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CHAPTER 3, Challenges and Opportunities
• Figure 3.1 The Planning Model
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what do we have, what do we need?
Figure 3.2 , Matching the Profile to the Environment
Examining the environment
Matching what needs to
be done
With what can be done
In all aspects of the
business
Examining the organizational profile
What do we need to succeed?
What do we have to offer?
What makes the industry work?
What strengths do I have, and what weakness must I
overcome?
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Examining the Environment
• Figure 3.3,
• The three levels
• of the environment
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Examining the Remote Environment
• To understand the remote environment we must gather information about a variety of issues, such as:
• Economic Issues
• Social Issues
• Political Issues
• Technological Issues
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Sources of information
• government publications
• university research papers
• trade association articles
• economic and social forecasts
• publications by consulting firms and financial institutions
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Figure 3.4 the remote environment for a ski area
Remote Environment for a Ski Area
Type of Issue
Description Possible Impact
EconomicThe amount of disposable income available for recreation, in the hands of customers.
As available income increases, demand for expensive holidays will improve.
Social
The perception of people regarding health and wellness and the use of recreation to achieve those ends.
As the personal need for exercise increases, demand for skiing should also increase.
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Figure 3.4 the remote environment for a ski area
Political
Government regulations regarding development of park land and the environmental impact of the development of recreation areas.
If we already have a ski area, government could protect our competitive position by not allowing development permits, or it could harm our competitive advantage by opening opportunities for new ski areas to join the market.
TechnologicalInternet based advertising systems and reservation systems.
We could attract a more diversified market from global sources.
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Examining the Industry Environment
• From the definition described previously, the Industry Environment:– Contains issues that directly impact the entire
industry and all of the competitors in the industry. Those issues could be influenced by the collective efforts of all organizations in the industry.
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Figure 3.5 The Five forces That Impact Competition in an Industry.
Rivalries among existing organizations as they compete with
each other
Buyers and customers
wanting lower prices
Suppliers wanting higher
prices and more business
New entrants to the industry wanting to join and share the
market
Substitute products from
other industries wanting to take away the market
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Figure 3.6 What makes the forces powerful?
Characteristics That Make The Forces Powerful
Threat of Substitute Products
Demand is high for the total industry relative to supply
Customers are not product sensitive
Threat of New
Entrants
Profits are high
Small capital investment is required
Customers are not brand sensitive
Demand exceeds supply in the industry for the product or service
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Figure 3.7 What makes the forces powerful?
Power of Buyers
Buying groups are formed
The product doesn’t add value
The buyers are not brand sensitive
They could integrate backward
Power of Suppliers
A small number of suppliers
The product supplied is important to the quality of the buyer’s product
Low profits are earned by suppliers
They could integrate forward
Rivalries Among Existing Organizations
Industry profits are low
Customer growth rate is low
Customers are not brand sensitive
Switching costs are high
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Examining the Local Environment
From the definition described previously,
the Local Environment:
• Contains issues that impact each individual organization in the industry in terms of how the organizations deal with each other. Those issues could be influenced by the direct efforts of a particular organization.
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Figure 3.10, Characteristics of the local environment.Analyzing the local Environment
Issue Question to be answered
Customers
Geographic
Demographic
Psychographic
Competitive Position
Market Share
Breadth of the product line
Product Quality
Advertising effectiveness
Production Efficiencies
Financial Efficiencies
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Characteristics of the local environment.
Creditors Financial Claims
Employees
Quality
Availability
Cost
Suppliers
Quality
Quantity
Timeliness
Cost
Ecological issues
Impact
Predictability
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Examining the Organizational Profile• As a starting point, identify the “Major
areas” of the organization where strengths and weaknesses might be found.
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Figure 3.12, Step 1, in profiling an organization.
Identify the “Major Areas”Major areas
Strategic planning
Marketing
Financial and accounting
Production, operations and technical
Human resource management
Organization and management
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Figure 3.13, Step 2, in profiling an organization., develop a complete list of potential issues.
Major areas Potential issues
Strategic planning
Quality of long and short range objectives
Degree of buy in from employees
Degree of buy in from directors and senior management
Can the organization act on the objectives?
Marketing
Breadth of the product line
Ability to gather and use information about the market
Brand loyalty
Customer service, before and after sale
Product image
Market share
Channels of distribution
Effectiveness of promotions
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Closing Remarks
Where to from here?• At this point in the strategic planning process the
organization has defined its industry and has defined itself in the industry.
• The next step is to organize these issues in to opportunities and challenges (threats) in the industry and strengths and weaknesses in the organization, and then match them all together in one process that will point the way to the best possible decision.
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