External Analysis Flashcards
(13 cards)
Industrial organization (I/O model)-> external prespective
- The External Environment:
- The general environment
- The industry environment
- The competitor environment - An Attractive Industry: whose structural characteristics suggest above-average returns
- Strategy Formulation: Identify the strategy called for by the attractive industry to earn above-average returns
- Assets and Skills: Develop or acquire assets and skills needed to implement the strategy
- Strategy Implementation: Use the firm’s strengths (its developed or acquired assets and skills) to implement the strategy
- Superior Returns: Earning of above-average returns
Resource Based View (RBV) -> internal perspective
- Resources
- Inputs into a firm’s production process - Capability
- Capacity of an integrated set of resources to integratively perform a task or activity - Competitive Advantage
- Ability of a firm to outperform its rivals - An Attractive Industry
- An industry with opportunities that can be exploited by the firm’s resources and capabilities - Strategy Formulation and Implementation
- Strategic actions taken to earn above- average returns - Superior Returns
- Earning of above-average returns
Vision
- what a firm wants to be (values)
- what it wants to achieve (aspirations)
- enduring
Vision statement:
- ideal description of an organisation
- short, concise, easily remembered
- recognizes the firm’s internal and external competitive environments
- s most effective when its development includes all stakeholders.
Mission
- more concrete
- inspiring and relevant to all stakeholders
- businesses in which the firm intends to compete
- customers it intends to serve.
Vision and mission together
- foundation the firm needs to choose and implement one or more strategies
Finally, the above-average returns are the fruits of the firm’s efforts to achieve its vision and mission.
Stakeholders
a. concept
Individuals and groups who can affect, and are affected by, the strategic outcomes achieved and who have enforceable claims on a firm’s performance through their ability to withhold participation essential to the organisation’s survival, competitiveness, and profitability.
Stakeholders continue to support an organisation when its performance meets or exceeds their expectations.
Also, stakeholder relationships can therefore be managed to be a source of competitive advantage.
Stakeholders
b. categories
Market Stakeholders:
- engage in economic transactions with the company as it carries out
its primary purpose of providing society with goods and services
- ex: mployees, shareholders, creditors
Nonmarket Stakeholders:
- people or groups who, although they do not engage in direct economic exchange with the firm, are affected by or can affect its actions
- ex: communities, governments, NGO’s, media
Shareholders
a. concept
Want the return on their investment to be maximized.
- A firm must carefully identify all important stakeholders
- It must prioritize them (by power, urgency of satisfying or here of importance)
Order of priority: owners (maximize shareholder wealth) –> customers (customer is always right) –> employees.
General environment (7s)
a. Demographic segment: population size, age structure, geographic and income distribution, etc.
b. Economic segment: inflation, savings and interest rates, GDP, trade and budget deficits, etc.
c. Political/legal segment: antitrust, tax and labor laws, deregulation, etc.
d. Socio-cultural segment: women and diversity in the workforce, environmental concerns, products, service and career preferences, etc.
e. Technological segment: innovations, private vs. Government R&D, knowledge applications, etc.
f. Global segment: cultural and institutional attributes, political events, global markets, etc
g. Physical segment (environmental): ecological system
Industry Environment (5f)
Barriers to entry:
- economies of scale
- product differentiation
- capital requirements
- switching costs
- access to distribution channels
- cost disadvantages independent of scale
- government policy
Competitor analysis
Focuses on each company against which a firm directly competes
- What drives the competitor (future objectives)
- What the competitor is doing and can do (current strategy)
- What the competitor believes about the industry (assumptions)
- What the competitor’s capabilities are (strengths and weaknesses)
Competitor intelligence
The set of data and information the firm gathers to better understand and better anticipate competitors’ objectives, strategies, assumptions, and capabilities.
