Chapter 3 : EVALUATING A COMPANYS EXTERNAL ENVIRONMENT Crafting and Executing Strategy The Quest For Competitive Advantage Thompson, Peteraf, Gamble, & Stickland

Chapter 3 : EVALUATING A COMPANYS EXTERNAL ENVIRONMENT

Crafting and Executing StrategyThe Quest For Competitive AdvantageThompson, Peteraf, Gamble, & Stickland

Alvaredo AritonangDewi PancawatyDiska Brilliant BoyIhsan Ismady PutraKartika WidayatiReni Hapsari

1OverviewLearning Objectives

The External Environment

Thinking Strategically about a Companys Industry and Competitive Environment

2Learning ObjectivesGain command and analytical tools to diagnose the competitive conditions in a companys industry.How to diagnose the factors shaping industry dynamics and to forecast on future profit.Mapping the market positions of key groups of industry rivals.Understand why in-depth evaluation of a businesss strengths and weaknesses from external situation.

3Figure 3.1From Thinking Strategically about the Companys Situation to Choosing a StrategyThinkingstrategicallyabout a firmsexternalenvironmentThinkingstrategicallyabout a firmsinternalenvironmentForming astrategicvision ofwhere thefirm needs to headIdentifyingpromisingstrategicoptionsfor the firmSelecting thebest strategyand businessmodel for the firm4The External Environment

Figure 3.2 The Components of a Companys Macro-Environment5THINKING STRATEGICALLY ABOUT A COMPANYS INDUSTRY AND COMPETITIVE ENVIRONMENTQuestions :Does the industry offer attractive opportunities for growth?What kinds of competitive forces are industry members facing, and how strong is each force?What factors are driving changes in the industry, and what impact will these changes have on competitive intensity and industry profitability?What market positions do industry rivals occupywho is strongly positioned and who is not?What strategic moves are rivals likely to make next?What are the key factors for competitive success in the industry?Does the industry offer good prospects for attractive profits?6Question 1 : Does the industry offer attractive opportunities for growth?

Key Economic indicator of an industrys growth : Market size and growth rate, geographic scope, life-cycle stage, the number and sizes of sellers, industry capacity, etc.Considerations:Different sectors or regions of a market grow at different rates.Growth varies with the industrys life cycle stageemergence, rapid growth, maturity, and decline.Growth does not guarantee profitability.7Question 2 : What kinds of competitive forces are industry members facing, and how strong is each force?

Figure 3.3 The Five-Forces Model of Competition: A Key Analytical Tool8

Figure 3.4Factors Affecting the Strength of Rivalry9

Figure 3.5 Factors Affecting the Threat of Entry10

Figure 3.6Factors Affecting Competition from Substitute Products11

Figure 3.7Factors Affecting the Bargaining Power of Suppliers12

Figure 3.8Factors Affecting the Bargaining Power of Buyers13Analyzing Industry DynamicsIdentifying the drivers of change.Assessing whether the drivers of change are, individually or collectively, acting to make the industry more or less attractive.Determining what strategy changes are needed to prepare for the impacts of the anticipated change.Question 3 : What factors are driving changes in the industry, and what impact will these changes have on competitive intensity and industry profitability?

14Changes in the long-term industry growth rateIncreasing globalizationChanges in who buys the product and how they use itTechnological changeEmerging new Internet capabilities and applicationsProduct and marketing innovationEntry or exit of major firmsDiffusion of technical know-how across companies and countriesImprovements in efficiency in adjacent marketsReductions in uncertainty and business riskRegulatory influences and government policy changesChanging societal concerns, attitudes, and lifestylesThe Most Common Drivers of Industry Change15Question 4 : What market positions do industry rivals occupywho is strongly positioned and who is not?

A Strategic GroupIs a cluster of industry rivals that have similar competitive approaches and market positions:Have comparable product-line breadthSell in the same price/quality rangeEmphasize the same distribution channelsUse the same product attributes to buyersDepend on identical technological approachesOffer similar services and technical assistance16

Which strategic group is located in the least favorable market position? Which group is in the most favorable position?Which strategic group is likely to experience increased intragroup competition? Which groups are most threatened by the likely strategic moves of members of nearby strategic groups?17What Can Be Learned from Strategic Group Maps?Maps are useful in identifying which industry members are close rivals and which are distant rivals.Not all map positions are equally attractive.Prevailing competitive pressures in the industry and drivers of change favor some strategic groups and hurt others.Profit prospects vary from strategic group to strategic group.18Question 5 : What strategic moves are rivals likely to make next?

Competitive IntelligenceInformation about rivals that is useful in anticipating their next strategic moves.Signals of the Likelihood of Strategic Moves:Rivals under pressure to improve financial performanceRivals seeking to increase market standingPublic statements of rivals intentionsProfiles developed by competitive intelligence units

19Question 6 : What are the key factors for competitive success in the industry?

Key Success Factors : Are the strategy elements, product and service attributes, operational approaches, resources, and competitive capabilities that are necessary for competitive success by any and all firms in an industry.Vary from industry to industry, and over time within the same industry, as drivers of change and competitive conditions change.2021Question 7 : Does the industry offer good prospects for attractive profits?

Industry Profitability Considerations:The industrys overall growth potentialEffects of strong competitive forcesEffects of prevailing drivers of change in the industryCompetitive strength of the firm: its market position relative to its rivals, its capability to withstand competitive forces, and whether its position will change in the course of competitive interactionsThe success of the firms strategy in delivering on the industrys key success factors22Thank You23