Firms and Context

• In the previous class, we analyzed the competitive forces that shape an

industry and, consequently, the firm

Firm

INDUSTRY
 Firm and Context
• In the previous class, we analyzed the competitive forces that shape an
industry and, consequently, the firm

• It is equally important to understand the key elements of the macro

context that go beyond the industry

Firm

INDUSTRY

MACRO CONTEXT
 The Macro Context
As mentioned, firms do not act in a vacuum.

The context can sometimes be a key constraining factor to define the

strategy of the firm

i.e. Musimundo & DVD rentals

 Context and Competitive Advantages
• Some succesful strategies can become unviable under a different context

• i.e. Best Buy in China

• This phenomenon is not always negative

 PESTEL Factors
• Acknowledging the pros and cons of the environment is essential to
define the strategy.

• The PESTEL analysis can be very useful as it contains the key factors
defining the macro context.
 PESTEL Factors
• Acknowledging the pros and cons of the environment is essential to define
the strategy.

• The PESTEL analysis can be very useful as it contains the key factors
defining the macro context.
FACTORS
Political Economic

Social Technological

Firm

INDUSTRY
Enviromental Legal
MACRO CONTEXT
• Political Factores PESTAL
• .i.e Agrobusiness

• Economic:
• i.e..
https://www.bbc.com/mundo/noticias/2011/11/111109_argentina_trueque_
comercial_vs

• Social:
• i.e. Dunking Donuts in Argentina

• Technological:
• i.e.. Intel in Costa Rica
• Enviromental:
• i.e. Osisko & Gold mine in Famatima
•
 Planning under uncertainty: Scenario planning

Scenario planning can be a useful tool to plan your strategy under

uncertainty

The first step of this method is to identify those variables that can
potentially vary
 Scenario Planning

As a second step, we analyze different potential combinations of these

variables. Then each case is individually examined
The important thing about scenario planning is that it can
simultaneously introduce several variables and values
A matrix with the different potential combinations is created.

i.e.. Agrobusiness- Key uncertainty variables:

• Weather
• Government role
• International Prices
• World consumption
With these four variables we can create multiple potential scenarios
Some key issues to consider with scenario planning:
• Several combinations can be discarded.
i.e. If consumption is high, probably the international price can’t be too low

• Avoid over-predictions.
• i.e. Don’t extrapolate growth rates: trees don’t grow up to the sky

i.e. Roma Club (’70)

While scenario can not anticipate 100% the future, it can offer more
foreseeable paths

Once these scenarios are analyzed, we need to pick a plan.

Contingencies are easier to define under these conditions.
https://www.youtube.com/watch?v=4HTwnmSqFcE