3.

The Strategic
Position (1)
– the
Environment

International Strategic Management

Master in International Business Management
The Faculty of International Business and
Economics,
ASE Bucharest
Layers of business environment The Organization

Competitors

Industry (or sector)

The macro-environment
Analising strategic position

a. External analysis –> environment

b. Internal analysis –> strategic capability

Expectations
& Purposes
Introduction
• Analyzing environment -> show how managers can make sense of an uncertain world around their
organization

• Challanges of analysis:
• To make sense of the environment diversity
• Problem of complexity (many of the separate issues in the business environment are
interconnected)
• Speed of change
AGENDA for Today
1. General analysis
2. The Macro - environment analysis
3. Industries and sectors analysis
4. Market Analysis

5
1. General analysis
• Techniques – general approach
▪ Future evolution: quick or slow?
▪ Future is cyclic or no cyclic?
▪ Future is predictable or unpredictable?
▪ The influencing factors over the organization are complex or
simple?

• Results – general strategic conclusions:

▪ The environment is too turbulent in order to develop
efficient predictabilities?
▪ Which are the opportunities and threats for the
organization?
AGENDA for Today
1. General analysis
2. The Macro - environment analysis
3. Industries and sectors analysis
4. Market Analysis

7
 2. The Macro - environment analysis
• Techniques:
2.1 PESTEL Analysis
2.2 Building Scenarios
2.3 Porter’s Diamond

• Results:
▪ Identifying key factors
▪ Predictability (if possible)
▪ Understanding the connections among events
▪ The determinants of national advantage
2.1 PESTEL Analysis

Economic

Political Socio-cultural
The
organization
Legal Technological

Environmental
Political factors (examples)
• Government stability
• Taxation policy
• Foreign trade regulations
• Social welfare policies
Economic factors (examples)
• Business cycles
• GNP trends
• Interest rates
• Money supply
• Inflation
• Unemployment
• Disposable income
Socio-cultural factors (examples)
• Population demographics
• Income distribution
• Social mobility
• Lifestyle changes
• Attitudes to work and leisure
• Consumerism
• Levels of education
Technological factors (examples)

• Government
spending on
research
• Government and
industry focus on
technological effort
• New discoveries /
developments
• Speed of technology
transfer
Environmental factors (examples)
• Environmental
protection laws
• Waste disposal
• Energy
consumption
Legal factors (examples)
• Competition law
• Employment law
• Health and safety
• Product safety
2.2 Building Scenarios
• Detailed and plausible views of how the business environment of an organization
might develop in the future based on groupings of key environmental influences
and drivers of change about which there is a high level on uncertainty

High

Potential
?
impact

Low High
Uncertainty
 2.3 Porter’s Diamond

• There are inherent reasons:

▪ why some nations are more
competitive than others?
▪ why some industries within nations
are more competitive than others?

• The national home base of an organization:

▪ plays an important role in creating
advantage on a global scale
▪ provides factors which
organizations are able to build on
and extend to provide such
advantage
Porter’s Diamond
– the determinants of national advantage

Firm strategy,
structure and
rivalry

Factors Demand
conditions conditions

Related and
supporting
industries
 Porter’s Diamond
– the determinants of national advantage
• Specific factor conditions – help explain the basis of advantage on a national level ->
provide initial advantages that are subsequently built upon a yield more advantaged
factors of competition

• Home demand conditions – provide the basis upon which the characteristics of the
advantage of an organization are shaped

• One successful industry may lead to advantage in related and supporting industries

• The characteristics of firm strategy, industry structure and rivalry in different

countries also help explain bases of advantage.
AGENDA for Today
1. General analysis
2. The Macro - environment analysis
3. Industries and sectors analysis
4. Market Analysis

20
 3. Industries and sectors analysis

• Techniques:
3.1 The 5 force framework - PORTER

• Results:
▪ The description of the competitive
market forces
3.1 The 5 force framework - Porter

Potential
entrants

Threat of entry

Bargaining Bargaining
Suppliers Competitive Buyers
power rivalry power

Threat of substitutes

Substitutes
a. The threat of entry:
• Depending on which extent there are barriers of entry
• Barriers of entry – factors that need to be overcome by new entrants if they are
to compete successfully
Typical barriers are as follows:
• Economies of scale
• The capital requirement of entry
• Access to supply or distribution channels
• Customer or supplier loyalty
• Experience
• Expected retaliation
• Legislation or government action
• Differentiation
b. The threat of substitutes
• Substitution reduces demand for a particular class of
products, as customer switches to other alternatives
(if a substitute provides a higher perceived benefit or
value)

• Substitution may take different forms:

▪ Product-for-product substitution &
complementors organizations (with products
more competitive)
▪ Substitution of need by a new product or service,
rendering an existing product or service
redundant
▪ Generic product – when products or services
compete for disposable income
c. The power of buyers
• Constraints the strategic
freedom of an
organization and
influences the margins
• Together with the power
of suppliers represent the
value network within
which an organization is
operating
• Buyer power is likely to be high when:
• There is a concentration of buyers
• The cost of switching a supplier is low or involves little risk
• There is a threat of the supplier being acquired by the buyer and / or the buyer
setting up in competition with the supplier (backward integration)
d. The power of suppliers
• Constraints the strategic freedom of an organization and influences the margins
• Together with the power of buyers represent the value network within which an
organization is operating

• Supplier power is likely to be high when:

▪ There is a concentration of suppliers
▪ The switching costs from one supplier to another are high
▪ There is the possibility of the supplier competing directly with their buyers
(forward integration)
 e. Competitive rivalry
• Competitive rivals – organizations with similar products
and services aimed at the same customer group

• Factors that affect the degree of competitive rivalry in

an industry or sector are:
• The extend to which competitors are in balance
• Industry growth rates may affect rivalry
• High fixed costs in an industry (perhaps through
capital intensity, may results in price wars and low
margins)
• High exit barriers to an industry (persistence of
excess capacity)
• Differentiation (e.g. in FMCG industry, where many
products or services are undifferentiated)
The 5 force framework - Porter
a.The threat of entry
b.The threat of substitutes
c.The power of buyers
d.The power of suppliers
e.Competitive rivalry
AGENDA for Today
1. General analysis
2. The Macro - environment analysis
3. Industries and sectors analysis
4. Market Analysis

29
4. Market Analysis
• Techniques:
4.1 SWOT Analysis (Opportunities & Threats);
4.2 Competitors Analysis (critical success factors; the
growth share matrix);
4.3 Customers Analysis (customer matrix, market studies &
segmentation)
• Results
▪ Market Opportunities & Threats
▪ Competitors profile
▪ The analysis of the relative market position
▪ Strategy towards the existing & potential clients
4.1 SWOT Analysis

S................. W...............

Opportunities Threats
 4.2 Competitors Analysis - Critical success factors
• Understanding what customers value: which are the critical succes factors?
• What differentiate competitors within a specific market?

• Critical success factors (CSFs) – those product features that are particularly valued by a
group of customers and, therefore, where organization must excel to outperform
competition
A strategy canvas – perceived value by customers
- an example for the electrical engineering industry

1.0

Company A
0.75

RATING Company B

0.5
Company C

0.25

Reputation After-sales service Testing Delivery reliability Technical quality

MOST IMPORTANT LESS IMPORTANT
Competitors Analysis - The growth share (or BCG) matrix

Market share
High Low

Stars Question
marks

Market
growth

Cash Dogs
Cows

Low
Competitors Analysis – main criteria of differentiation

• Objectives
• Resources (different types: financial, HR, operational, etc)
• Performance history
• Existing products and services
• Existing strategies
4.3 Customers Analysis – main phases
1.Identify clients and markets
2.Market segmentation and strategic effects
3.The importance and role of the offered services to the clients & their quality
Customers Analysis - market studies & segmentation

B2B - Industrial /
Type of factor B2C - Consumer markets
organizational markets
• Age, sex, race • Industry
Characteristics • Income • Location
of people/ • Family size • Size
organizations • Life-cycle stage • Technology
• Location • Profitability
• Lifestyle • Management
• Size of purchase • Application & volume
Purchase / use • Brand loyalty • Importance of purchase
situation • Purpose of use •Frequency of purchase
• Purchasing behavior • Purchasing procedure
• Importance of purchase • Choice criteria
• Choice criteria • Distribution channel
• Performance requirements
User’s needs • Product similarity
• Assistance from suppliers
• Price preference
and preferences • Brand preferences
• Brand preferences
for product • Desired features • Desired features
characteristics • Quality
• Quality
• Service requirements
Customers Analysis - customer matrix (applied in sales)
What the customers want?

Transactional

Sale
SALES
What What
we Sale Relation we
want? want?
Consultative

Relation
SALES

What the customers want?

Who are the customers appreciating the products/services we sell?
Big

SUGESTIONS SUGESTIONS
➢ Check your resources ➢ Invest resources for
building a relationship
Value for sales representative

➢ Be prepared to
negotiate ➢ Build a long term
development plan for
➢ Pay attention to your
each client
profitability

SUGESTIONS SUGESTIONS
➢ Don’t invest time or ➢ Prioritize your clients
resources for these
➢ Invest time and
clients
resources for closing the
sales as sooner as
possible

Small Value for customers Big

AGENDA for Today
1. General analysis
2. The Macro - environment analysis
3. Industries and sectors analysis
4. Market Analysis

40
THANK YOU!