SOM497 Business Policy

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SOM497 Business Policy Strategy
CHAPTER 4 Environmental Scanning Industry
Analysis
STRATEGIC MANAGEMENT BUSINESS POLICY 10TH
EDITION THOMAS L. WHEELEN J. DAVID HUNGER
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External Environment Societal Environment
Political/Legal
Technological
Economic
Suppliers
Substitutes
F I R M
Buyers
Rival Firms
New Entrants
Ecological
Societal Values and Lifestyles
Demographics
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Environmental Analysis Why need it?  

• Organizations do not exist in a vacuum. (Rosen,
  1995)
• Allows managers to make better decisions by
• Drawbacks

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External Environment Issues Priority Matrix
PROBABILITY OF OCCURRANCE
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Industry Analysis Porters 5-Forces Model
Threat of New Entrants
Other Stake- holders
Intensity of Rivalry
Power of Buyers
Power of Suppliers
Threat of Substitutes
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Intensity of Rivalry

• A competitive move by one firm can have an effect
  (e.g. prices, profit) on the others
• Intense rivalry related to
• Numerous or equally balanced competitors
• Slow industry growth
• High fixed costs
• Low differentiation
• Low switching costs
• High strategic stakes
• High exit barriers

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Threat of New Entrants

• Economies of scale
• Product differentiation
• Capital requirements
• Switching costs

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Threat of New Entrants (cont)

• Access to distribution channels
• Cost disadvantages
• Government policy

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Strategic Groups

• Groups of firms that pursue similar strategies
  with similar resources
• Why determine strategic groups?
• How to plot a strategic group map?

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Strategic Groups - Example
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Strategic Types

• Categories of firms with unique strategic
  orientation
• Four Strategic Types
• DEFENDERS
• PROSPECTORS
• ANALYZERS
• REACTORS

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Is the Brewer of Budweiser Beer a Defender,
Prospector, or Analyzer?

• Anheuser-Busch , accelerating its back to beer
  strategy, said it will sell its unprofitable
  Eagle Snacks Business and the St. Louis Cardinals
  major league baseball team, along with the clubs
  Busch Stadium home.
• Source Richard Gibson, Anheuser-Busch Will
  Sell Snacks Unit, Cardinals and the Clubs Home
  Stadium, The Wall Street Journal (October 26,
  1995) A3.
• Question By selling its nonbeer-related
  businesses, is Anheuser-Busch exhibiting a
  defender, prospector, or analyzer response to
  uncertainty? How can you tell?

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Hyper-competition

• Environmental turbulence via higher levels of
• Market stability affected by
• What are some Industries?

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Next Class

• Read prepare to discuss Textbook Case 18
  Wal-Mart, Inc. On Becoming the Worlds Largest
  Company