P 3 BUSINESS ANALYSISENVIRONMENTAL MODELS
Revision Class
RATIONAL MODEL
Mission
Corporate
Appraisal
Strategic Options
ChoicesImplementation
Position Audit
Strategic Control
Environment
Analysis
Position Choice
Action
STRATEGY LENSES A way to understand an organization’s
strategy As design: logical process, forces and
constraints weighed carefully, analytic and evaluative techniques to establish clear strategic direction. Implementation of planned action.
As experience: adaptation of past strategies, what has gone before.
As ideas: innovation, variety and diversity for generating new ideas.
Example: Jaguar, BMW, Mercedes convertible
PESTEL Shows macro-environmental influences
that might affect organization Political: government stability, taxation
policy, foreign trade regulations, social welfare policies
Economic: business cycles, GNP trends, interest rates, money supply, inflation, unemployment, disposable income.
Socio-cultural: population demographics, income distribution, social mobility, lifestyle changes, attitudes to work and leisure, consumerism, levels of education.
PESTEL Technological: govt spending on
research, govt and industry focus on technological effort, new discoveries & developments, speed of technology transfer, rates of obsolescence.
Environmental: EPLs, waste disposal, energy consumption
Legal: competition law, employment law, health and safety, product safety
5 FORCES This framework helps identify the
sources of competition in an industry or sector:
Forces strong – profits are weak Forces weak – profits are strong THREAT OF ENTRY: economies of scale,
capital requirement, access to supply or distribution channels, customer or supplier loyalty, experience, expected retaliation, legislation or government action, differentiation
5 FORCES THREAT OF SUBSTITUTES: e-mail substitutes
postal service, travel substitutes, product substitutes eye glasses, lenses, laser treatment, herbal medicine, medicine free way of life.
POWER OF BUYER OR SUPPLIER: (buyer power) volume purchase, cost of switching, threat of acquiring the supplier (supplier power) few suppliers, switching cost high, competing directly with buyers
RIVALRY: competitors: offer similar products to similar markets, more competition less profit, low growth affects profits, price wars, low differentiation.
PORTER’S DIAMOND Competitive environment will differ
between countries. Some nations are more competitive
than others. The determinants of national
advantage:
Demand Conditions
Firm Strategy, structure,
rivalry
Related & Support
Industries
Factor Conditions
PORTER’S DIAMOND Factor conditions: human resources, physical
resources, knowledge, capital, infrastructure. Home demand conditions: Japanese
customers high expectations of electronic equipment provided impetus for those industries in Japan.
Related and Support Industries: one successful industry may lead to advantage in related and support industry. Italy: leather foot wear, leather machinery, design services. Singapore, port services, ship repair services. Pakistan, textiles, cotton, ginning, weaving.
PORTER’S DIAMOND Firm strategy, industry and rivalry:
bases of advantage. Germany: systematic, hierarchical processes, contributed to reliability and technical excellence in engineering industries. Domestic rivalry: Pharmaceutical industries in Switzerland.
SCENARIO PLANNING Scenarios are detailed and plausible
views of how the business environment of an organization might develop in the future based on groupings of key environmental influences and drivers of change about which there is a high level of uncertainty.
When environment has high level of uncertainty due to complexity or rapid change
SCENARIO PLANNING Approach to understand the future
impact of the environment 10 years, 20 years or even more Predicting plausible futures Improves organizational learning How environment unfolds and influences
strategies
SCENARIO PLANNING Key drivers for change: Market globalization: similar needs, global
customers, transferable marketing Cost globalization: scale economies,
sourcing efficiencies, country specific costs, high product development costs
Globalization of competition: interdependence, competitors global, high exports/imports
Globalization of govt policies: trade policies, technical standards, host government policies
CYCLE OF COMPETITION
Incumbent Entrant
Builds Barriers
Attacks soft market
segments
No responseWidens attack to
adjacent segments
Reinforces barriers
Starts price wars
Attacks entrant’s home
market
Restart the cycle in adjacent
market