Professional Documents
Culture Documents
Market
Analysis
Community Competitor
Analysis Analysis
Supplier
Analysis
Selection of
Interest Group Strategic Factors Governmental
Analysis Analysis
• Opportunities
• Threats
Strategic Issues and
Strategic Factors
StrategicIssues
Trends likely to affect future environment
StrategicFactors
Those strategic issues with high
probability of occurrence and high
probable impact on corporation
Issues Priority Matrix
Identify a number of likely trends emerging
in the societal and task environments,
determining what the industry or the world
will look like in the near future
Assess the probability of these trends
actually occurring from low to high
Attempt to ascertain the likely impact
(from high to low) of each of these trends
on the corporation being examined
Issues Priority Matrix
Probable Impact on Corporation
Medium
Threat
of New
Entrants
Relative
Power
of Unions,
Governments,
etc. Industry
Other Competitors Bargaining
Stakeholders Power
of Buyers
Buyers
IntenseRivalryisRelatedTo:
Number of Competitors: numerous or equally
balanced competitors
Rate of Industry Growth: slow industry growth
Product or Service Characteristics: Lack of
differentiation or switching costs
Amount of Fixed Costs : high fixed or storage costs
High fixed or storage costs
Lack of differentiation or switching costs
Capacity augmented in large increments (leading
to overcapacity and price cuttings)
Diverse competitors
High strategic stakes
High exit barriers (specialized assets, fixed costs
of exit, strategic interrelationships, emotional
barriers, government and social restrictions)
Shifting Rivalry
The factors that determine the intensity of
competitive rivalry can and do change
As an industry matures, its growth rate declines,
resulting in intensified rivalry, declining profits
An acquisition can introduce a different personality
to an industry
Focusing selling efforts on the fastest growing
segments can reduce the impact of industry rivalry
Entry Barriers and Exit
Barriers
When entry barriers are high and exit barriers are
low, entry will be deterred, and unsuccessful
competitors will leave the industry
When both entry and exit barriers are high, profit
potential is high, but is usually accompanied by
more risks, and unsuccessful firms will fight to stay
The worst case is when entry barriers are low and
exit barriers are high (overcapacity, poor
profitability)
Pressure from Substitute
Products
Substitutes limit the potential return of an industry
by placing a ceiling on the prices firms in the
industry can profitably charge
Identifying substitute is searching for other products
that can perform the same function as the product
of the industry
The impact of substitutes can be summarized as the
industry’s overall elasticity of demand
Bargaining Power of Buyers
Buyers compete by forcing down prices, bargaining
for higher quality or more services, and playing
competitors against each other
A buyer’s group is powerful if:
Perkins
International House
of Pancakes
Ponderosa
Price
Bonanza Shoney's
Denny's
Country Kitchen
Arby's Wendy's
Domino's Dairy Queen
Hardee's Taco Bell
Burger King McDonald's
Low
Limited Menu Full Menu
Product-Line Breadth
Strategic Types
Defenders
Prospectors
Analyzers
Reactors
Strategic Types
Defenders : companies with a limited product line that focus on
improving the efficiency of their existing operations
Prospectors : companies with fairly broad product lines that focus on
product innovation and market opportunities
Analyzers : corporations that operate at least in 2 different product-
market areas. Emphasis on efficiency in stable areas. Emphasis on
innovation in variable areas
Reactors : corporations that lack a consistent strategy- structure-
culture relationship. Ineffective responses to environmental
pressures
Hyper-competition
In hyper-competition the frequency, boldness, and agressiveness
of dynamic movement by the players accelerates to create a
condition of constant disequilibrium and change
Market stability is threatened by short product life cycles, short
product design cycles, new technologies, frequent entry by
unexpected outsiders, redefinition of market boundaries as diverse
industries merge
Environments escalate towards higher levels of uncertainty,
dynamism, heterogeneity of the players and hostility
Companies must be willing to
cannibalize their own products
(replacing popular products before
competitors do so) in order to sustain
their competitive advantage
As a result, it is important to study
industry or competitive intelligence
Using Key Success Factors to
Create an Industry Matrix
KSFs are those variables that can affect
significantly the overall competitive positions of
all companies within any particular industry
They vary from industry to industry and are
crucial to determine a company’s ability to
succeed within the industry
Key success factors are different from strategic
factors : Key Success factors deal with an entire
industry. Strategic factor deal with a particular
company
Common Types of Key Success
Factors
TECHNOLOGY RELATED KSFs
Scientific research expertise
technical capability to make
improvements in production processes
Product innovation capability
Expertise in a given technology
Capability to use internet to disseminate
information, take orders, deliver products
or services
MANUFACTURING RELATED KSFs:
Low-cost production efficiency (achieve scale
economies, capture experience curve effects)
Quality of manufacture (fewer defects, less need of
repairs)
High utilization of fixed assets
Low-cost plant locations
Access to adequate supplies of skilled labor
High labor productivity
Low-cost product design and engineering
Flexibility to manufacture a range of models and
sizes/take care of customer orders
DISTRIBUTION RELATED KSFs :
A strong network of wholesale
distributors
Gaining ample space on retailers’
shelves
Having company-owned retail outlets
Low distribution costs
Fast delivery
MARKETING RELATED KSFS:
Fast, accurate technical assistance
Courteous customer service
Accurate filling of buyers’ orders
Breadth of product line and product selection
Merchandising skills
Attractive styling packaging
Customers guarantees in mail order retailing new
products introduction
Clever advertising
SKILLS RELATED KSFs:
Superior workforce talent
Quality control know how
Design expertise
Expertise in a particular technology
An ability to develop innovative products and
production improvements
An ability to get newly conceived products past the
R&D phase and out into the market
ORGANIZATIONAL CAPABILITY:
Superior information systems
Ability to respond quickly to changing market
conditions
Superior ability to employ the internet
More experience and managerial know how
OTHER TYPES OF KSFs:
Favorable reputation with buyers
Overall low cost
Pleasant , courteous employees
Access to financial capital
Patent protection
Industry Matrix
Company A Company A Company B Company B
Strategic Factors Weight Rating Weighted Score Rating Weighted Score
1 2 3 4 5 6
Total 1.00
Source: T. L. Wheelen and J. D. Hunger, “Industry Matrix.” Copyright © 1997 by Wheelen and Hunger
Associates. Reprinted by permission.
Gateway Apple Dell
Total 1.00 2.83 2.47 3.49
Competitive Intelligence
Is a formal program of gathering information on
a company’s competitors
Most corporations rely on outside organizations
to provide them with environmental data.
Information on market conditions, government
regulations, competitors and new products can
be bought from information brokers
Industrial espionage is considered
illegal
Unethical tactics; bribery,
wiretapping, computer break-ins
should never be used to get
information
10 questions to monitor
competitors for strategic
planning
1. Why do your competitors exist? to make profits
or to support another unit?
2. Where do they add customer value? Higher
quality, lower price, credit terms, better service?
3. Which of your customers are the competition
most interested in? best customers or the ones
you don’t want?
4. What is their cost base and liquidity?
5. Are they less exposed with their suppliers than
your firm?
6. What do they intend to do in the future? Target your
market segments? Growing?
7. How will their activities affect your strategies? Should you
adjust your plans and operations?
8. How much better than your competitor do you need to be
in order to win customers?
9. Will new competitors appear over the next few years?
Threats
Notes: 1. List opportunities and threats (5–10 each) in column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (Not
Important) in Column 2 based on that factor’s probable impact on the company’s strategic position. The total weights must sum to
1.00. 3. Rate each factor from 5 (Outstanding) to 1 (Poor) in Column 3 based on the company’s response to that factor. 4. Multiply
each factor’s weight times its rating to obtain each factor’s weighted score in Column 4. 5. Use Column 5 (comments) for rationale
used for each factor. 6. Add the weighted scores to obtain the total weighted score for the company in Column 4. This tells how
well the company is responding to the strategic factors in its external environment.
Source: T. L. Wheelen and J. D. Hunger, “External Strategic Factors Analysis Summary (EFAS).” Copyright © 1991 by Wheelen and
Hunger Associates. Reprinted by permission.
EFE – Gateway Computers (2003)
Key External Factors Weight Rating Wtd
Score
Opportunities
1. Global PC market expected to grow 20% in 0.10 3 0.30
2004
Opportunities (cont’d)
6. Modernization of business firms and 0.05 2 0.10
government agencies
Threats (cont’d)
2. Severe price cutting in PC industry 0.10 2 0.20
Threats (cont’d)
7. U.s. consumers and businesses delaying 0.05 2 0.10
purchase of PC’s