HI6006

Competitive Strategy

Tutorial week 2 – External

Environment
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Learning objectives
Master title style

 Understand a firm’s external environment and be able

to analyse it

 Differentiate between the general environment and the

industry environment

 Apply an External Analysis to any industry

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EXTERNAL Master title style

Five competitive forces to determine the

industry’s attractiveness.

General Environment

• Demographic• Political/legal• Socio-cultural •

Economic• Technological• Global

Threats and Opportunities

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EXTERNAL Master title style

 Opportunity
 a condition in the general environment that, if exploited, helps a
company to achieve strategic competitiveness.

 Threat
 a condition in the general environment that may hinder a
company’s efforts to achieve strategic competitiveness.

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EXTERNAL Master title style

 Question

 Apply a SWOT analysis to Tiffany

& Co business environment.

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EXTERNAL Master title style
P – the Political landscape

E – the Economic outlook

S – the Socio-Cultural adaptations

T – the Technology space

E – the earth Environment and Sustainability

L – the Legal and Ethical domain

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EXTERNAL Master title style

 QUESTION

 Global and socio-cultural elements of

the general environment are significant
to the future of Tiffany & Co, discuss
how and why?

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EXTERNAL Master title style

 The socio-cultural segment

women in the workforce
workforce diversity
attitudes about the quality of work life
concerns about the environment
shifts in work and career preferences
shifts in preferences regarding product of work
life and service characteristics.

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EXTERNAL Master title style

 The economic segment

 direction of the economy
 membership of important trade and economic
organisations
 inflation rates
 interest rates
 trade deficits or surpluses
 budget deficits or surpluses
 personal savings rates and business savings rates
 gross domestic product.

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EXTERNAL Master title style

 The demographic segment

population size
age structure
geographic distribution
ethnic mix
income distribution.

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EXTERNAL Master title style

 The political/legal segment

 influence of government
 influence of organisations on government
 competition and anti-monopoly laws
 taxation laws
 deregulation philosophies
 labour and employment laws
 educational philosophies and policies.

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EXTERNAL Master title style

 The technological segment

product innovations
creation of new knowledge and new applications
focus of private and government-supported R&D
expenditures
Internet technology and global e-commerce
e-commerce and new business model.

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EXTERNAL Master title style

 The global segment

new global markets
existing global markets that are changing
important international political events
critical cultural and institutional
characteristics of global markets.

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EXTERNAL Master title style

5 Forces Model
• Historically, firms concentrated only on direct
competitors
• Focusing on wider industry members highlights potential
opportunities and competitors
• Five forces analysis helps firms understand the
profitability potential of the industry in which they
compete

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EXTERNAL Master title style

 Value-reducing diversification

managerial motives for diversification may

lead to value reduction
• diversifying managerial employment risk
• increasing managerial compensation.

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EXTERNAL Master title style

Question
Examine the case regarding Tiffany &
Co
 Analyse the case regarding Tiffany
& Co using the five competitive
forces to determine the industry’s
attractiveness.
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