POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

LESSON 2: SCANNING THE ENVIRONMENT

An Activity
Presented to Prof. Ester R. Guerzon
of the Polytechnic University of the Philippines
Sta. Mesa Manila

In Partial Fulfillment of the Requirements in Subject

Strategic Management (BUMA 20033) for Bachelor of Science in Accountancy

By
Culianan, Aaron Charles V.

December 2022
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ACTIVITIES/ASSESSMENTS:

1. Identify what are the opportunities and threats in the industry. Discuss briefly.

Identification of opportunities and threats of a specific industry lies to the SWOT

Analysis. It is an analysis in which both the external and internal environment are

considered.

Opportunities are positive external elements that may provide a competitive

advantage for a company. And by doing a SWOT Analysis, it will help the company to

determine how to position the firm so it can take advantage of those identified

opportunities. Some examples of opportunities are:

a) A country lower or cuts its tariff;

b) Availability of new technology in the market; and

c) Potential expansion of the business.

On the other hand, threats are those internal and external factors that have a potential

to affect not only the company’s operation but even its whole structure, negatively.

Identification of these threats will come in handy in SWOT Analysis by positioning the firm

strengths to minimize those environmental threats. Some examples of threats are:

a) Increase of cost of raw materials; and

b) Increase in competition.
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In conclusion, identification of opportunities and threats involves a systematic

procedures and involves a lot of professional judgment. Nevertheless, being aware of what

is potentially out there will help the firm’s management and those charge with governance

to put their strategies forward and implement their preventive controls.

2. Briefly explain each stage in the industry life cycle.

Industry life cycle refers to four stages such as: 1) Introduction Stage; 2) Growth Stage; 3)

Maturity Stage and; 4) Decline Stage.

 Introduction stage is characterized by slow sales growth and lack of profits because

of high expenses of promotion and selective distribution to generate awareness of the

product and encourage customers to try it. During this stage, only a few, basic products

are being produced, and the strategy is to increase marketing efforts.

 Growth stage, during this stage, the opportunity for cost reductions is at its maximum

because production volume is increasing at a high rate. Thus, fixed costs are being

spread over more units of production, and the benefits of the learning curve is being

realized. Some indication of this stage is when a new customers are trying the products,

and when there is a growing number of satisfied customers.

 Maturity stage. In this stage, sales growth declines and competitors are most

numerous. This is characterized by slowing demand growth, saturated markets and

even direct and price competition and strategic emphasis on efficient operations.

 Decline stage. The first symptom of the decline stage of a product’s life cycle triggers

such other effects as price cutting, narrowing of the product line, and reduction in

promotion budgets.
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From this we can conclude that through these lenses the management perspective is

not in the short-term sense of the business going concern assumption, rather the company

takes a much longer view to the life of its business.

3. Examine how Porter’s five forces model are used as an analytical tool in achieving

organization competitive advantage as well as the new forces corresponding it.

Porter’s five forces model is a useful tool for analyzing the industry or industries in

which your firm competes. In involves the following:

a) The threat of new entrants. This threat practically states that if there is a new

competitors, the profits recorded from previous year as this will the base of forecasting the

profits for future periods, such forecasting will be impaired as the new competitors will have

an impact to the established profits of the firm. Accordingly, this new entry can be prevent

if the business is larger than the new entry; there is a product differentiation; the financing

of the company is flexible; there is an access to a much larger distribution channels; and

there is a cost disadvantage independent of scale.

b) The bargaining power of suppliers. This power is evident when the supplier is so low

that it can practically dictates the price of the raw materials you used in the business.

c) The bargaining power of buyers. This implies that the supply of the product is

practically in the hands of the buyer. This can be observe if it is concentrated or purchases

large volume relative to seller sales; the product is at its standard or easily interchangeable;

it faces few switching costs; the product earns low profit; the product is not important to the

quality of its products or services.

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d) The threat of substitutes. This threat is present when the product of the business is

not so ordinary that it can be substitute. This threat will prevent the company to take

advantage on having a large profit margin as their product is not deem to be in demand as

it can be change to other product.

e) The intensity of competitive rivalry. Competition is always present in the market but

its intensity can be quantifiable. If the product or services is in the same line of business

and its advertisement and reviews to the public is almost impossible to differentiate given

that the opportunity of expansion is almost equally, this can be seen as having a high

intensity. The opposite of the described scenario above will entails a low intensity.

In conclusion, this model will determine the attractiveness of the industry in which the

focal firm is competing. As attractiveness increases, so does the possibility that your focal

firm will be able to earn above-average returns by using its chosen strategies.

4. Explain and discuss the following how these affect the organization.

(a) Competitive advantage. A firm has a competitive advantage “when it implements a

strategy that creates superior value for customers and that its competitors are unable to

duplicate or find too costly to imitate.” Therefore, having a competitive advantage it will

positively affect the organization. But it worth to realize that competitive advantage is not

permanent.

(b) Value chain. It is the set of activities required to design, develop, produce, market, and

deliver products and services to customers. Some authors also describes that the life cycle

of the product may also be called as value chain.

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(c) Building block of competitive advantage. Efficiency, quality, innovation and

responsiveness to customers are the four building block of competitive advantage. With

efficiency, it has an indirect relationship with the costs incurred. The higher the efficiency,

the lower its cost to incur. Conversely, quality and responsiveness to customer has a direct

relationship to the cost it may charge the customer. The higher the quality and having

superior customer service or responsiveness to customer will lead to higher costs it may

charge its customers. For innovation, the superior the innovation will result to higher prices.

These building blocks of competitive advantage will aid the business entity to become more

profitable, have lower expenses incurred but higher revenue recorded because of the

premium charged to customers and have its edge among its competitors in the market.

However any company can adopt these building blocks regardless of the industry and

services it provides, therefore, it is very crucial for a business entity to ensure their quality

image and competitive edge

(d) Generic distinctive competencies. The key to an efficient business strategies is to

have effective distinctive competencies. These are the capability that sets out the company

from its competitors and would greatly benefits the company as a whole. It allows the

business entity to cater a wider brand awareness and increases its reputation. The market

continues to evolve and get by on the new trends that emerge and these distinctive

competencies are vital for the continued existence of an entity, thus serving a new learning

opportunity for an entity to progress.

(e) Durability of competitive advantage. For an entity to have a competitive advantage,

its resources must satisfy these four conditions – valuable, rare, costly to imitate and

difficult to substitute. According to Buffet, durable competitive advantage is the “company’s

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economic moat”. Having a durable competitive advantage will make an entity more

economical wherein companies achieves outstanding growth through profits and returns

for its shareholders, become superior, and continuously provides quality and reasonable

price. Competitive advantage alone is not sufficient for an entity to survive but rather its

durability. The durability of competitive advantage is a crucial and determining factor in the

long term success and longevity of an organization.

5. How does an organization would achieve superior efficiency, quality innovation and

a positive respond to clientele?

Being efficient is the ability to accomplish something with little waste of time, effort and

resources. Superior efficiency is the effective utilization of transforming factors of

production such as labor, land, capital, etc., and converted into output which may be goods

or services. For a business entity to attain superior efficiency, is to utilize inputs in the most

productive way possible which is having fewer inputs required to produce a given output

and having the least cost incurred.

Innovation refers to the changes made to make a process increase its efficiency with

minimum resources consumed thus reducing business risks and allows an entity to

differentiate with other competitors in the market. To achieve quality innovation, it is

something with novelty value, practical, timely and developed to address the current and

future needs of the stakeholders that are vital in the sustenance of an organization.
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In achieving positive response to clientele, achieving quality innovation and superior

efficiency are part of it. Any entity must provide and satisfy what the customer exactly

wants. It allows a company to improve response time and provide superior service because

in achieving positive response is about the speed and quality that you provide to the

customers. One could show prompt attentiveness and customers will then attribute more

value to the service provided that creates a competitive advantage among its competitors.