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“Scanning” Environmental Scanning Or Analysis Where are we Now ? Prof. Vijay K S, MBA Programme`-BIET, Dava
“Scanning”Environmental Scanning
Or Analysis Where are we Now ?
Prof. Vijay K S, MBA Programme`-BIET, Davangere
As an ExampleCaptain of a “Cricket team”
What he may think or consider before going for
the toss?
After Winning or Loosing the toss, What would be
his focus?
Makes necessary decisions as the game proceeds?
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Manager will also think before and after taking a decisions
Considers the climate for the products /
services
Look inside and figure out, what they good
at?
Makes necessary decisions as the things
proceeds….
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Why Scan?
To know your position in the environment
To respond effectively to constant change
To see the organization as a whole To avoid surprises To survive To lay the foundation for strategic issues
Prof. Vijay K S, MBA Programme`-BIET, Davangere
SCANNING: Where we are now?
Analyzing Company’s External Environment
External Environment: Outside the Organization
Macro Environment:
Micro / Task Environment: Industry Analysis
Internal Environment: Focal Organization
Monitoring, evaluation and dissemination of information from the external and internal environments to key people within the corporation to avoid strategic surprise and to ensure its long-term health
Prof. Vijay K S, MBA Programme`-BIET, Davangere
“Analysis of Company’s External Environment”
External Analysis
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Courtesy : Prof. Sathyanarayana K
Analyzing Company’s External Environment
Macro EnvironmentEconomic
Conditions
Political
Factors
Environment
al Forces
Legal/Regulatory Factors
Techn
ologic
al Fac
tors
Sociocultural Factors
Immediate Industry and Competitive Environment
Company
Substitute
Products
Buyers
New Entrant
s
Rival Firms
Suppliers
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Analyzing Company’s External Environment
Macro Environment: Economic Forces
That regulates the exchange of materials, money, energy and information
Technological Forces That generate problem-solving intentions
Political & Legal Forces Power, Laws and Regulations
Socio-cultural Forces That regulates the values, traditions and Customs
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Analyzing Company’s External Environment
Macro Environment: Economic Forces
GDP Trends Interest Rates Money Supply Inflation Rates Unemployment Levels Wage/Price Controls Energy Availability & Cost Disposable & Discretionary Income
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Analyzing Company’s External Environment
Macro Environment: Technological Forces
Total government spending for R&D Total industry spending for R&D Focus of technological efforts Patent protection New products New developments in technology transfer from lab to marketplace
Productivity improvements through automation
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Analyzing Company’s External Environment
Macro Environment: Political and Legal Forces
Antitrust regulations Environmental protection laws Tax laws Special incentives Foreign trade regulations Attitudes toward foreign companies Laws on hiring and promotion Stability of government
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Analyzing Company’s External Environment
Macro Environment: Socio-cultural Variable
Lifestyle Changes Career Expectations Regional Shifts in Population Life Expectancies More women in workforce Greater concern for fitness Postponement of family formation Increase in temporary workers
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Strategically relevant components of a Company’s External Environment
Why are some companies better able to adopt than others?
Difference in the ability of managers
Choice of factors
Difference in considering Important or not
Ignorance on new development
Personal and functional experiences
Success of current strategies may likely bias their perception
The willingness reject unfamiliar as well as negative information is called Strategic Myopia Prof. Vijay K S, MBA Programme`-BIET, Davangere
Strategically relevant components of a Company’s External Environment
Strategic myopia is a condition in which the management of a business can see
clearly those things that are to take place in the short term, but have only a fuzzy
view of what their future might be over the longer term.
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Strategically relevant components of a Company’s External Environment
High Priority
High Priority
Medium Priority
High Priority
Medium Priority
Low Priority
Medium Priority
Low Priority
Low Priority
Issue Priority Matrix
High Medium Low
High
Medium
Low
Probable Impact on Corporation
Prob
abili
ty o
f Occ
urre
nce
The High priority ones are the strategic factors and they are the strategically relevant componentsProf. Vijay K S, MBA Programme`-BIET, Davangere
Industry Analysis
Industry ? An Industry is a group of firms that produces a similar products or services
Can you name few Industries ?
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Industry Analysis- Seven Question?
1. What are the industry dominant economic traits?
2. What competitive forces are at work in the industry and how strong are they?
3. What are the forces of change in the industry and what impact will they have?
4. Which companies are in the strongest/weakest competitive position?
5. Who’s likely to make what competitive moves next?
6. What key factors will determine success or failure?
7. How attractive is the industry in terms of its prospects for above average profitability?Prof. Vijay K S, MBA Programme`-BIET, Davangere
Industry Analysis
Competitive Environment Analysis
- Dominant Economic features
Market size (Small markets don’t attract big fish) Scope of competitive rivalry Market/industry growth rate (life cycle)
Fast growth breeds new entry; slowdowns lead to increased competition.
Number of rivals and their size Number of buyers and their size Level of backward and forward integration Technological change (rate and scope) Level of differentiation between firms’ products Opportunities for economies of scale Ease of entry and exit Capital requirements
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Industry Analysis
Competitive Environment Analysis
- Porter’s Five Forces Model
Industry Competiti
on
Threat of new
entrant
Bargaining
Power of Buyers
Threat of
Substitutes
Bargaining
Power of supplier
s
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Industry Competiti
onRivalry among existing firms
Threat of new
entrant
Bargaining
Power of Buyers
Threat of
Substitutes
Bargaining
Power of supplier
s
An abstraction that makes it difficult for a company to enter an industry
The extent to which corporations are mutually dependent
By satisfying the same needs as another products
Ability to force down prices, Bargain for higher quality andPlay a higher competition
Ability to rise prices or reduce the quality of purchased goods And services
Industry Analysis
Competitive Environment Analysis
- Porter’s Five Forces Model
Prof. Vijay K S, MBA Programme`-BIET, Davangere
1. Threat of New Entrants
Economies of scale
Product differentiation
Capital requirement
Switching costs
Access to distribution channels
Cost disadvantages independent if size
Government policy
Industry Analysis
Competitive Environment Analysis
- Porter’s Five Forces Model
Prof. Vijay K S, MBA Programme`-BIET, Davangere
2. Rivalry Among Existing Firms
Number of competitors
Rate of Industry Growth
Produce or Service Characteristics
Amount of Fixed Costs
Capacity
Height of Exit Barriers
Diversity of Rivals
Industry Analysis
Competitive Environment Analysis
- Porter’s Five Forces Model
Prof. Vijay K S, MBA Programme`-BIET, Davangere
3. Threat of substitutes
Switching cost
Prices
Alternate Uses
Access
Industry Analysis
Competitive Environment Analysis
- Porter’s Five Forces Model
Prof. Vijay K S, MBA Programme`-BIET, Davangere
4. Bargaining Power of Buyers
Number of buyer companies
Uniqueness of product
Availability of substitutes
Threat of backward integration
Purchasing Industries purchase behavior
Industry Analysis
Competitive Environment Analysis
- Porter’s Five Forces Model
Prof. Vijay K S, MBA Programme`-BIET, Davangere
5. Bargaining Power of Suppliers
Number of Supplier companies
Uniqueness of supplied product
Availability of substitutes
Threat of forward integration
Purchasing Industries purchase behavior
Industry Analysis
Competitive Environment Analysis
- Porter’s Five Forces Model
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Industry Analysis
Competitive Environment Analysis
- Industry Driving Forces
Industry conditions change because EXTERNAL FORCES are DRIVING industry participants to alter their actions
DRIVING FORCES are the MAJOR UNDERLYING CAUSES of changing industry & competitive conditions
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Changes in long-term industry growth rate Changes in who buys the product & how
they use it Product innovation Technological change/process innovation Marketing innovation Entry or exit of major firms Diffusion of technical knowledge
Industry Analysis
Competitive Environment Analysis
- Industry Driving Forces
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Increasing globalization of industry Changes in cost and efficiency Shifting from standardized to differentiated
products (or vice versa) Regulatory influences & government policy
changes Changing societal concerns, attitudes, &
lifestyles Changes in degree of uncertainty & risk
Industry Analysis
Competitive Environment Analysis
- Industry Driving Forces
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Increasing globalization of industry Changes in cost and efficiency Shifting from standardized to differentiated
products (or vice versa) Regulatory influences & government policy
changes Changing societal concerns, attitudes, &
lifestyles Changes in degree of uncertainty & risk
Industry Analysis
Competitive Environment Analysis
- Industry Driving Forces
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Industry Analysis
Competitive Environment Analysis
- Industry Driving Forces
Industry Participants: Competitors Customers Suppliers
Driving Forces Analysis Steps:1. Identifying what the driving forces are2. Assessing whether the drivers of change are, on the whole,
acting to make the industry more or less attractive3. Determining what strategy changes are needed to prepare
for the impact of the driving forces.Prof. Vijay K S, MBA Programme`-BIET, Davangere
Industry Analysis
Competitive Environment Analysis
- Key Success Factors
Apparel Industry
Designs
Colour Combination
Low CostCreativ
ityProf. Vijay K S, MBA Programme`-BIET, Davangere
Industry Analysis
Competitive Environment Analysis
- Key Success Factors
KSF are the variables that can significantly affect the overall competitive positions of companies within any particular industry.
KSF are the strategy elements, product and service attributes, operational approaches, resources and competitive capabilities that are essential to surviving and thriving in the industry.
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Key Success Factors Weight
Company ARating
Company AWeighted Score
Company BRating
Company BWeighted Score
1 2 3 4 5 6
Total 1.00
Industry MatrixIndustry Analysis
Competitive Environment Analysis
- Key Success Factors
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Industry Analysis
Competitive Environment Analysis
- External Factor Analysis Summary (EFAS)
Prof. Vijay K S, MBA Programme`-BIET, Davangere
Industry Analysis
Competitive Environment Analysis
- External Factor Analysis Summary (EFAS)
Prof. Vijay K S, MBA Programme`-BIET, Davangere
