Environmental Scanning and Industry Analysis: Group 1

environmental
scanning and
industry analysis
group 1
ENVIRONMENTAL SCANNING AND INDUSTRY ANALYSIS 06/22
Meet Our Team
gimena, lacap, pascual, rupa,
jean febby kriz edrilyn

shadey jean anne faith
environmental
scanning
IS THE MONITORING, EVALUATION, AND
DISSEMINATION OF INFORMATION FROM THE
EXTERNAL AND INTERNAL ENVIRONMENTS
TO KEY PEOPLE WITHIN THE CORPORATION.
THIS HELPS AVOID STRATEGIC SURPRISE

AND ENSURE LONG-TERM HEALTH.
identifying external
environmental variables
natural environment - physical resources, wildlife, and climate.

societal environment - mankind’s social system that includes general
forces that do not directly touch on the short-run activities but often
influence long-run decisions.
ECONOMIC FORCES THAT REGULATE THE EXCHANGE OF MATERIALS, MONEY, ENERGY,
AND INFORMATION.
TECHNOLOGICAL FORCES THAT GENERATE PROBLEM-SOLVING INVENTIONS
POLITICAL–LEGAL FORCES THAT ALLOCATE POWER AND PROVIDE CONSTRAINING AND
PROTECTING LAWS AND REGULATIONS.
task environment - governments, local communities, suppliers,

competitors, customers, creditors, employees/labor unions, special-
interest groups, and trade associations
INDUSTRY ANALYSIS (MICHAEL PORTER) - AN IN-DEPTH EXAMINATION OF KEY FACTORS
WITHIN A CORPORATION’S TASK ENVIRONMENT.
SCANNING THE NATURAL ENVIRONMENT
Concept of sustainability
a firm’s ability to continuously renew
itself for long-term success and survival
is dependent not only upon the greater
economic and social system but also upon
the natural ecosystem in which the firm is
embedded.
Management must also include in its

strategic decision-making processes the
impact of its activities on the natural
environment.
SCANNING THE SOCIETAL ENVIRONMENT
(steep analysis)
Each country in the world can

be represented by its own
unique set of societal forces.
STEEP Analysis
Sociocultural, Technological,
Economic, Ecological, and
Political-legal enviromental
forces
SOME IMPORTANT VARIABLES IN THE SOCIETAL ENVIRONMENT
international societal
considerations
DIFFERENCES IN SOCIETAL
ENVIRONMENTS STRONGLY
AFFECT THE WAYS IN WHICH A
MULTINATIONAL CORPORATION
CONDUCTS ITS MARKETING, FINANCIAL,
MANUFACTURING, AND OTHER
FUNCTIONAL ACTIVITIES
SOME IMPORTANT VARIABLES IN INTERNATIONAL SOCIETAL ENVIRONMENTS:
A N N IN G I T S
BEFORE PL TI C U L AR
Y F O R A P A R
STR A TE G
L OC A T IO N ,A
ER N A T IO N A L
INT T HE
M U ST S C A N
CO M P AN Y
L A R C O U N T RY
PARTICU Q U E S T IO N
N M E N T ( S ) IN
ENVI R O
N IT I E S A N D
O R O P P O R TU
F A R E T H O SE
S , A N D C O M P
THREAT IZ A T IO N A L
O W N O R G A N
WITH IT S S .
WE A K N ES S E
G T HS A N D
STREN
scanning the task

environment
A CORPORATION’S SCANNING OF THE
ENVIRONMENT INCLUDES ANALYSES OF
ALL THE RELEVANT ELEMENTS IN THE
TASK ENVIRONMENT.
THESE ANALYSES TAKE THE FORM OF
INDIVIDUAL REPORTS WRITTEN BY
VARIOUS PEOPLE IN DIFFERENT PARTS
OF THE FIRM.
IDENTIFYING EXTERNAL
STRATEGIC FACTORS
COMPETITIVE ADVANTAGE LIES IN THE ABILITY TO IDENTIFY AND RESPOND
TO ENVIRONMENTAL CHANGE WELL IN ADVANCE OF COMPETITION.
NO FIRM CAN SUCCESSFULLY MONITOR ALL EXTERNAL FACTORS.
STRATEGIC MYOPIA - WILLINGNESS TO REJECT UNFAMILIAR AS WELL AS
NEGATIVE INFORMATION
ONE WAY TO IDENTIFY AND ANALYZE DEVELOPMENTS IN THE EXTERNAL
ENVIRONMENT IS TO USE THE ISSUES PRIORITY MATRIX
issues priority matrix
1. IDENTIFY A NUMBER OF LIKELY TRENDS EMERGING
IN THE NATURAL, SOCIETAL, AND TASK
ENVIRONMENTS. THESE ARE STRATEGIC
ENVIRONMENTAL ISSUES—THOSE IMPORTANT
TRENDS THAT, IF THEY OCCUR, DETERMINE WHAT
THE INDUSTRY OR THE WORLD WILL LOOK LIKE IN
THE NEAR FUTURE.
2. ASSESS THE PROBABILITY OF THESE TRENDS
ACTUALLY OCCURRING, FROM LOW TO MEDIUM TO
HIGH.
3. ATTEMPT TO ASCERTAIN THE LIKELY IMPACT (FROM
LOW TO HIGH) OF EACH OF THESE TRENDS ON THE
CORPORATION BEING EXAMINED.
industry analysis:
analyzing the task environment
a industry is a set of
companies that do the
same job for customers
in essentially the same
way.
line med theater
on ia
st y
re t r in
ami
n g in d u s dustry
PORTER'S APPROACH TO INDUSTRY ANALYSIS
FIGURE 4-3 FORCES DRIVING INDUSTRY COMPETITION

threat of new entrants
NEW ENTRANTS TO AN INDUSTRY TYPICALLY BRING TO IT NEW CAPACITY, A
DESIRE TO GAIN MARKET SHARE, AND SUBSTANTIAL RESOURCES.
AN ENTRY BARRIER IS AN OBSTRUCTION THAT MAKES IT DIFFICULT

FOR A COMPANY TO ENTER AN INDUSTRY.
SOME OF THE POSSIBLE BARRIERS TO ENTRY ARE:

1. ECONOMIES OF SCALE
2. PRODUCT DIFFERENTIATION
3. CAPITAL REQUIREMENTS
4. SWITCHING COSTS
5. ACCESS TO DISTRIBUTION CHANNELS
6. COST ADVANTAGES INDEPENDENT OF SIZE
7. GOVERNMENT POLICY
rivalry among existing firms

INTENSE RIVALRY IS RELATED TO THE PRESENCE
OF SEVERAL FACTORS, INCLUDING:
1. NUMBER OF COMPETITORS
2. RATE OF INDUSTRY GROWTH
3. PRODUCT/SERVICE CHARACTERISTICS
4. AMOUNT OF FIXED COSTS
5. CAPACITY
6. HEIGHT OF EXIT BARRIERS
7. DIVERSITY OF RIVALS
threat of substitute
products or services
A substitute product is a product
that appears to be different but
can satisfy the same need as
another product.
bargaining power
of buyers
ABILITY TO FORCE DOWN PRICES, BARGAIN FOR
HIGHER QUALITY OR MORE SERVICES, AND PLAY
COMPETITORS AGAINST EACH OTHER.
LARGE PURCHASES, BACKWARD INTEGRATION,

ALTERNATIVE SUPPLIERS, LOW COST TO
CHANGE SUPPLIERS, PRODUCT PRESENTS A HIGH
PERCENTAGE OF BUYER'S COST, BUYER EARNS
LOW PROFITS, PRODUCT IS UNIMPORTANT TO
BUYER.
bargaining power of suppliers

ability to raise prices or reduce the quality of purchased goods and services.
A supplier or supplier group is powerful

if some of the following factors apply:
industry is dominated by a few
companies.
unique product or service
substitutes are not readily available
ability to forward integrate
unimportance of product or service to
the industry
INGOUDE COMPANY PRESENTATION 04/12
relative power of other stakeholders
government
local communities
creditors
trade associations
special interest groups
unions
shareholders
complementors
industry evolution
fragmented industry
2015
NO FIRM HAS A LARGE MARKET DOMINATION BY A FEW LARGE

SHARE AND EACH FIRM ONLY FIRMS, EACH STRUGGLES TO
SERVES A SMALL PIECE OF THE DIFFERENTIATE PRODUCTS
TOTAL MARKET IN COMPETITION FROM ITS COMPETITION.
WITH OTHER FIRMS.
consolidated industry
categorizing international
industries
figure 4-4 continuum of international industries

environmental risk assessment
SOME OF THE SYSTEMS THAT EXIST TO ASSES THE

POLITICAL AND ECONOMIC RISK ARE:
BUSINESS ENVIRONMENT RISK INDEX

ECONOMIST INTELLIGENCE UNIT
FROST AND SULLIVAN’S WORLD
POLITICAL RISK FORECASTS
strategic group
IS A SET OF BUSINESS UNITS
OR FIRMS THAT PURSUE
SIMILAR STRATEGIES WITH
SIMILAR RESOURCES. IT IS
VERY USEFUL AS WAY TO
BETTER UNDERSTAND THE
COMPETITIVE ENVIRONMENT.
FIGURE 4-5
strategic characteristics:
types
is a category of firms Defenders
based on a common
strategies orientation Prospectors
and a combination of Analyzers
structure, culture and
process consistent with Reactors
that strategy
INGOUDE COMPANY PRESENTATION 06/22
hypercompetition
a dynamic competitive world in
which no action or advantage can
be sustained for long. - the
frequency, boldness, and
aggressiveness of dynamic
movement by the players
accelerates to create a condition
of constant disequilibrium and
change.
USING KEY SUCCESS FACTORS TO
CREATE AN INDUSTRY MATRIX
USING KEY SUCCESS FACTORS TO CREATE
AN INDUSTRY MATRIX
USING KEY SUCCESS FACTORS TO CREATE
AN INDUSTRY MATRIX
competitive
intelligence
It is a formal program of
gathering information on a
company's competitors.
often called business

intelligence.
primary reasons for

practicing competitive
intelligence
BUILD INDUSTRY AWARENESS
SUPPORT THE STRATEGIC PLANNING PROCESS
DEVELOP NEW PRODUCTS
CREATE NEW MARKETING STRATEGIES AND
TACTICS
SOURCES OF COMPETITIVE INTELLIGENCE
outside organizations
SUPPLIERS, EMPLOYEES,
POTENTIAL CUSTOMERS
the internet
pros: easily accessible
cons: "noise" misinformation
industrial espionage
monitoring competitors for

strategic planning
primary activity: monitor competitors

to understand a competitor, it is important to answer the following 10 questions:
1. why do competitors exist? do they exist to make profits or just to support another
unit?
2. where do they add customer value - higher quality, lower price, excellent credit
terms, or better service?
3. which of your customers are the competitors most interest in? are they cherry-picking
your best customers, picking the ones you don't want, or going after all of them?
4. What is their cost base and liquidity? How much cash do they have? How do they get
their supplies?
5. Are they less exposed with their suppliers than your firm? Are their suppliers better
than yours?
6. What do they intend to do in the future? Do they have a strategic plan to target your
market segments? How committed are they to growth? Are there any succession issues?
monitoring competitors for

strategic planning
7. How will their activity 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? Do
either of you have a competitive advantage in the marketplace?
9. Will new competitors or new ways of doing things appear over the next few years? Who
is a potential new entrant?
10. If you were a customer, would you choose your product over those offered by your
competitors? What irritates your current customers? What competitors solve these
particular customer complaints?
ecasting
for T H E F U T U RE;
Y D O N O T T ELL B E,
"TH E H A T C A N
E R E L Y S T A TE W
TH EY M H A T W I L L B E .”
NOT W
S SU M PT ION S:
A
DANGERS OF ING ASSUMPTIONS
UL TY UN DE RLY AU S E OF
FA FR EQUE N T C
MO ST
ARE THE T IN G ERR O RS.
FORECAS
useful forecasting
techniques
EXTRAPOLATION
* TIME SERIES METHOD
BRAINSTORMING
EXPERT OPINION
DELPHI TECHNIQUE
STATISTICAL MODELING
PREDICTION MARKET
SCENARIO WRITING
Extrapolation. Assumes that the world is reasonably consistent and changes slowly in
the short.
Time-series method. Attempts to carry a series of historical events forward into
the future.
Brainstorming. It is a non-quantitative approach that simply requires the presence of
people who are knowledgeable in the field.
Expert opinions. It is a non quantitative technique in which experts in a particular
area attempt to forecast likely development.
Delphi technique. It is where separated experts independently assess the likelihoods of
specified events.
Statistical modeling. This is a quantitative technique that attempts to discover causal
or at least explanatory factors that link two or more time series together.
Prediction Market. “Large groups can often be better than those of experts because
such groups can aggregate a large amount of dispersed wisdom.”
Scenario writing. It is the most widely used forecasting method after trend
extrapolation.
the strategic audit:
a checklist for
environmental
scanning
THE AUDIT PROVIDES A CHECKLIST OF
QUESTIONS BY AREA OF CONCERN.
synthesis of external factors
summary
column 1: external factors
column 2: weight
column 3: rating
column 4: weighted score
column 5: comments

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environmental

Meet Our Team

gimena, lacap, pascual, rupa,

jean febby kriz edrilyn

THIS HELPS AVOID STRATEGIC SURPRISE

natural environment - physical resources, wildlife, and climate.

task environment - governments, local communities, suppliers,

Management must also include in its

Each country in the world can

scanning the task

FIGURE 4-3 FORCES DRIVING INDUSTRY COMPETITION

AN ENTRY BARRIER IS AN OBSTRUCTION THAT MAKES IT DIFFICULT

SOME OF THE POSSIBLE BARRIERS TO ENTRY ARE:

rivalry among existing firms

LARGE PURCHASES, BACKWARD INTEGRATION,

bargaining power of suppliers

A supplier or supplier group is powerful

relative power of other stakeholders

NO FIRM HAS A LARGE MARKET DOMINATION BY A FEW LARGE

figure 4-4 continuum of international industries

environmental risk assessment

SOME OF THE SYSTEMS THAT EXIST TO ASSES THE

BUSINESS ENVIRONMENT RISK INDEX

often called business

primary reasons for

SOURCES OF COMPETITIVE INTELLIGENCE

monitoring competitors for

primary activity: monitor competitors

monitoring competitors for

the strategic audit:

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