STRATEGIC AWARENESS

WHAT IS SA? You are manufacturing and selling a car Put these factors in order: product, style,

emotion, delight What car is it? In this country 60% of cars are

domestically purchased What company is it? Do you think it’s successful and why?

WHAT IS SA? Sue is 18, her holiday wardrobe is sorted It’s all been done in one hit She looks chic and up to the minute

when she baby sits for a friend e.g. furry gilet, military style jacket, gypsy skirt

She says “why buy a Mark Jacobs jacket if you can get a lookalike for less”

What’s the name of the company? Is it successful and why?

WHAT IS SA? It’s made from sugar, tastes like sugar, is

600 time sweeter than sugar, but it’s not sugar

It can be baked, it has a long shelf life and is easily mixed with other ingredients

What’s its name? Who makes it? Why is it so successful?

WHAT IS SA? Example 1 – Renault Example 2 – Primark Example 3 - Sucralose or Splenda – Tate

and Lyle

WHAT IS SA? Other examples: Adidas – merged with Reebok (Aug 05) Rimmel, Chanel, H & M, H Stern,

Burberry, Roberto Cavalli…….. What’s the link?

McDonalds – new clown, Serena and Venus Williams, Destiny’s Child, Justin Timberlake – why?

WHAT IS SA? – more examples

Disney Sony Tesco BP Ryanair

BUSINESS ENVIRONMENT DEEPER EXAMINATION OF THE FORCES

CAUSING CHANGE INSIDE FIRMS FORCES THAT ACT AS CATALYSTS FOR

CHANGE TRADITIONAL – “PEST”, “NEDSLEPT”,

industry life cycle

BUSINESS ENVIRONMENT

ORG

NAT TECH POLIT

ECON

DEMO SOCIAL

ENVIRO

LEGAL

NEDSLEPT NATURAL – climate/weather factors ECONOMIC – state of the economy,

competition, demand and supply etc DEMOGRAPHIC – population change -

age, sex, immigration, geographical distribution, number of marriages, birth and death rate

SOCIAL – attitudes, tastes, fashions, habits

NEDSLEPT LEGAL – UK government law, EU law and

international law ENVIRONMENTAL – impact of tourism on

the environment, pressure groups, media POLITICAL – attitude to tourism, pro/anti,

actions of government – domestic and international – particularly the increasing relevance of the EU

TECHNOLOGICAL – research and development, delivering tourism

INDUSTRY LIFE CYCLE Illustrates the stages that an industry

moves through Enables a business to identify where it is

in the cycle and what its future strategy should be

Similar to the product life cycle, but not the same!

INDUSTRY LIFE CYCLE

Sales maturity

growth decline

intro 0 Time

INDUSTRY LIFE CYCLE Intro - lead users Early growth -early adopters Late growth -early majority Maturity/Decline - late majority Decline - laggards

INDUSTRY LIFE CYCLE Intro – industry is “up for grabs” often

based on innovation - is it really an industry at all - who wants the product? how can it be sold? what is the right price?

Growth - firms worry about volume, quality and price e.g. can we sell 2 million laptops this year – there is a focus on improvements

Maturity/Decline - squeezing the profit out – margins often get thin - economies of scale typically important

OTHER MODELS PEARCE & ROBINSON – looks at 3

environments1. REMOTE ENVIRONMENT - global and

domestic - comprises five factors that are not influenced by a single firm i.e. economic, social, political, technological, and ecological. These factors must be considered by the firm when working with the market.

OTHER MODELS2. INDUSTRY ENVIRONMENT – competitive

forces - made up of the entry barriers, supplier power, buyer power, substitute availability, and competitive rivalry

These contending forces are of the greatest importance to the firm in strategy formulation.

OTHER MODELS3. OPERATING ENVIRONMENT - also called

competitive or task environment - it deals closely with competitors, creditors, customers, labour, suppliers

In assessing the competitive position of the firm, the following criteria are:

Market share, Breadth of product line Effectiveness of sales distribution Price competitiveness

OTHER MODELS Advertising promotion effectiveness Location and age of facility Capacity and productivity Experience, Raw material costs,

Financial position Relative product quality, R&D

advantages calibre of personnel, customers, suppliers, other stakeholders

OTHER MODELS DILL – TASK ENVIRONMENT – This focuses on

forces affecting the industry and its structure e.g. competitors, customers, suppliers, and substitutes

ROBINS – Looks at the PRIME FORCES influencing a business e.g. NATURE OF WORKFORCE

TECHNOLOGY ECONOMIC SHOCKS SOCIAL TRENDS WORLD POLITICS COMPETITION

BUSINESS ENVIRONMENTKEY FACTORS FOR SUCCESS ANALYSIS

FOCUS ON THE KEY FACTORS FOR SUCCESS IN AN INDUSTRY

THEN FOCUS ON THE KEY ENVIRONMENTAL FORCES

KEY FACTORS FOR SUCCESS ANANLYSIS

EXAMPLE - Car industry KEY FACTORS1. low unit wage costs2. technological innovation3. innovative design

KEY FACTORS FOR SUCCESS ANALYSIS KEY ENVIRONMENTAL FORCES1. general wage levels 2. regulations and employment law3. strength of trade unions4. government policy on industrial

relations5. support for research and

development

PORTER’S FIVE FORCES LOOKS AT THE FACTORS SPECIFIC

TO THE COMPETITIVE BALANCE OF POWER IN AN INDUSTY

CAN BE USED BY A FIRM TO:1. identify opportunities in its

environment 2. protect itself against competition

and other threats

PORTER’S FIVE FORCES

INDUSTRY COMPETITORS

RIVALRY

POTENTIALENTRANTS

BUYERS

SUBSTITUTES

SUPPLIERS

FIVE FORCES THREAT OF POTENTIAL ENTRANTS

DEPENDS ON BARRIERS TO ENTRY e.g. technical knowledge

THREAT OF SUBSTITUTES e.g. SEGA v SONY v NINTENDO

SUPPLIER POWER e.g. power of Microsoft over PC makers

FIVE FORCES BUYER POWER e.g. the power of

Tescos or Asda in buying from farmers and other suppliers

ALL OF THE ABOVE INFLUENCE THE EXTENT OF RIVALRY BETWEEN FIRMS

OTHER FACTORS: the number of firms in the market, their relative market share, how independent they are

FOUR LINKS ANALYSIS LOOKS AT THE FACTORS SPECIFIC TO

CO-OPERATION IN AN INDUSTRY FIRMS HAVE FORMAL & INFORMAL

LINKS WITH OTHERS COLLUSION – illegal OPPORTUNITIES & THREATS ARISE

AS A RESULT OF THE LINKS

FOUR LINKS ANALYSIS

THE FIRM

GOV LINKS & NETWORKS

INFORMAL COOP LINKS& NETWORKS

FORMALCOOP LINKSCOMPLEMENTORS

FOUR LINKS ANALYSIS GOV LINKS & NETWORKSe.g. government may be a customer,

local Business Link INFORMAL COOP LINKS & NETWORKS i.e. no legal connection, local

Chamber of Trade and Commerce, Trade Association

FOUR LINKS ANALYSIS FORMAL COOP LINKS – a legal contract e.g. a joint venture, joint shareholding,

contract to supply COMPLEMENTORS Firms whose products add value to the

base firm e.g. Hewlett Packard and Microsoft

HP products are complemented by Microsoft software