Chapter 2 The Competitive Environment: Assessing Industry Attractiveness

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Chapter 2The Competitive EnvironmentAssessing
Industry Attractiveness
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External Environment

• External environments are uncontrollable,
  multifaceted. They frame your firms
  opps/threats, your strategic options.
• You must understand what elements are critical,
  how do they affect you, where are they now, and
  where are they likely to be in the future?
• They dont affect everyone in the same way.
• 2 levels
• Macro- broad, general, all encompassing, affects
  all industries
• Industry or competitive environment

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Macro-Environment

• Demographic characteristics of the people in an
  area or market
• Political focuses primarily on governmental
  activities regulation, policies, taxation,
  support of business or industries, stability
• Social/Cultural attitudes, values, lifestyles,
  aspirations
• Technological technological developments that
  may have an impact on your industry or firm
  product or process
• Global What has caused it? What does it mean?
  What opportunities and threats does it present?
  What risks and competition exist? What are some
  of the implementation and control issues
  involved?

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Competitive Environment

• More specific and focused than macro. Looking at
  the specific industry a firm competes in and its
  characteristics or properties.
• Porters Five Forces Model of Competition is
  perhaps the most widely used framework. Exhibit
  2-1, p. 44.
• Threat of New Entrants Barriers to entry
• Bargaining Power of Customers
• Bargaining Power of Suppliers
• Competing Rivalry among existing sellers
• Potential Product Substitutes
• Question becomes What do you do about each
  force? Each has strategic implications.

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Strategic Groups

• Groups of firms in a single industry that pursue
  similar strategies
• Or compete in the same niche
• Understanding SG will help identify who your
  specific competition is
• It is more important to look at the competition
  within groups rather than the competition between
  groups
• Groups do shift, firms change focus, customer
  needs change
• Look at Honda and Toyota

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Information Gathering

• Main issues revolve around ethical data gathering
• Data storage
• Data interpretation
• Data dissemination
• How do you make sense of it all?