Strategic Management Chapter 3

Front 1

macro - environment

Back 1

Political factors
Economic conditions
Sociocultural
Technological factors
Environment (natural)
Legal /regulatory

Hint 1

PESTEL

the broad environmental context in which a company's industry is situated

Front 2

Strategic questions about a company's competitive environment

Back 2

1) how strong are the industry's competitive forces?
2) what are the driving forces in the industry?
3) market position of competitors - who's strongest and weakest?
4) rival's next move?
5) what are the industry's key success factors?
6) is the industry's outlook conductive to good profitability?

Front 3

5 forces model of competition

Back 3

Competition from rival sellers
Competition from potential new entrants
Competition from producers of substitute products
Supplier bargaining power
Customer bargaining power

Front 4

using the 5 forces model

Back 4

step 1) For each of the 5 forces, identify different parties involved and specific factors that bring competitive pressures

step 2) evaluate how strong the pressures stemming from each of the 5 forces are

step 3) determine whether the strength of the 5 forces is conductive to earning attractive profits in the industry

Front 5

rivalry increases when...

Back 5

1) when demand is growing slowly or declining

2) as it becomes less costly for buyers to switch brands

3) as the products of rival sellers becomes less differentiated

4) when there is excess supply or unused production capacity, especially if the product has high fixed & storage costs

5) as the number of competitors increases and they become more equal in size/capacity

6) as companies become more diverse in long term direction, objective, strategies, and countries

7) when high exit barriers exist and keep unprofitable companies from leaving.

Front 6

weapons for competing with rivals

Back 6

price discounting

couponing & advertising sales

advertising

innovating products

introducing new or improved features or selection

increasing customization of product or service

building better dealer networks

improving warranties & offering low interest financing

Front 7

factors that affect threat of new entrants

Back 7

reaction of incumbent firms to the new entry

barriers to entry

Front 8

biggest barriers to new entrants

Back 8

industry incmbent's cost advantages

strong brand preferences and high degrees of customer loyalty

network effects in customer demand (video games)

high capital requirements

building a network of distributors or dealers

restrictive government policies

Front 9

are barriers to entry high or low

Back 9

depends on the resources and capabilities possessed by the pool of potential entrants

Hint 9

high or low barriers to entry today, can switch tomorrow

Front 10

where strongest barriers to entry come from

Back 10

the strongest competitive pressures associated with potential entry frequently come not from the outsider, but from current industry participants looking for growth opportunities

Front 11

strength of competitive pressure from substitute products

Back 11

1) whether substitutes are really available and attractively priced

2) whether buyers view the substitute as comparable or better in quality, performance, ect.

3) whether the cost of switching is high of low

Front 12

factors that determine the strength of supplier's bargaining power

Back 12

1) whether demand for suppliers' product is high and they are in short supply

2) whether suppliers provide a differentiated input that enhances the performance of the indsutry' product

3) whether it s costly or difficult to switch suppliers

4) whether the supplier industry is dominated by a few large companies and whether it is more concentrated than the industry it sells to

5) whether suppliers provide an item that accounts for a sizable fraction of the cots of the industry's product

6) whether it makes good economic sense for industry members to integrate backward and self-manufacture instead of buy from suppliers

7) whether there are good substitutes available for the supplier's products

8) whether industry members are major customers of supplier's

Front 13

competitive pressure from buyers increases when...

Back 13

1) buyer demand is weak in relation to industry supply

2) when industry goods are standardized or differentiation is weak

3) when when their costs of switching to other brands or substitutes is low

4) when buyers are large, but small relative to the number of sellers

5) when they are well informed about sellers products, prices, and costs

6) when they pose a credible threat of integrating backward into the business of sellers

7) if buyers have discretion to delay their purchases or not purchase at all

Front 14

buyers are more sensitive to price when

Back 14

1) earnings or income is low

2) the product represents a large portion of their total purchases

Front 15

what determines the extent of competitive pressure

Back 15

the strongest competitive forces determine the extent of the competitive pressure on industry profitability

Front 16

effectively matching strategy to competitive conditions

Back 16

1) pursuing avenues that protects the firm from from as many of the different competitive pressures as possible

2) initiate actions to shift the competitive forces in the company's favor by altering the underlying factors driving the 5 forces

Hint 16

a company's strategy is increasingly effective the more it provides insulation from competitive pressure, shifts the battle in the company's favor, and positions the firm to take advantage of attractive growth opportunities.

Front 17

driving forces

Back 17

are the major underlying causes of change in an industry and competitive condidtions

Front 18

driving forces analysis

Back 18

step 1) identifying what the driving forces are

step 2) assessing whether the drivers of change or acting to make the industry more or less attractive

step 3) determining what strategy changes are needed to prepare for the impact of driving forces

Front 19

categories of driving forces

Back 19

changes in an industry's long-term growth rate

increasing globalization

emerging new Internet capabilities and applications

changes is who buys the product and how they use it

technological change and manufacturing process innovation

product and marketing innovation

entry or exit of major firms

diffusion of technical know-how across companies and countries

changes in cost and efficiency

reductions in uncertainty and business risk

regulatory influences and government policy changes

changing societal concerns, attitudes and lifestyles

Front 20

the most important part of driving forces analysis

Back 20

determining whether the impact of driving forces will increase or decrease market demand, competition, and profitability

Front 21

assessing the impact of the factors driving industry change

Back 21

1) are the driving forces as a whole causing demand to increase of decrease?

2) is the impact of the driving forces making competition more or less intense?

3) I will the driving forces lead to higher or lower profitability?

Front 22

main benefit of driving forces analysis

Back 22

is helping managers understand what strategy changes are needed to prepare for the impact of the driving forces

Front 23

strategic group mapping

Back 23

a technique for displaying the different market or competitive positions that rival firms occupy in the industry

Front 24

a strategic group

Back 24

a cluster of individual rivals that have similar competitive approaches and market positions

Front 25

a strategic group map

Back 25