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ABDM 5084 STRATEGIC MANAGEMENT & PLANNING: Week 5

10. Briefly describe two important recent changes in the remote environment of Malaysian
business in each of the following areas:

a. Economic.
b. Social.
c. Political.
d. Technological.
e. Ecological

Various sources can be used to identify changes in the above mentioned areas. Magazines
such as Malaysian Business and The Edge, newspapers such as The New Straits Times and
The Star, and various Internet sites are good sources.

2. Many firms neglect industry analysis. When does this hurt them? When does it not?

The section titled “Industry Analysis and Competitive Analysis” helps in answering this
question. According to the text, there are four reasons why industry analysis is important.
First, industry analysis helps in determining the competitive arena. It would hurt the
company if the competitive arena is not defined because the company would not really
know who its customers are and be able to evaluate relevant trends. Second, industry
analysis helps in defining a firm’s competitors. Neglecting industry analysis may lead to
ignoring important competitors and substitutes. Third, industry analysis helps identify the
key success factors in the industry and measures how the firm stacks up on these factors.
Finally, industry analysis helps executives evaluate the firm’s goals.

While the above four are typically reasons why identifying firm boundaries is important, it
also holds good for industry analysis in general. Neglecting industry analysis may not hurt a
firm in those rare cases when a particular industry is very stable with very few changes
either in products, customers, or competitors.

3. Who in a firm should be responsible for industry analysis?

Typically, it should be the responsibility of the CEO or the top management team. Only
they are likely to have the broad enough perspective to define the industry correctly and
provide a model to gather trends and determine their impact. Of course, input from lower
level managers (particularly managers from the manufacturing and marketing functions) is
vital because they act as boundary spanners for the firm and may have access to key data.

CASE STUDY: GUINNESS

1. Using the Porter’s five forces framework, analyse the attractiveness of the brewery &
distillery industry and briefly discuss Guinness’s competitive position.

• Threat of new entrants: Not a powerful competitive force because of barriers to


entry such as access to distribution, capital requirements, economies of scale, brand
differentiation.
• Bargaining powers of buyers: Strategic buyers are supermarkets and pubs. This is a
powerful competitive force because they buy in bulk and there are options/different
brands to select from.
• Bargaining powers of suppliers: Suppliers are producers of barley, wheat, water and
hops. Numerous suppliers resulting in relatively weak suppliers.
• Threat of substitutes: Wine, soft drinks isotronic drinks, fruit juices due to health
concerns. Can be a powerful competitive force.
• Intensity of rivalry: High as evidenced by the heavy expenditures on promotions.

Conclusion: A rather unattractive industry. However, Guinness is in a strong


competitive position. Profitable as stated in case. Able to position itself based on its
competencies to overcome powerful buyers (forward integration), substitutes (high
equity brand name) and overcome intensive rivalries (not susceptible to price cutting
because strong brand name and liquid enabling it to spend on promotions).

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