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INDUSTRY & INTERNATIONAL

ENVIRONMENT

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INDUSTRY ENVIRONMENT

3 Important sectors

1. Customers2. Suppliers

3. Competitors

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INDUSTRY ENVIRONMENT -Customer

sector

Strategist must include 3 factors when analyzing

industry in terms ofcustomer segment

1. Buyer Identification

2. Demographic factors

3. Geographic locations

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INDUSTRY ENVIRONMENT -Customer sector

.continued

Distinct classes of buyer

Availability Price

Convenience Quality Warranty

Credit Reputation

Competitive product Product Turnover

Consumer Recognition Profit Potential

Product Availability Promotional & Merchandising support

Product Line-Breadth Supply Dependability

Cost vs. Profitability Price Product Performance

Financing Product Information Source Availability

Legal Conformity Product line Technical Assistance

CONSUMER

Retailers and/or Wholesalers

Industrial and/or institutional Buyers

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Industry Environment- Supplier

Sector1. Suppliers acquire more power if there industry is

more concentrated than the industry to which they

sell

2. The power of the supplier to raise price & lower

profits is lessened when the buyer firm is a

monopolist or oligopolies

3. The power of the supplier to raise price & lower

profits is greatest when the buyer is not an important

customer

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Industry Environment- Supplier

Sector4. The supplier has least power when there are

substitute materials available at a reasonable

cost and power is the maximum when thesubstitutes are not available

5. The power of the supplier is greatest when the

supplier can integrate forward. However the

threat can be offset if the buyer can integrate

backward

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Industry Environment- Supplier

Sector6. Supplier power is more when its product are

differentiated & switching cost is high

7. Suppliers power is high when they can supply

a component at cheaper rate than buyers can

make it themselves

8. When the suppliers product are crucial for

buyers market place success

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Industry Environment- Supplier

Sector1. Availability & cost of raw materials and sub-

assemblies

2. Availability & cost of energy

3. Availability & cost of energy

4. Availability & cost of labor

5. Lead Time

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Industry Environment- Competitor sector

ENTRY & EXIT OF MAJOR COMPETITORS

A) Barriers to entry

Product differentiation

Economies of scale

Absolute cost advantage, independent of size

Learning experience curve effects

Technology & specialized know how of firms already inindustry

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Industry Environment- Competitor sector

6. Access to marketing channels

7. Brand preference & customer loyalty

8. Capital requirement

9. Likely reaction of current firms

10. Regulatory policies

11. Tariffs & international trade restrictions

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Industry Environment- Competitor

sectorBARRIERS TO EXIT1. Managerial values prevent it

2. Other products or services are related to exitcandidates

3. Costs are sunk in assets

4. Direct exit costs are high

5. Indirect costs may reduce exit behavior

B) Availability to substitutes

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Industry Environment- Competitor

sectorC. Changing Fashions

D. Internet

E. Intensity of rivalry1. Number of equally balanced competitors

2. Slow industry growth

3. High fixed or storage cost4. Lack of differentiation or switching cost

5. High strategic stakes

6. High exit barriers

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INTERNATIONAL ENVIRONMENT

THREATS- From host countries;

1. Ownership

2. Employment3. Profits & Fees

4. Internal Debt-capital

5. Training & Development6. Host country markets

7. Technological bases

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INTERNATIONAL ENVIRONMENT

THREATS from potential risk

1. Political Risk

2. Social risk

3. Economic risk

4. Financial risk

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INTERNATIONAL ENVIRONMENT

OPPORTUNITIES- Driving forces

1.Increasing globalization of the industry

2.Product innovation3.Marketing innovation

4.Entry & Exit of major firms

5.Growing buyer preferences for differentiatedproducts

6.Diffusion of technical know-how across morecompanies & more countries

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INTERNATIONAL ENVIRONMENT

7. Changes in the long term industry growth rate

8. The internet & e-commerce opportunities & threats

9. Shifts in buyer demographics & new ways of usingproducts

10. Technological changes

11. Changing societal concerns, attitudes & lifestyles

12. Regulatory influences & government policy changes

13. Changes in uncertainty & risk

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FACTORS AFFECTING DIAGNOSIS

OF ENVIRONMENT

1. Dependency of the firm on the environment

2. Degree of development & complexity

3. Volatility

4. Time

5. Cost of search & luck

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Environmental Threats & Opportunities Profile

GLUECK (ETOP)

Market Industry Growth rate in 7%-8%

p.a. sports cycle -30%

p .a Unsaturated demand

Supplier Mostly ancillaries &associated companies -

spare parts &

components -REP license

for imported rawmaterials available

Technological Technological

upgradation in progress

import of m/c under OGL

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ETOP ANALYSIS

1. List all the most important opportunities &

threats facing the company

2. Assign weight to each factor 0 -1 (Notimportant to important) based on that factors

probable impact on a the Companys strategic

position (All weight sum to 1.00 regardless of

number of factors)

3. Assign a rating to each factor from 1-5 (poor

to outstanding) based on the companys

current response to that particular factor

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ETOP ANALYSIS

4. Get the weighted score -Weight x rating

5. 1-poor, 3 -average, 5 -Outstanding6. Total weighted score -how well the company is

responding to current and expected factor in

environment7. Comments -Why a particular factor was

selected and how weight and rating were

estimated