identifying opportunities and threats
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What you will learn in this section :• Envisioning Strategy
– Definition– Framework– Visual Models
• External Analysis– PEST– PEST Impact Analysis
• Industry and Competitive Analysis– Industry Structure– Evolution of Industries– Industry Supply Chain– Potential Industry Earnings– Porter’s 5 Forces Analysis– Competitive Intensity– Strategies for minimizing competitive forces– Perceptual Map– Barriers to Entry/Incumbency advantages– DSIR effect
• Company Resources and Capabilities– ARC Analysis/HR– SWOT Analysis– Value Creating Processes/Core Competencies– Strategic Gameboard– Balanced Scorecard– Change Management © Sunil Mehrotra
Understanding Strategic Management is like pealing an onion
Analyzing the External Environment:PEST Analysis
Political ChangeEco
nomic
Change
Technological
ChangeSocial Change
OpportunitiesOpportunities
ThreatsThreats
Fiscal PolicyMonetary PolicyTax lawsIntellectual Property protectionCopyright lawsSecurities LawsBusiness climate
GDPGDP growthExchange rateUnemployment rateSkilled laborEducation levelsTrade unionsInfrastructureHealthcare costsRaw materials
DemographicsIncome DistributionSocial stabilityEthnic patternsConsumerismDiscretionary incomeFashions/fadsConsumer trends
New technologiesMaterials technologiesProcess technologiesInformation technologiesCommunication technologiesGovernment incentivesEnergy costsBroadband penetrationTechnology incubation
© Sunil Mehrotra
ExternalEnvironment
PEST Analysis using the Internethttp://delicious.com/smehro/mbam619+PEST+Politics%20PEST Politicshttp://www.nytimes.com/interactive/2008/10/18/business/20081019-metrics-graphic.htmlCan Presidents tame business cycles
http://harvardbusiness.org/flatmm/hbextras/200805/recessions/HBR Interactive graphics on recessions
http://delicious.com/smehro/mbam619+PEST+economy%20PEST Economy
http://www.fedstats.gov/?cm_sp=ExternalLink-_-Federal-_-DOCFed Stats all in one place
http://www.allbusiness.com/marketing-advertising/market-research-analysis-market/11469816-1.htmlCollection of resources and links to free data
http://delicious.com/smehro/mbam619+PEST+Social%20PEST Social
http://delicious.com/smehro/mbam619+PEST+Technology%20PEST Technology
PEST Analysis: ExampleFederal Deficit as % of GDP
Example of fiscal policy :Visualizing federal budget
Example of fiscal policy:National Debt: 1940 to present
Who is funding our debt?
Citigroup's role in CDOs and the financial crisis
Auto worker wages
http://www.nytimes.com/imagepages/2008/12/10/business/20081210_LEONHARDT_GRAPHIC.html
Economy at a glance
Real Economic Grow th
Existing Home Sales
Consumer Prices
Unemployment
Productivity
-3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%
Economic Indicators
Sept. 2008Oct. 2008
% change from previous period
World map:Population
New technologies are being adopted faster today
16
Trough ofDisillusionment
Slope ofEnlightenment
Plateau ofProductivity
TechnologyTrigger
Peak of Inflated
Expectations
Visib
ility
Maturity
Mesh Networks
4G Wireless
Wireless Broadband
UWB
Light Emitting Polymer Displays
Micro Fuel Cells
Smart Dust
GPRSEDGE
WCDMA
MIMO
802.11b Wi-Fi
MEMS
As of 2Q03
Change Will Be Relentless:Wireless industry example
17
Hot SpotUsers/
Hot Spots
20082001
30,000 Users 1,000 Hot Spots
75,000,000 Users 167,000 Hot Spots
Gartner Predicts: Hot Spots Explode …
How the Web has grown and evolved
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This Is the“Now Economy”
Faster Economic Pace
ThreatsThreatsEmerge Appear
Triennial RollingStrategyStrategy
Windows KeyholesOpportunityOpportunity
Forecast ChaoticDemandDemand
Impatient Customers
“Time Tortured”
Demand Convenience
Two Key Forces Driving Business Change
20
Culture: Innovation in art
21
Analyzing the External Environment:PEST Analysis
Political ChangeEco
nomic
Change
Technological
ChangeSocial Change
OpportunitiesOpportunities
ThreatsThreats
Fiscal PolicyMonetary PolicyTax lawsIntellectual Property protectionCopyright lawsSecurities LawsBusiness climate
GDPGDP growthExchange rateUnemployment rateSkilled laborEducation levelsTrade unionsInfrastructureHealthcare costsRaw materials
DemographicsIncome DistributionSocial stabilityEthnic patternsConsumerismDiscretionary incomeFashions/fadsConsumer trends
New technologiesMaterials technologiesProcess technologiesInformation technologiesCommunication technologiesGovernment incentivesEnergy costsBroadband penetrationTechnology incubation
© Sunil Mehrotra
ExternalEnvironment
Political Change Impact
Fiscal PolicyMonetary PolicyTax lawsIntellectual Property protectionCopyright lawsSecurities LawsBusiness climateInternational Trade
“Economy” Change Impact
GDPGDP growthExchange rateUnemployment rateSkilled laborEducation levelsTrade unionsInfrastructureHealthcare costsRaw materials
Strategicresponse
Impact of change
Nature ofchange
Political Change
Economic Change
Social Change
Technological Change
PEST Impact Matrix
Opportunities ThreatsThreats
© Sunil Mehrotra
It is crucial to describe the subject for the PEST analysis clearly so that people, contributing to the analysis, and those interpreting the results from PEST analysis, could understand the purpose of the PEST assessment and its implications
Strategicresponse
Impact of change
Nature ofchange
Political Change
Economic Change
Social Change
Technological Change
PEST Impact example:
Opportunities ThreatsThreats
© Sunil Mehrotra
PEST Analysis Example:
Political ChangeEco
nomic
Change
Technological
ChangeSocial Change
OpportunitiesOpportunities
© Sunil Mehrotra
InfrastructureTechnologies
EmergingMarkets
DigitalConnections
DemographicsEnvironmentalSolutions
Originations
Strategicresponse
Impact of change
Nature ofchange
Political Change
Economic Change
Social Change
Technological Change
PEST Impact example:
Opportunities ThreatsThreats
© Sunil Mehrotra
PEST Impact example:
© Sunil Mehrotra
Demographics
PEST Impact example:
© Sunil Mehrotra
Student Examples: Pest Analysis
Breanne HayesApril 2008 MBA Graziadio School of Business and ManagementPepperdine University
Elizabeth Passeretti
April 2008 MBA CandidateGraziadio School of Business and ManagementPepperdine University
Strategicresponse
Impact of change
Nature ofchange
Political Change
Economic Change
Social Change
Technological Change
PEST example:
Opportunities ThreatsThreats
FDA approval process
More conservative
Longer time to market
Shorten Product Development Cycle
Aging Population
Caring for the elderly
New growth opportunities
Identify product/market needs to serve the elderly
US economic downturn
Consumer spending down
Generic drugs more accepted
Evaluate acquisitions
New materials for joint replacement
New cost/quality frontier
Potential new competitors
New products Invest in
promising start-ups
© Sunil Mehrotra
Strategicresponse
Impact of change
Nature ofchange
Political Change
Economic Change
Social Change
Technological Change
PEST Impact example:
Opportunities ThreatsThreats
Democratic party in power
More government control
Pressure on prices
Operational Efficiency to reduce costs
Aging Population
Caring for the elderly
New growth opportunities
Identify product/market needs to serve the elderly
$100+ crude oil price
Commodity prices increasing
Focus on Operational Efficiency
Breakthrough in science.Process improvement technologies
New science and new technologies imminent
Potential new competitors
New start-ups.Disruptive technologies
Invest in/acquire promising start-ups
Pressure on costs
© Sunil Mehrotra
Contemplating the Future
Scenario Planning
http://strategicframing.com/strategic-planning-workshop/
Nappies 1-6?
What is visual thinking?
What is Strategic Management?-strategic planning framework
What is the role of the CEO/Leader?-Leadership styles
What is PEST Analysis?
Using the Internet for PEST Analysis-Data sources and web resources
Identifying business Opportunities and Threatsthrough PEST Impact analysis framework
Mnemonic 2