Strategic Position:

The Environment

•Strategic Management (5 ECTS)

•Ismo Vuorinen

•Principal Lecturer

•Autumn 2010

2-2

Layers of the business environment

The

Organisation

2-3

The Macro-Environment

PESTEL

Scenarios

Key

drivers

2-4

PESTEL Framework

Political Economic

Technological

Environmental Legal

Social

2-5

What Are Key Drivers for Change?

Key drivers for change are

environmental factors that are likely

to have a high impact on the success

or failure of strategy.

Identification of Key Drivers for Change

Uncertainty of change

Low High

Effect on

branch or

company

BigKey Drivers of

Change

2-7

What is a Scenario?

Scenarios are detailed and plausible views

of how the business environment of an

organisation might develop in the future

based on key drivers for change about

which there is a high level of uncertainty.

2-8

Industries and Sectors

Competitive

forces

Competitive

cycles

Industry

life cycle

2-9

The Five Forces Framework (Porter)

Substitutes

Competitive

rivalry

Potential

entrants

BuyersSuppliers

2-10

The Threat of Entry: Barriers to Entry

Scale and experience

Access to supply and distribution channels

Expected retaliation

Legislation or government action

Differentiation

2-11

Why Are Substitutes a Threat?

Substitutes can reduce demand for a

particular class of products as

customers switch to alternatives.

• Price/performance ratio

• Extra-industry effects

2-12

The Power of Buyers

Are buyers concentrated?

What are the costs of switching?

Does backward vertical integration exist?

2-13

The Power of Suppliers

Are suppliers concentrated?

What are the costs of switching?

Does forward vertical integration exist?

2-14

Degree of Competitive Rivalry

Competitor balance

Industry growth rate

High fixed costs

High exit barriers

Low differentiation

2-15

Comparative Industry Structure Analysis

2-16

Cycles of Competition

2-17

What is Hypercompetition?

Hypercompetition occurs where the

frequency, boldness and aggressiveness

of dynamic movements by competitors

accelerate to create a condition of

constant disequilibrium and change.

2-18

Competitors and Markets

Strategic

groups

Strategic

customers

Market

segments

2-19

What are Strategic Groups?

Strategic groups are

organisations within an industry

with similar strategic characteristics,

following similar strategies or

competing on similar bases.

2-20

Characteristics for Identifying Strategic

Groups

Scope of activities

Extent of product diversity

Extent of geographic coverage

Number of segments served

Distribution channels

Resource commitment

Extent of branding

Marketing effort

Extent of vertical integration

Product quality

Technological leadership

Organisational size

2-21

Benefits of Identifying Strategic Groups

Understanding competition

Analysis of strategic opportunities

Analysis of mobility barriers

2-22

What is a Market Segment?

A market segment is a group of

customers who have similar needs that

are different from customer needs in

other parts of the market.

2-23

Some Bases of Market Segmentation

2-24

What is a Strategic Customer?

A strategic customer is the person(s)

at whom the strategy is primarily

addressed because they have the most

influence over which goods or services

are purchased.

2-25

What are Critical Success Factors?

Critical success factors (CSFs) are

those product features with which a

organisation must outperform the

competition because they are

particularly valued by a group of

customers.

2-26

Types of Opportunity

In substitute

industries

In other strategic

groups

In targeting

buyers

For complementary

products

In new market

segmentsOver time

7.11.2010 Ismo Vuorinen / syksy 2009 27