Upload
sam-snegiryov
View
16
Download
3
Tags:
Embed Size (px)
DESCRIPTION
qwdajwdajdiawjdiajidjwijiwjdjdjdjdjjdjwiafi fwoajfowa fw fw fw f wf wf wf w f w r g rg w e e ef e fe ef e f efe w w w f e f e f f eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeee eeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeefjjejjeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeffffffff ffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffjjjjjjjjjjjjjjj jeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee
Citation preview
1
BUSU9SM Strategic Management
Autumn 2015
Lectures 2 & 3
External analysis
3
The new external environment
of business• The aftermath of the financial crisis
―Financial instability: complex, interconnectedness global financial system
―Subdued economic activity throughout the industrialised world
―Crisis in southern Europe (+ Ireland and Iceland)
• Political upheaval
–Arab spring of 2011; unrest China and Russia; Middle East unrest;
• Instability in the natural world
– Climate change, earthquakes; water shortages; flooding
• Accelerating technological change
–Disruption of established markets; convergence of markets
• New competitors
– Especially from China and India
• Social pressures
– Loss of legitimacy of market capitalism; concerns over equity, ethics and sustainability
2
4
The Macro Environment
• PEST analysis is useful for scanning the general environment
• PEST is political, economic, social, and technological factors
• PEST analysis can be used to identify weak signals that may
point to a discontinuity shaping the environment
• PEST provides a link between the general and competitive
environment
• Weak signals in the general environment can become forces for
change in the competitive environment
5
PEST Analysis
How macro-environmental factors might impact a business organisation:
PoliticalChanges in government economic policy, e.g.
taxation, government spending, monetary policy
Changes in legal requirements e.g. employment
law, health and safety legislation, licensing
practices, environmental regulations, competition
policy
Changes in the government ownership
e.g. nationalisation, privatisation, de-regulation
EconomicChanges in the level of economic activity, e.g.
growth rates, rates of unemployment, inflation
Changes in wage rates and income distribution
Changes in exchange rates
SocialChanges in demographics e.g. the size of the
population, the age distribution with the population
Changing attitudes e.g. work/life balance,
concern for the environment, ethical standards
Changes in social structure e.g. socio-economic
groupings, social mobility
TechnologicalDevelopment of new products and processes
Automation
Developments in information and
communication technologies
Developments in the natural sciences
3
6
PEST Analysis for Wireless
Handset Industry
Political
• Standardisation
• Restrictions on usage
Economic
• Level of economic activity
• Rapid take up of technology
Social
• Health scares
• Changes in fashion
Technological
• Improvements in battery
technology
• 4G and better encryption
technology
7
From environmental analysis
to industry analysis
4
8
Industries, markets and sectors
An industry is a group of firms producing products and
services that are essentially the same
A market is a group of customers for specific products
or services that are essentially the same
A sector is a broad industry group (or a group of
markets) especially in the public sector
9
Types of industry (1)
• Monopolistic industries - an industry with one firm and
therefore no competitive rivalry. A firm has ‘monopoly
power’ if it has a dominant position in the market
• Oligopolistic industries - an industry dominated by a few
firms with limited rivalry and in which firms have power
over buyers and suppliers
• Perfectly competitive industries - where barriers to entry
are low, there are many equal rivals each with very similar
products, and information about competitors is freely
available
5
10
Types of industry (2)
• Hypercompetitive industries - where the frequency,
boldness and aggression of competitor interactions
accelerate to create a condition of constant
disequilibrium and change
• Hypercompetition often breaks out in otherwise
oligopolistic industries (e.g) mobile phones
• Organisations interact in a series of competitive moves
in hypercompetition which often becomes extremely
rapid and aggressive as firms vie for market leadership
11
The profitability of US
industries: 2000-2010
Industry Median ROE
2000-10(%)
Leading companies
Tobacco 33.5 Philip Morris Int., Altria,
Reynolds American
Household and personal
products
27.8 Procter & Gamble,
Kimberly-Clark, Colgate-
Palmolive
Motor vehicles and parts 4.4 GM, Ford, Johnson
Controls
Entertainment 3.9 Time Warner, Walt
Disney, News
Corporation
Airlines -11.3 AMR, UAL, Delta
Airlines
Source: Data from Fortune 1000 by industry
6
12
Porter’s Five Forces of
Competition Framework
13
The Porter’s Five Forces
Framework
Porter’s five forces framework helps identify the
attractiveness of an industry in terms of five competitive
forces:
• the threat of entry,
• the threat of substitutes,
• the bargaining power of buyers,
• the bargaining power of suppliers and
• the extent of rivalry between competitors.
The five forces constitute an industry’s ‘structure’
7
14
Structural determinants of the
competitive forces
15
The US Airline Industry
• In 2012 the US airline industry was following a familiar path
• The industry is a disaster in terms of its financial performance
• To explain the reasons for poor performance the key is to link competition in the industry to industry structure
• Porter’s five forces can assist us here
http://www.youtube.com/watch?v=cFjNdrcep4Q
http://www.youtube.com/watch?v=buGhbXFL1II
http://www.youtube.com/watch?v=9r7AkA529hM
8
16
Five Forces of Framework:
Applied to US Airline Industry
16
SUPPLIERS
POTENTIAL
ENTRANTS SUBSTITUTES
BUYERS
INDUSTRY
COMPETITORS
Rivalry among
existing firms
•Airplane makers
•Labour unions
•Airports
• Car/rail on journeys
<250 miles
• Videoconferencing
• Limited bargaining
power, but price
sensitive and low
switching costs
• Cost of entry modest
•Airlines attract
entrepreneurs
• Multiple competitors
• Low product
differentiation
• Excess capacity
• High exit barriers
• High ratio of fixed to
variable costs
17
Can the Airline Industry
Improve Profitability?
• Product differentiation
• Capacity reduction
• Mergers and alliances
• Regional concentration
• Forward integration
9
18
Industry profitability
2013-2017?
• Capacity growth
• Industry consolidation
• Entry to industry
• Supplier power
• Cost reduction
19
Key issues in using Porter
•Defining the right industry
•Converging industries
•Complementarity (a 6th Force)
10
20
SUPPLIERS
POTENTIAL
ENTRANTSSUBSTITUTES
BUYERS
INDUSTRY
COMPETITORS
Rivalry among
existing firms
Bargaining power of suppliers
Bargaining power of buyers
Threat of
new entrantsThreat of
substitutes
COMPLEMENTS
The suppliers of
complements create
value for the industry
and can exercise
bargaining power
Five Forces or Six? —
Introducing Complements
21
Implications of Porter’s five
forces
• Which industries to enter/exit?
• Can we influence the industry?
• Are our competitors affected in the same way?
11
22
Drawing Industry Boundaries:
Identifying the Relevant Market
• What industry is BMW in?
– World car industry
– European car industry
– World luxury car industry?
• Key criterion: SUBSTITUTABILITY
– On the demand side : are buyers willing to substitute between types of
cars and across countries
– On the supply side : are manufacturers able to switch production
between types of cars and across countries
• May need to analyze industry at different levels for different types of
decision
23
Identifying Key Success Factors
•
Analysis of demand
• Who are our
customers?
• What do they want?
KEY SUCCESS FACTORS
Analysis of competition
• What drives competition?
What are the main
dimensions of competition?
•How intense is competition?
•How can we obtain a superior
competitive position?
What do customers
want?
How does the firm
survive competition
Pre-requisites for successful
strategy
12
24
Identifying Key Success Factors:
some examples
24
What do customers want? How do firms survive competition? Key success factors
Steel Low price
Product consistency
Reliability of supply
Specific technical specifications
for special steels
Strong price competition and cyclical
profitability necessitates cost efficiency
and strong financial resources
Cost efficiency through: large-scale
plants, low-cost location, speedy
capacity adjustment
Or hi-tech mini-mills can achieve low
costs through flexibility and high
productivity
Quality and service differentiation
Fashion
clothing
Demand segmented by garment
type, style, quality, colour
Customers pay price premium for
brand, style, exclusivity and
quality
Intensely competitive due to low entry
barriers, low seller concentration and
strong retail buying power
Differentiation can yield substantial price
premium but imitation rapid
Combining differentiation with low-
costs
Key differentiation variables: design,
speedy to fashion trends, brand
reputation, quality
Cost efficiency requires manufacture in
low wage countries
Super-
markets
Low prices
Convenient location
Wide range of products adapted to
local preferences
Freshness of produce, good
service, pleasant ambience, easy
parking
Market localized
Intensity of price competition depends on
number and proximity of competitors
Bargaining power a critical determinant
of cost of bought-in-goods
Low-cost operation requires operational
efficiency, scale-efficient stores, strong
buying power, low wage costs
Differentiation requires wide product
range (hence, large stores), convenient
location, easy parking
26
Strategic groups
• Strategic groups are organisations within an industry or
sector with similar strategic characteristics, following
similar strategies or competing on similar bases
• These characteristics are different from those in other
strategic groups in the same industry or sector
• There are many different characteristics that
distinguish between strategic groups
• Strategic groups can be mapped on to two dimensional
charts – maps. These can be useful tools of analysis
13
27
Strategic Groups in the World
Car Industry
28
Uses of strategic group analysis
•Understanding competition - enables focus
on direct competitors within a strategic
group, rather than the whole industry
• Analysis of strategic opportunities - helps
identify attractive ‘strategic spaces’ within
an industry
•Analysis of ‘mobility barriers’ i.e. obstacles
to movement from one strategic group to
another
14
29
Market segmentation
• Markets are rarely homogenous
• Within markets there are subgroups known as
market segments
• This process of segmentation represents a powerful
competitor tool
• By identifying a specific market segment and
concentration effort here firms can build a mini-
monopoly
Segmentation & Key Success Factors:
The US/UK Bicycle Market
Segment Key Success Factors
Low price bicycles sold primarily through
department and discount stores, mainly under the
retailer’s own brand
Low cost through global sourcing of components
and low wage assembly
Supply contract with major retailer
Leading competitors: Assemblers in Taiwan &
China and a few US manufacturers
Medium-priced bicycles sold mainly under
manufacturer’s brand; distributed through
specialist cycle stores
Cost efficiency through scale and low wage costs
Reputation for quality
Good dealer reputation
International marketing and & distribution
Leading competitors: Raleigh, Peugeot, Fuji
High-priced bicycles for enthusiasts Quality components and assembly
Design innovation – e.g. less weight/wind
resistance
Reputation (e.g. success in racing)
Strong dealer relations
Children’s bicycles/tricycles sold through
discount stores and toy stores
Similar to low price bicycle segment
15
31
The limitations of analytical
models
• All of the models are static, assume stability and
are in essence a ‘snap’ shot of the real world
• Change in the environment can happen far too
quickly and many of the models can’t adapt quickly
enough
• Competition is the only game in town
• Complementors exist that support other firms