton, R. (1991),
Dynamic
Simple
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The Macro Environment
POLITICAL
ECONOMIC
SOCIETAL
ENVIRONMENTAL
TECHNOLOGICAL
VALUES/LIFE-STYLE
INEVITABLES
TRENDS
UNCERTAINTIES
Details and focus of analysis will depend on the
industry that is being investigated & should be linked
to forces that drive competition in that industry
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Structural Analysis of Industries
Michael Porter
Potential
Entrants
Threat of entry
Bargaining
Suppliers
Power
Industry
competitors
Bargaining
Power
Buyers
Rivalry
Threat of substitutes
Substitutes
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Structural Analysis of Industries
Michael Porter
• State of competition & the profit potential of an
industry depends on 5 forces
• Knowledge of the 5 forces allows a firm to:
– Establish the context for its strengths & weaknesses
– Determine industry opportunities & threats
• The Goal:
– To find a defendable position in the industry, where the
firm can defend itself against these forces, or influence
them in its own favour
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Generic Competitive Strategies
Michael Porter 1985
“Positioning” determines whether a firm’s
profitability is above or below the industry
average.
Position is logically based on industry
structure, this should allow the firm to deal
with industry forces better than rivals
should be based either on lower costs or on
differentiation
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Generic Competitive Strategies
Michael Porter 1985
Three Generic Strategies:
Cost Leadership
Differentiation
Focus
Firms must choose pursuing more than one will result in the firm
being “stuck in the middle”
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Generic Competitive Strategies
Michael Porter 1985
Competitive Advantage
Broad
Cost
Leadership
Competitive
Scope
Narrow
Cost
Focus
Differentiation
?
Differentiation
Focus
Adapted from M.E. Porter Competitive Advantage, Free Press, 1985.
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Generic Competitive Strategies
Michael Porter 1985
There is only place for one cost leader in
any industry
There is more than one basis for
differentiation or focus
If two or more firms seek to occupy the
same position & on the same basis an
unprofitable battle can result
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4
The Strategy Clock
Bowman & Faulkner
High
Differentiation
Focus
Differentiation
Perceived
Added
Value
Low
Price
Low
Price/added
value
Low
Low
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Strategies destined
for ultimate
failure
Price
Compiled by Rulzion Rattray
High
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Achieving
Sustainable Competitive Advantage
Be clear who target customers are
Understand customer’s perceived value
Understand basis of competitors strategy
Understand basis of own competitive
position; resources, stakeholders
Ensure customers needs are met in a
distinctly different way
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Compiled by Rulzion Rattray
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References
• Johnson, G. & Scholes, K. (1998) Exploring Corporate Strategy, Prentice
Hall
• Porter ME (1979), “How Competitive Forces Shape Strategy”, Harvard
Business Review March/April 1979.
• Porter ME (1985), Creating & Sustaining Superior Performance, Free
Press.
• Stacey, R, (1996), Strategic Management & Organisational Dynamics,
Pitman, London.
• Turton, R. (1991), Behaviour in a Business Context, London, Chapman
Hall.
• Ginter P & Duncan (1990), Macroenvironmental Analysis, Long Range
Planning, December.
• Whittington R., (1993), What is Strategy & does it matter?, Routledge.
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