Environmental Scanning & Monitoring

Environmental Environmental Scanning Scanning

& & MonitoringMonitoring

Internal Analysis & Internal Analysis & Challenge of Internal Challenge of Internal

AnalysisAnalysis

What Tools Are Useful in Assessing What Tools Are Useful in Assessing Strengths and Weaknesses i.e. Strengths and Weaknesses i.e. Resources, Capabilities, and Core Resources, Capabilities, and Core CompetenciesCompetencies? ?

Strengths and Strengths and WeaknessesWeaknesses

Goal: objective assessment of your Goal: objective assessment of your strengths and weaknessesstrengths and weaknesses relative to competitorsrelative to competitors important to customersimportant to customers

Note: This is difficult to do well.Note: This is difficult to do well.

Challenge of Internal Challenge of Internal AnalysisAnalysis

Identifying, developing, protecting, Identifying, developing, protecting, and deploying resources, and deploying resources, capabilities, and core competenciescapabilities, and core competencies

ResourcesResources Inputs into a firm’s production process such Inputs into a firm’s production process such

as capital equipment, skill of individual as capital equipment, skill of individual employees, patents, finance, and talented employees, patents, finance, and talented managersmanagers Tangible Resources – Assets that can be seen Tangible Resources – Assets that can be seen

and quantifiedand quantified Intangible Resources – Family commitment, Intangible Resources – Family commitment,

networks, organizational culture, reputation, networks, organizational culture, reputation, intellectual property rights, trademarks, intellectual property rights, trademarks, copyrights copyrights

By themselves, resources do not create a By themselves, resources do not create a strategic advantage for the firm.strategic advantage for the firm.

CapabilitiesCapabilities Capacity to deploy resources that Capacity to deploy resources that

have been purposely integrated to have been purposely integrated to achieve a desired end state.achieve a desired end state.

Primary base for the firm’s Primary base for the firm’s capabilities is the skills and capabilities is the skills and knowledge of its employees.knowledge of its employees.

Just because the firm has a strong Just because the firm has a strong capacity for deploying resources capacity for deploying resources does not mean it has a competitive does not mean it has a competitive advantage.advantage.

Core CompetenciesCore Competencies

Resources and capabilities serve as Resources and capabilities serve as a source of competitive advantage a source of competitive advantage for a firm over its rival.for a firm over its rival.

Not all resources and capabilities Not all resources and capabilities are core competencies.are core competencies.

Many suggest that firms should Many suggest that firms should identify and concentrate on only 3 identify and concentrate on only 3 or 4 core competencies.or 4 core competencies.

Identifying and Building Identifying and Building Core CompetenciesCore Competencies

Core competencies must be Core competencies must be distinctivedistinctive.. Capabilities that are done better than Capabilities that are done better than

competitorscompetitors Identifying core competencies is key Identifying core competencies is key

to development of sound strategy.to development of sound strategy. We use the We use the value chainvalue chain to help to help

identify core competencies.identify core competencies.

The Value ChainThe Value Chain A framework for identifying core A framework for identifying core

competenciescompetencies Inside the firmInside the firm In the supply chainIn the supply chain

Can be used toCan be used to Identify strengths and weaknessesIdentify strengths and weaknesses Identify sources of competitive Identify sources of competitive

advantageadvantage Identify market opportunitiesIdentify market opportunities

The Value ChainFirm Infrastructure

Human Resource Management

Technological Development

Procurement

InboundLogistics

Operations Outbound Logistics

Marketing& Sales

Service

MA

RG

IN

MA

RG

IN

Sup

port

ing

Act

iviti

esP

rimar

yA

ctiv

ities

Relationship with Suppliers Relationship with Buyers

Elapsed Time - Value added time cost

Primary Activities in the Primary Activities in the Value ChainValue Chain

Inbound LogisticsInbound Logistics

Materials handling, warehousing, inventory Materials handling, warehousing, inventory control used to receive, store and disseminate control used to receive, store and disseminate inputs to a productinputs to a product

Fertilizer and chemical storage, delivery of Fertilizer and chemical storage, delivery of inputs, application of inputsinputs, application of inputs

Inbound Logistics

Marketing and Sales

Outbound Logistics

OperationsService

Human Resource management

Firm Infrastructure

Human Resources

Procurement


OperationsOperations

Take inputs from inbound logistics and Take inputs from inbound logistics and convert to final productsconvert to final products

Plowing, planting, spraying, harvesting, Plowing, planting, spraying, harvesting, feeding, medicating, weighing,etc.feeding, medicating, weighing,etc.

Inbound Logistics

Marketing and Sales

Outbound Logistics

OperationsService


Firm Infrastructure

Human Resources

Procurement


Outbound Logistics Outbound Logistics

Collecting, Storing, and physical Collecting, Storing, and physical distribution of the final product.distribution of the final product.

Crop storage, finished hog handling, Crop storage, finished hog handling, Processing and determining delivery Processing and determining delivery dates, delivery to the packer or elevator dates, delivery to the packer or elevator etc.etc.

Inbound Logistics

Marketing and Sales

Outbound Logistics

OperationsService


Firm Infrastructure

Human Resources

Procurement


Marketing and SalesMarketing and Sales

Provide means through which customers can Provide means through which customers can purchase products and to induce them to do sopurchase products and to induce them to do so

Advertising, communicating with buyers, Advertising, communicating with buyers, developing customer relationships, pricing developing customer relationships, pricing products (futures, hedging, forward contracting, products (futures, hedging, forward contracting, etc.), delivery schedulingetc.), delivery scheduling

Inbound Logistics

Marketing and Sales

Outbound Logistics

OperationsService


Firm Infrastructure

Human Resources

Procurement


ServiceService

Activities designed to enhance or Activities designed to enhance or maintain a product’s valuemaintain a product’s value

Timely delivery, identity preservation, Timely delivery, identity preservation, ISO9000, certifying as organic, etc.ISO9000, certifying as organic, etc.

Inbound Logistics

Marketing and Sales

Outbound Logistics

OperationsService


Firm Infrastructure

Human Resources

Procurement

Supporting Activities in the Supporting Activities in the Value ChainValue Chain

ProcurementProcurement Activities to purchase the inputs needed to Activities to purchase the inputs needed to

produce productsproduce products Negotiating with suppliers, standard timing of Negotiating with suppliers, standard timing of

replenishing parts and tools, setting up buying replenishing parts and tools, setting up buying groups, etc.groups, etc.

Technological DevelopmentTechnological Development Activities that improve the firm’s products and/or Activities that improve the firm’s products and/or

processes processes Volunteering for test plots, being a part of feeding Volunteering for test plots, being a part of feeding

trials, attending technology seminars/field days, trials, attending technology seminars/field days, designing equipment to make specific production designing equipment to make specific production tasks more efficient, etc.tasks more efficient, etc.

Inbound Logistics

Marketing and Sales

Outbound Logistics

Operations

Human Resources


Procurement

Service

Firm Infrastructure


Human ResourcesHuman Resources Recruiting, hiring, training, Recruiting, hiring, training,

developing, and compensating all developing, and compensating all personnelpersonnel

Inbound Logistics

Marketing and Sales

Outbound Logistics

Operations

Human Resources


Procurement

Service

Firm Infrastructure

Supporting Activities in Supporting Activities in the the

Value ChainValue ChainFirm InfrastructureFirm Infrastructure

General Management, planning, finance, accounting, General Management, planning, finance, accounting, legal support, governmental relations, etc.legal support, governmental relations, etc.

Establishment of accounting practices, management Establishment of accounting practices, management information systems, compliance with environmental information systems, compliance with environmental regulations, tracking and reporting for government regulations, tracking and reporting for government programs, etc.programs, etc.

Where strategy development takes place identifying Where strategy development takes place identifying opportunities and threats, resources and capabilities, opportunities and threats, resources and capabilities, and support of core competenciesand support of core competencies

Inbound Logistics

Marketing and Sales

Outbound Logistics

Operations


Firm Infrastructure

Service

Technology

Procurement


Inbound LogisticsInbound Logistics Materials handling, warehousing, inventory control used to Materials handling, warehousing, inventory control used to

receive, store and disseminate inputs to a productreceive, store and disseminate inputs to a product Fertilizer and chemical storage, delivery of inputs, application of Fertilizer and chemical storage, delivery of inputs, application of

inputsinputs OperationsOperations

Take inputs from inbound logistics and convert to final productsTake inputs from inbound logistics and convert to final products Plowing, planting, spraying, harvesting, feeding, medicating, Plowing, planting, spraying, harvesting, feeding, medicating,

weighing,etc.weighing,etc. Outbound LogisticsOutbound Logistics

Collecting, Storing, and physical distribution of the final product.Collecting, Storing, and physical distribution of the final product. Crop storage, finished hog handling, Processing and determining Crop storage, finished hog handling, Processing and determining

delivery dates, delivery to the packer or elevator etc.delivery dates, delivery to the packer or elevator etc.

Primary Activities in the Primary Activities in the Value ChainValue Chain Marketing and SalesMarketing and Sales

Provide means through which customers can purchase Provide means through which customers can purchase products and to induce them to do soproducts and to induce them to do so

Advertising, communicating with buyers, developing Advertising, communicating with buyers, developing customer relationships, pricing products (futures, hedging, customer relationships, pricing products (futures, hedging, forward contracting, etc.), delivery schedulingforward contracting, etc.), delivery scheduling

ServiceService Activities designed to enhance or maintain a product’s Activities designed to enhance or maintain a product’s

valuevalue Timely delivery, identity preservation, ISO9000, certifying Timely delivery, identity preservation, ISO9000, certifying

as organic, etc.as organic, etc.

Inbound Logistics

Marketing and Sales

Outbound Logistics

OperationsService


Firm Infrastructure

Human Resources

Procurement


ProcurementProcurement Activities to purchase the inputs needed to produce productsActivities to purchase the inputs needed to produce products Negotiating with suppliers, standard timing of replenishing Negotiating with suppliers, standard timing of replenishing

parts and tools, setting up buying groups, etc.parts and tools, setting up buying groups, etc. Technological DevelopmentTechnological Development

Activities that improve the firm’s products and/or processes Activities that improve the firm’s products and/or processes Volunteering for test plots, being a part of feeding trials, Volunteering for test plots, being a part of feeding trials,

attending technology seminars/field days, designing attending technology seminars/field days, designing equipment to make specific production tasks more efficient, equipment to make specific production tasks more efficient, etc.etc.

Human ResourcesHuman Resources Recruiting, hiring, training, developing, and compensating all Recruiting, hiring, training, developing, and compensating all

personnelpersonnel

Inbound Logistics

Marketing and Sales

Outbound Logistics

Operations

Human Resources


Procurement

Service

Firm Infrastructure

Supporting Activities in Supporting Activities in the the

Value ChainValue Chain Firm InfrastructureFirm Infrastructure

General Management, planning, finance, accounting, General Management, planning, finance, accounting, legal support, governmental relations, etc.legal support, governmental relations, etc.

Establishment of accounting practices, management Establishment of accounting practices, management information systems, compliance with environmental information systems, compliance with environmental regulations, tracking and reporting for government regulations, tracking and reporting for government programs, etc.programs, etc.

Where strategy development takes place identifying Where strategy development takes place identifying opportunities and threats, resources and capabilities, opportunities and threats, resources and capabilities, and support of core competenciesand support of core competencies

Inbound Logistics

Marketing and Sales

Outbound Logistics

Operations


Firm Infrastructure

Service

Technology

Procurement

The Result of the Value The Result of the Value ChainChain MarginsMargins

CaptureCapture the value from performing value- the value from performing value-creating activities as cheaply as possiblecreating activities as cheaply as possible

The basic idea is that the consumer is The basic idea is that the consumer is willing to pay a certain amount for the value willing to pay a certain amount for the value you create. This is depicted as the size of you create. This is depicted as the size of the overall pentagon.the overall pentagon.

The size of the individual activity boxes The size of the individual activity boxes represents the cost of performing those represents the cost of performing those particular activities.particular activities.

Thus, the smaller the size of the individual Thus, the smaller the size of the individual activity boxes relative to the value the activity boxes relative to the value the consumer is willing to pay, the greater the consumer is willing to pay, the greater the MARGIN will be for the firm.MARGIN will be for the firm.

Value Chain AnalysisValue Chain Analysis

A firm’s value chain must be compared to A firm’s value chain must be compared to competitors’ value chains to determine competitors’ value chains to determine where competitive advantages exist.where competitive advantages exist.

To be a source of competitive advantage a To be a source of competitive advantage a resource or capability must allow a firm to:resource or capability must allow a firm to: Perform an activity in a manner that is superior Perform an activity in a manner that is superior

to competitor’s performancesto competitor’s performances Perform a value-creating activity that Perform a value-creating activity that

competitors cannot completecompetitors cannot complete

Generating Alternative Generating Alternative Strategies From SWOTStrategies From SWOT SWOT analysis is a tool for helping assess SWOT analysis is a tool for helping assess

the current situation for the firm.the current situation for the firm. However, we need to be able to combine However, we need to be able to combine

the information in the SWOT analysis in a the information in the SWOT analysis in a meaningful way to generate alternative meaningful way to generate alternative strategies that we might pursue.strategies that we might pursue.

The TOWS matrix is a tool designed to The TOWS matrix is a tool designed to match external opportunities and threats match external opportunities and threats with our internal strengths and with our internal strengths and weaknessesweaknesses

SWOT AnalysisSWOT Analysis

Opportunities1.2.3.

Strengths1.2.3.

Threats1.2.3.

Weaknesses1.2.3.

Internal Environment

ExternalEnvironment

TOWS MatrixTOWS Matrix Technique used in strategy Technique used in strategy

formulation for combining formulation for combining External analysisExternal analysis

OpportunitiesOpportunities ThreatsThreats

Internal analysisInternal analysis StrengthsStrengths WeaknessesWeaknesses

TOWS MatrixTOWS Matrix

Weaknesses:1.2.3.

Strengths:1.2.3.

WO StrategiesUse Opportunities to

overcome weaknesses

SO StrategiesUse strengths to take advantage of opportunities

Opportunities:1.2.3.

WT StrategiesDefensive strategies

to minimize weaknesses and

avoid threats

ST StrategiesTake advantage of

Strengths to avoid

threats

Threats:1.2.3.

Source: Weihrich

The External Environment The External Environment AnalysisAnalysis

External Environmental External Environmental AnalysisAnalysis

A continuous process which includesA continuous process which includes

Scanning:Scanning: Identifying signals of environmental Identifying signals of environmental changes and trendschanges and trends

Monitoring:Monitoring: Detecting meaning through ongoing Detecting meaning through ongoing observations of environmental changes and trendsobservations of environmental changes and trends

Forecasting:Forecasting: Developing projections of Developing projections of anticipated outcomes based on monitored changes anticipated outcomes based on monitored changes and trendsand trends

Assessing:Assessing: Determining the timing and Determining the timing and importance of environmental changes and trends importance of environmental changes and trends for firms’ strategies and their managementfor firms’ strategies and their management

External Environmental External Environmental AnalysisAnalysis

Strategic IntentStrategic IntentStrategic MissionStrategic Mission

The ExternalThe ExternalEnvironmentEnvironment

Analysis of general environmentAnalysis of general environment

Analysis of industry environmentAnalysis of industry environment

Analysis of competitor environmentAnalysis of competitor environment

The ExternalThe ExternalEnvironmentEnvironment

PEST (STEP) AnalysisPEST (STEP) Analysis

POLITICALPOLITICAL ECONOMICECONOMIC SOCIAL/CULTURALSOCIAL/CULTURAL TECHNOLOGICALTECHNOLOGICAL


SLEPT AnalysisSLEPT Analysis

SOCIAL/CULTURALSOCIAL/CULTURAL LEGALLEGAL ECONOMICECONOMIC POLITICALPOLITICAL TECHNOLOGICALTECHNOLOGICAL


PESTLE AnalysisPESTLE Analysis

POLITICALPOLITICAL ECONOMICECONOMIC SOCIAL/CULTURALSOCIAL/CULTURAL TECHNOLOGICALTECHNOLOGICAL LEGALLEGAL ENVIRONMENTAL/ECOLOGICALENVIRONMENTAL/ECOLOGICAL


Industry EnvironmentIndustry Environment A set of factors that directly influences A set of factors that directly influences

a company and its competitive actions a company and its competitive actions and responsesand responses

Interaction among these factors Interaction among these factors determine an industry’s profit potentialdetermine an industry’s profit potential Threat of new entrantsThreat of new entrants Power of suppliersPower of suppliers Power of buyersPower of buyers Product substitutesProduct substitutes Intensity of rivalryIntensity of rivalry

Five Forces Model of Five Forces Model of CompetitionCompetition

Identify current and potential competitors Identify current and potential competitors and determine which firms serve themand determine which firms serve them

Conduct competitive analysisConduct competitive analysis Recognize that suppliers and buyers can Recognize that suppliers and buyers can

become competitorsbecome competitors Recognize that producers of potential Recognize that producers of potential

substitutes may become competitorssubstitutes may become competitors

Threat of New Entrants

Threat of New Entrants

Bar

gain

ing

Pow

er o

f

Bar

gain

ing

Pow

er o

f Su

pplie

rsSu

pplie

rs

Bargaining Power of Bargaining Power of BuyersBuyers

Threat of Substitute

Threat of Substitute

Products

Products

Rivalry A

mong

Rivalry A

mong

Competing Firm

s

Competing Firm

s

Five Forces Model of Five Forces Model of CompetitionCompetition

Five Forces ofFive Forces ofCompetitionCompetition

Threat of New EntrantsThreat of New Entrants

Barriers to entryBarriers to entry Economies of scaleEconomies of scale Product differentiationProduct differentiation Capital requirementsCapital requirements Switching costsSwitching costs Access to distribution channelsAccess to distribution channels Cost disadvantages independent of scaleCost disadvantages independent of scale Government policyGovernment policy Expected retaliationExpected retaliation

Bargaining Power of Bargaining Power of SuppliersSuppliers

A supplier group is powerful when:A supplier group is powerful when: it is dominated by a few large companiesit is dominated by a few large companies satisfactory substitute products are not satisfactory substitute products are not

available to industry firmsavailable to industry firms industry firms are not a significant customer industry firms are not a significant customer

for the supplier groupfor the supplier group suppliers’ goods are critical to buyers’ suppliers’ goods are critical to buyers’

marketplace successmarketplace success effectiveness of suppliers’ products has effectiveness of suppliers’ products has

created high switching costscreated high switching costs suppliers are a credible threat to integrate suppliers are a credible threat to integrate

forward into the buyers’ industryforward into the buyers’ industry

Bargaining Power of BuyersBargaining Power of Buyers Buyers (customers) are powerful when:Buyers (customers) are powerful when:

they purchase a large portion of an industry’s they purchase a large portion of an industry’s total outputtotal output

the sales of the product being purchased the sales of the product being purchased account for a significant portion of the account for a significant portion of the seller’s annual revenuesseller’s annual revenues

they could easily switch to another productthey could easily switch to another product the industry’s products are undifferentiated the industry’s products are undifferentiated

or standardized, and buyers pose a credible or standardized, and buyers pose a credible threat if they were to integrate backward into threat if they were to integrate backward into the seller’s industrythe seller’s industry

Threat of Substitute Threat of Substitute ProductsProducts

Product substitutes are strong threat Product substitutes are strong threat when:when:

customers face few switching costscustomers face few switching costs substitute product’s price is lowersubstitute product’s price is lower substitute product’s quality and performance substitute product’s quality and performance

capabilities are equal to or greater than those capabilities are equal to or greater than those of the competing productof the competing product

Intensity of RivalryIntensity of Rivalry

Intensity of rivalry is stronger when competitors:Intensity of rivalry is stronger when competitors:

are numerous or equally balancedare numerous or equally balanced experience slow industry growthexperience slow industry growth have high fixed costs or high storage costshave high fixed costs or high storage costs lack differentiation or low switching costslack differentiation or low switching costs experience high strategic stakesexperience high strategic stakes have high exit barriershave high exit barriers

High Exit BarriersHigh Exit Barriers Common exit barriers include:Common exit barriers include:

specialized assets (assets with values linked to specialized assets (assets with values linked to a particular business or location)a particular business or location)

fixed costs of exit such as labor agreementsfixed costs of exit such as labor agreements strategic interrelationships (relationships of strategic interrelationships (relationships of

mutual dependence between one business and mutual dependence between one business and other parts of a company’s operation, such as other parts of a company’s operation, such as shared facilities and access to financial shared facilities and access to financial markets)markets)

emotional barriers (career concerns, loyalty to emotional barriers (career concerns, loyalty to employees, etc.)employees, etc.)

government and social restrictionsgovernment and social restrictions

Competitor EnvironmentCompetitor EnvironmentCompetitor intelligenceCompetitor intelligence is the ethical is the ethical gathering of needed information and gathering of needed information and data about competitors’ objectives, data about competitors’ objectives, strategies, assumptions, and capabilitiesstrategies, assumptions, and capabilities what drives the competitor as shown by its what drives the competitor as shown by its

future objectivesfuture objectives what the competitor is doing and can do as what the competitor is doing and can do as

revealed by its revealed by its current strategycurrent strategy What the competitor believes about itself and What the competitor believes about itself and

the industry, as shown by its the industry, as shown by its assumptionsassumptions What the the competitor may be able to do, as What the the competitor may be able to do, as

shown by its shown by its capabilitiescapabilities

Competitor AnalysisCompetitor AnalysisFuture Objectives:Future Objectives:

Future objectivesFuture objectives How do our goals How do our goals compare with our compare with our competitors’ goals?competitors’ goals?

Where will the emphasis Where will the emphasis be placed in the future?be placed in the future?

What is the attitude What is the attitude toward risk?toward risk?

Competitor AnalysisCompetitor Analysis

Current strategyCurrent strategy

Current Strategy:Current Strategy: How are we currently How are we currently

competing?competing? Does this strategy Does this strategy

support changes in the support changes in the competitive structure?competitive structure?

Future objectivesFuture objectives


AssumptionsAssumptions

Assumptions:Assumptions: Do we assume the future Do we assume the future

will be volatile?will be volatile? Are we operating under a Are we operating under a

status quo?status quo? What assumptions do our What assumptions do our

competitors hold about competitors hold about the industry and the industry and themselves?themselves?




CapabilitiesCapabilities

Capabilities:Capabilities: What are our strengths What are our strengths

and weaknesses?and weaknesses? How do we rate compared How do we rate compared

to our competitors?to our competitors?





ResponseResponse

Response:Response: What will our competitors What will our competitors

do in the future?do in the future? Where do we hold an Where do we hold an

advantage over our advantage over our competitors?competitors?

How will this change our How will this change our relationship with our relationship with our competitors?competitors?

CapabilitiesCapabilities




Environmental Scanning & Monitoring

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