What you will learn in this section :• Envisioning Strategy

– Definition– Framework– Visual Models

• External Analysis– PEST– PEST Impact Analysis

• Industry and Competitive Analysis– Industry Structure– Evolution of Industries– Industry Supply Chain– Potential Industry Earnings– Porter’s 5 Forces Analysis– Competitive Intensity– Strategies for minimizing competitive forces– Perceptual Map– Barriers to Entry/Incumbency advantages– DSIR effect

• Company Resources and Capabilities– ARC Analysis/HR– SWOT Analysis– Value Creating Processes/Core Competencies– Strategic Gameboard– Balanced Scorecard– Change Management © Sunil Mehrotra

Understanding Strategic Management is like pealing an onion

Analyzing the External Environment:PEST Analysis

Political ChangeEco

nomic

Change

Technological

ChangeSocial Change

OpportunitiesOpportunities

ThreatsThreats

Fiscal PolicyMonetary PolicyTax lawsIntellectual Property protectionCopyright lawsSecurities LawsBusiness climate

GDPGDP growthExchange rateUnemployment rateSkilled laborEducation levelsTrade unionsInfrastructureHealthcare costsRaw materials

DemographicsIncome DistributionSocial stabilityEthnic patternsConsumerismDiscretionary incomeFashions/fadsConsumer trends

New technologiesMaterials technologiesProcess technologiesInformation technologiesCommunication technologiesGovernment incentivesEnergy costsBroadband penetrationTechnology incubation

© Sunil Mehrotra

ExternalEnvironment

PEST Analysis using the Internethttp://delicious.com/smehro/mbam619+PEST+Politics%20PEST Politicshttp://www.nytimes.com/interactive/2008/10/18/business/20081019-metrics-graphic.htmlCan Presidents tame business cycles

http://harvardbusiness.org/flatmm/hbextras/200805/recessions/HBR Interactive graphics on recessions

http://delicious.com/smehro/mbam619+PEST+economy%20PEST Economy

http://www.fedstats.gov/?cm_sp=ExternalLink-_-Federal-_-DOCFed Stats all in one place

http://www.allbusiness.com/marketing-advertising/market-research-analysis-market/11469816-1.htmlCollection of resources and links to free data

http://delicious.com/smehro/mbam619+PEST+Social%20PEST Social

http://delicious.com/smehro/mbam619+PEST+Technology%20PEST Technology

PEST Analysis: ExampleFederal Deficit as % of GDP

Example of fiscal policy :Visualizing federal budget

Example of fiscal policy:National Debt: 1940 to present

Who is funding our debt?

Citigroup's role in CDOs and the financial crisis

Auto worker wages

http://www.nytimes.com/imagepages/2008/12/10/business/20081210_LEONHARDT_GRAPHIC.html

Economy at a glance

Real Economic Grow th

Existing Home Sales

Consumer Prices

Unemployment

Productivity

-3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%

Economic Indicators

Sept. 2008Oct. 2008

% change from previous period

World map:Population

New technologies are being adopted faster today

16

Trough ofDisillusionment

Slope ofEnlightenment

Plateau ofProductivity

TechnologyTrigger

Peak of Inflated

Expectations

Visib

ility

Maturity

Mesh Networks

4G Wireless

Wireless Broadband

UWB

Light Emitting Polymer Displays

Micro Fuel Cells

Smart Dust

GPRSEDGE

WCDMA

MIMO

802.11b Wi-Fi

MEMS

As of 2Q03

Change Will Be Relentless:Wireless industry example

17

Hot SpotUsers/

Hot Spots

20082001

30,000 Users 1,000 Hot Spots

75,000,000 Users 167,000 Hot Spots

Gartner Predicts: Hot Spots Explode …

How the Web has grown and evolved

19

This Is the“Now Economy”

Faster Economic Pace

ThreatsThreatsEmerge Appear

Triennial RollingStrategyStrategy

Windows KeyholesOpportunityOpportunity

Forecast ChaoticDemandDemand

Impatient Customers

“Time Tortured”

Demand Convenience

Two Key Forces Driving Business Change

20

Culture: Innovation in art

21

Analyzing the External Environment:PEST Analysis

Political ChangeEco

nomic

Change

Technological

ChangeSocial Change

OpportunitiesOpportunities

ThreatsThreats

Fiscal PolicyMonetary PolicyTax lawsIntellectual Property protectionCopyright lawsSecurities LawsBusiness climate

GDPGDP growthExchange rateUnemployment rateSkilled laborEducation levelsTrade unionsInfrastructureHealthcare costsRaw materials

DemographicsIncome DistributionSocial stabilityEthnic patternsConsumerismDiscretionary incomeFashions/fadsConsumer trends

New technologiesMaterials technologiesProcess technologiesInformation technologiesCommunication technologiesGovernment incentivesEnergy costsBroadband penetrationTechnology incubation

© Sunil Mehrotra

ExternalEnvironment

Political Change Impact

Fiscal PolicyMonetary PolicyTax lawsIntellectual Property protectionCopyright lawsSecurities LawsBusiness climateInternational Trade

“Economy” Change Impact

GDPGDP growthExchange rateUnemployment rateSkilled laborEducation levelsTrade unionsInfrastructureHealthcare costsRaw materials

Strategicresponse

Impact of change

Nature ofchange

Political Change

Economic Change

Social Change

Technological Change

PEST Impact Matrix

Opportunities ThreatsThreats

© Sunil Mehrotra

It is crucial to describe the subject for the PEST analysis clearly so that people, contributing to the analysis, and those interpreting the results from PEST analysis, could understand the purpose of the PEST assessment and its implications

Strategicresponse

Impact of change

Nature ofchange

Political Change

Economic Change

Social Change

Technological Change

PEST Impact example:

Opportunities ThreatsThreats

© Sunil Mehrotra

PEST Analysis Example:

Political ChangeEco

nomic

Change

Technological

ChangeSocial Change

OpportunitiesOpportunities

© Sunil Mehrotra

InfrastructureTechnologies

EmergingMarkets

DigitalConnections

DemographicsEnvironmentalSolutions

Originations

Strategicresponse

Impact of change

Nature ofchange

Political Change

Economic Change

Social Change

Technological Change

PEST Impact example:

Opportunities ThreatsThreats

© Sunil Mehrotra

PEST Impact example:

© Sunil Mehrotra

Demographics

PEST Impact example:

© Sunil Mehrotra

Student Examples: Pest Analysis

Breanne HayesApril 2008 MBA Graziadio School of Business and ManagementPepperdine University

Elizabeth Passeretti

April 2008 MBA CandidateGraziadio School of Business and ManagementPepperdine University

Strategicresponse

Impact of change

Nature ofchange

Political Change

Economic Change

Social Change

Technological Change

PEST example:

Opportunities ThreatsThreats

FDA approval process

More conservative

Longer time to market

Shorten Product Development Cycle

Aging Population

Caring for the elderly

New growth opportunities

Identify product/market needs to serve the elderly

US economic downturn

Consumer spending down

Generic drugs more accepted

Evaluate acquisitions

New materials for joint replacement

New cost/quality frontier

Potential new competitors

New products Invest in

promising start-ups

© Sunil Mehrotra

Strategicresponse

Impact of change

Nature ofchange

Political Change

Economic Change

Social Change

Technological Change

PEST Impact example:

Opportunities ThreatsThreats

Democratic party in power

More government control

Pressure on prices

Operational Efficiency to reduce costs

Aging Population

Caring for the elderly

New growth opportunities

Identify product/market needs to serve the elderly

$100+ crude oil price

Commodity prices increasing

Focus on Operational Efficiency

Breakthrough in science.Process improvement technologies

New science and new technologies imminent

Potential new competitors

New start-ups.Disruptive technologies

Invest in/acquire promising start-ups

Pressure on costs

© Sunil Mehrotra

Contemplating the Future

Scenario Planning

http://strategicframing.com/strategic-planning-workshop/

Nappies 1-6?

What is visual thinking?

What is Strategic Management?-strategic planning framework

What is the role of the CEO/Leader?-Leadership styles

What is PEST Analysis?

Using the Internet for PEST Analysis-Data sources and web resources

Identifying business Opportunities and Threatsthrough PEST Impact analysis framework

Mnemonic 2