Analyzing External Environment

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Analyzing External Environment

• SOM 497
• Session 4

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FORD MOTOR COMPANYwww.ford.com/

• Ford Announcements
• Analyst Comments

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The Environmentally Aware Organization

• What is an environmentally aware organization?
• An organization that knows that it does not
  exist in the vacuum hence it pays attention to
  its surroundings
• What is this awareness / info use for?
• To analyze the external environment to make
  strategic decisions

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Analyzing External Environment

• What does Analyzing External Environment means
  / represents?
• the value managers add when they have a sense of
  events outside the company
• able to stay a step ahead of competitors by
  accurately anticipating and promptly responding
  to actions that can impact the organization

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Analyzing External Environment

• How is environmental awareness pursue?
• Inputs / Awareness
• Outputs / Infos uses

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Analyzing External Environment

• Inputs / Awareness
• Scanning Surveillance of the firms external
  environment to predict environmental changes to
  come and detect changes that are already underway
• Monitoring Tracks the evolution of trends,
  events, or streams of activities in the external
  environment
• Competitive intelligence Helps firms define and
  understand their industry and identify rivals
  strengths and weaknesses

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Analyzing External Environment

• Outputs / Infos uses
• Forecasting / Scenario Planning Tools that
  enable managers to imagine what the future may
  bring (threats and opportunities)
• SWOT Raw list of External Strengths, Weakness,
  Opportunities and Treats and their Why

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Analyzing External Environment

• What are the broad segments that Managers should
  be aware of (i.e. segments that influence the
  organization)?
• Demographic
• Sociocultural
• Political/legal
• Technological
• Macroeconomic
• Global

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What about competitors and business operations.?

• Porters Five Forces Model
• The role of the competitive (also called the task
  or industry) environment and its analysis.
• Dynamic Industry Analysis
• Assumes industry changes
• Incorporate synergies
• Strategic Groups
• the main competitors
• how a company fits in with the overall industry
  in which it competes

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Porters Five Forces Model
Relative Selling Volume No substitutes Companys
Relative Buying Volume Relevance of Suppliers
Product Switching Cost Threat of Forward
Integration
Threat of New Entrants
Economies of Scale Product Differentiation Capital
Requirements New Entrant Switching Costs Access
to Distribution Channels Cost Disadvantages
Independent of Scale
Availability Switching Costs Loyalty
Industry Competition - Rivalry -
Buyers Power
Suppliers Power
Relative Purchase Volume Product
Differentiation Buyers Switching Costs Price
Sensitivity Backward Integration Price-Quality
relationship
Size Number of Firms in the Industry Slow
Industry Growth High Fix or Storage Costs Lack of
Differentiation of Switching Cost Capacity
Augmented in Large Increments High Exit Barriers
Threat of Substitutes
IMPORTANT This is from the Organization
perspective!!!!
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Dynamic Industry Analysis
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Strategic Groups
Price
Low
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In Class Team ActivityPart 1

• Using
• your team work from the last classes
• todays homework
• Forms provided
• Discuss in the FUNCTIONAL TEAMS at the functional
  level
• 6-Environmental forces
• Porters 5 Forces
• Write down
• your conclusions
• do you need to change or include new questions to
  your last teamwork exercise?

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In Class Team ActivityPart 2

• Using
• your team work from the last classes
• todays homework
• Forms provided
• Conclusions from part 1
• Discuss in the SUPERMARKET TEAMS at the
  360-Degree level the overlapping or not between
  organizational functions of
• 6-Environmental forces
• Porters 5 Forces
• Write down
• your conclusions
• do you need to change or include new questions to
  your last teamwork exercise?