Strategic Management

Assignment#1

Class: MBA 1.5 –E

Submitted To: Sir Shahid Nawaz

Submitted By: Muhammad Umair Sheikh

Muhammad Zaryab Sial

Sameed Khan
 APPLICATION QUESTIONS

Q1) Imagine yourself as the CEO of a large firm in an industry in which

you are interested. Please (1) identify major trends in the general
environment, Analyse their impact on the firm, and (3) identify major
sources of information to monitor these trends.

Ans: My interest is in the automobile industry and the firm which I have chosen
is Toyota as I believe that Toyota offers very wide range of product line including
heavy diesel and petrol engines and sedan and Japanese assembled cars
respectively. Being the CEO of Toyota I believe general environment really affects
the firm’s overall performance. There are 6 major trends in the general
environment which are;

 Demographic segment of the general environment :

The demographic of segment includes genetic and observable characteristics

of a population, including the levels and growth of age, density, sex, race,
ethnicity, education, geographic region, and income. Toyota covers a very big
mass market and without any discrimination catering high and low income
level groups.

 Sociocultural segment of the general environment :

The values, beliefs, and lifestyles of a society describes this segment being the
higher level ranked(CEO) in Toyota I believe we are handling all these CSR
activities at the very best and advance level in order to maintain the good repute.

 Political/legal segment of the general environment :

How a society creates and exercises power, including rules, laws, and taxation
policies. Pakistan being a developing country and easy access to operation license
and legal aspects Toyota is happy in the Asian continent as growing economies
helps us to retain good margin for us as the cost of production is cheap labor
extensive countries help us grow more.

 Technological segment of the general environment :

I believe that Toyota is immensely jumping in terms of technological advancement

and innovations as well as we can see the upgraded new models which are in the
market and in the stream line you can easily find out the modern specifications
which they are offering to the community on their demand and need.

 Economic segment of the general environment :

Looking at the income levels and the rate of economic growth in Pakistan Toyota
fears a bit as being the high level head I see bad law and order situation which
hesitates investors to invest in this region mainly due to political instability, crash
downs of the stock markets these aspects make things quite negative and most of
all distribution of wealth is quite unequal.

 Global segment of the general environment :

Markets and consumers are more global. This segment includes relevant new
global markets, existing markets that are changing and critical cultural and
institutional characteristics of global markets. Toyota is the most prominent brand
which is recognized across the globe and has a very mass market available till
now. Being the CEO of the firm I can proudly say that my firm holds a very
valuable and heavy weighted market share in the world’s developed economies.

To monitor these trends we have to look forward to some of the factors which
help us in determining the source of information.

Scanning: Is the study of all segments in the general environment through

scanning, Toyota identify early signals of potential changes in the general
environment and detect changes that are already ongoing scanning often reveals
uncertain, incomplete, or independent data and information. Environmental
scanning is challenging but critically important for Toyota.
Monitoring: The second source of information is monitoring Toyota observes
environmental changes to see if an important trend is emerging from among
those spotted through scanning effective monitoring requires the firm to identify
important stakeholders and understand its reputation among these stakeholders
as the foundation for serving their unique needs. Scanning and monitoring are
particularly important to Toyota as Toyota competes in an industry with high
technological uncertainty.

Forecasting: The third source of information is forecasting as we develop

projections for our firm that what might happen and how quickly as a result of the
changes and trends detected through scanning and monitoring, both of which
focus on events at a point in time Technology trends are continually driving
product life cycles shorter which makes Toyota’s forecasting demand for new
technological products that much more challenging. During an economic
downturn forecasting becomes more difficult and more important.

Assessing: Toyota surely and truly believe that in determining the timing and
significance of the effects of environmental trends that have been identified by
them which are specifying the implications of the understanding gathered in the
previous stages it is important to interpret the information as soon as possible.
Even if formal assessment is poor the appropriate interpretation of that
information is important. Gathering and organizing information is important but
appropriately interpreting that intelligence to determine if an identified trend in
the external environment is an opportunity or threat to Toyota.

Q2: Analyse movements across the strategic groups in the U.S. retail
industry. How do these movements within this industry change the
nature of competition? Please replace US with Pakistan.

Ans: Strategic groups are groups of firms, usually within an industry, that share
similar strategies. The performance implications are that firms can group
themselves with close competitors and identify barriers between groups, identify
positions within the industry that are marginal or tenuous, and chart directions
for future strategic development. Strategic group analysis is a more fine-grained
way to conduct competitor analysis as the competitive environment of an
industry may differ from the competitive environment of the strategic group.
Retail industry in Pakistan is still at an early stage of development and scope for
expansion is there although heavy investment is required to build operate and
market such malls, added to which managing such large enterprises requires
considerable expertise especially in terms of matching the right step with the
right brand offering at the right location. Globally retail is said to be experiencing
tough time partly due to overcapacity and partly because of the influence of
online shopping. In Pakistan online retail is catching on at a slower pace. However
as the global experience is currently demonstrating, for many people there is no
substitute available. What has changed is that customers also want access to the
convenience of online shopping hence the rising popularity of the Omni-store
model such as easy paisa Jazz Cash whereby customers can move seamlessly
between off and online according to their preference of the moment.

SUMMARY QUESTIONS

Q1) why must managers be aware of a firm’s external environment?

Ans: It is important for managers to be aware of firm’s external environment as to

avoid any disturbance in efficiency and effectiveness of the production cycle. So
managers need to be responsive to the external environment enables firms to
avoid strategic mistakes. It is possible for firms to become internally focused
efficient producers of obsolete goods and services (e.g. Floppy disks, Pineapple
slices). Rather managers need to respond to opportunities and threats from the
external environment in order to develop the most successful products and
services.
Q2) What is gathering and analysing competitive intelligence and why
is it important for firms to engage in it?
Ans: Competitive intelligence is a firm's activities of collecting and interpreting
data on competitors, defining and understanding the industry and identifying
competitors' strengths and weaknesses. Be aware of market dynamics and know
when you are being outsmarted or if you are in fact outperforming the
competition. Have complete knowledge of the external business
environment which can influence your marketing strategy as well as the long term
view of the company. Risk assessment by knowing the changes happening in the
market and how they will influence your own business. Opportunity where in a
segment ignored by your competition can be immediately taken over by your
products. It is not spying, fortune-telling, simple data collection or an isolated
activity within a firm. The purpose of competitive intelligence is to increase
management's awareness of developments in the external environment thereby
increasing the quality of strategic decisions.

Q3) Discuss and describe the six elements of the external

environment of chosen firm.
Ans: Firm’s in an industry have to look forward to the external environment as in
order to significantly carry forward its mission and objectives and can gain the
comparative advantage.

The 6 elements of the external environment are:

1) Demographic segment

2) Sociocultural segment

3) Political segment

4) Technological segment

5) Economic segment

6) Global segment
The firm which I have selected is Toyota and they closely monitor all the segments
of the external environment in order to provide effective products and services as
due to high competition Toyota have to look ahead of their competitors. The
demographic segment refers to the statistics of a population, such as age, income
characteristics, ethnic groups, and geographic distribution Toyota targets the
mass market and caters all income level groups by having a wide product range at
different prices.

The sociocultural segment refers to the values, beliefs, and lifestyles of a country
Toyota prefers to work on green environment and enhancing such technologies in
their cars that provide clean air and environment and playing the role in
community. The political segment refers to the creation and use of power within
a country, including the effect of various regulations, including the areas of
environmental protection, employment discrimination protection, and taxes. The
technological segment refers to new products and services derived from advances
in engineering, applied science, and/or pure science. These new products and
services can change manufacturing processes, create new industries, and alter the
boundaries between industries. The economic segment refers to the level and
change in monetary and macroeconomic factors such as unemployment, inflation,
interest rates, and economic growth. The global segment refer to effect on a
country's business environment from abroad and include factors such as
competition, foreign market opportunities, foreign supply opportunities, legal
changes due to international treaties, and regional economic integration.

Q4: Select one of these elements and describe some changes relating
to it in an industry that interests you.

Ans: We have chosen technological innovation in automotive industry as it is very

much said that like cell phone are now capable of doing more than making calls;
cars can do much more than drive and park. In recent years, the automotive
industry has worked hand-in-hand with major technology companies in order to
deliver the most advanced, safest and most comfortable vehicles out there. Cars
are becoming large smart devices with advanced emergency braking capabilities,
mapping technology for autonomous driving, better fuel efficiency and cars as a
service as a form of transportation. There are 4 major technological innovations
coming in the near future.

 More Fuel-Efficient Rides

 Projecting Vehicle Technology
 Self-Driving Technology
 Online rental car service

Some of the greatest minds in the tech industry have joined forces with
automotive companies in order to improve the way our vehicles operate these
days. The rise of electric vehicle technology is helping to reduce carbon emissions
without breaking the bank as more companies are designing cars with electric
motors.

Q5: Describe how the five forces can be used to determine the
average expected profitability in an industry.

Ans: The 5 forces model consists of:

1) Threat of new entrants

2) Bargaining power of buyers

3) Bargaining power of supplier

4) Threat of substitute products and service

5) Intensity of rivalry among competitors in an industry

Each force can be looked at as a way that the industry environment limits a firm's
ability to earn profits through either raising prices or lowering costs.
The threat of new entrants limits a firm's ability to raise prices because then a
new entrant may decide to enter the industry and offer a lower price. The
bargaining power of buyers directly limits a firm's ability to raise prices. The
bargaining power of suppliers directly limits a firm's ability to lower costs. The
threat of substitute products and services limits a firm's ability to raise prices
because customers would then buy the substitutes. The intensity of rivalry among
competitors in an industry limits a firm's ability to raise prices because then
customers would buy from a competitor.