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CHAPTER 4 Environmental Scanning and Industry Analysis

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Environmental Scanning

Societal environment --

–Political-legal forces

–Economic forces

–Sociocultural forces

–Technological forces

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Societal Environment

Political-legal Forces --

–Allocate power; provide laws and regulations

Economic Forces --

–Regulate exchange of materials, money, energy and information

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Societal Environment

Sociocultural Forces --

–Regulate values, mores, and customs of society

Technological Forces --

–Generate problem-solving inventions

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Task Environment

Task environment --

–Elements or groups that directly affect a corporation and are affected by it

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Task Environment

Industry Analysis --

–In-depth examination of key factors within a corporation’s task environment

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Variables in Societal Environment

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Transformational Sociocultural Trends

8 Current Trends –

–Increasing environmental awareness–Growing health consciousness–Expanding seniors market–Impact of the Generation Y boomlet–Declining mass market–Changing pace and location of life–Changing household composition–Increasing diversity of workforce & market

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Scanning the Task Environment

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External Strategic Factors

Strategic myopia --

–Willingness to reject unfamiliar as well as negative information

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Issues Priority Matrix

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Analyzing the Task Environment

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Porter’s Approach to Industry Analysis

Threat of New Entrants –

–Economies of scale–Product differentiation–Capital requirements–Switching costs–Access to distribution channels–Cost disadvantages–Government policy

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Porter’s Approach to Industry Analysis

Rivalry Among Existing Firms –

–Number of competitors–Rate of industry growth–Product or service characteristics–Amount of fixed costs–Capacity–Height of exit barriers–Diversity of rivals

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Porter’s Approach to Industry Analysis

•Threat of Substitute Products or Services

•Bargaining Power of Buyers

•Bargaining Power of Suppliers

•Relative Power of Other Stakeholders

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Industry Evolution

Fragmented Industry –

–No dominant industry

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Industry Evolution

Consolidated Industry –

–Dominated by a few large firms

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Strategic Groups

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Strategic Types

•Defenders

•Prospectors

•Analyzers

•Reactors

General Types –

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Competitive Intelligence

Called business intelligence

Gathering information on a company’s competitors

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Forecasting

Forecasting Techniques --

–Extrapolation

–Brainstorming

–Expert opinion

–Delphi technique

–Statistical modeling

–Scenario writing

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Synthesis of External Factors -- EFAS