strategic analysis, Apuntes de Administración de Empresas

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CHAPTER 2

STRATEGIC ANALYSIS (I): EXTERNAL ANALYSIS

STRATEGIC MANAGEMENT

UAB

Index

2.1. Mission, vision, and strategic objectives

2.2. External analysis

2.2.1. External environment concept and its levels

2.2. 2. Analysis of the general environment

2.2.3. Analysis of the industry and the competitive environment

2.2.4. Segmentation of demand. Strategic groups.

2.1. Mission, vision, and strategic objectives

• Reflects the identity and personality of the firm; why it exists.
• What is the essence of the business and what do we want it to be?

MISSION

• Future perceptions
• What will we be, what should we be, and what do we want to be in the future?

VISION

2.1. Mission, vision, and strategic objectives

2.2. External analysis

2.2.1. External environment concept and its levels

✓ CONCEPT : The environment refers to all the factors outside the

company, that cannot be controlled, and that affect the results and

success of its strategies.

What are the characteristics of the current business environment?

✓ LEVELS OF THE ENVIRONMENT :

General environment and competitive environment

OBJETIVE: DETECT THREATS AND OPPORTUNITIES FROM THE ENVIRONMENT

2.2. External analysis

2.2.1. External environment concept and its levels

LEVELS OF THE ENVIRONMENT

FIRM

Competitors Suppliers Technological Customers context Socio-cultural context Political context Economic context Ecological context Legal context

Specific

environment

General

environment

2.2. External analysis

2.2.2. Analysis of the general environment

STRATEGIC PROFILE – PESTLE ANALYSIS

Stages for analysis:

1) To define the limits of the environment (geographic)

2) Identify the key variables to be considered within each critical

dimension of the environment : Political, Economic, Socio-cultural,

Technological, Ecological, Legal (PESTEL)

3) Develop the strategic profile (list all the factors, assess them from 1-5,

highlight threats and opportunities).

STRATEGIC PROFILE –

PESTLE ANALYSIS

➢ Simple and easy to use

➢ Subjective and qualitative

Source: Navas and Guerras (2013: 85)

2.2. External analysis

2.2.2. Analysis of the general environment

Industrial districts

Concept: Group of similar firms and institutions , connected by the same

economic activity , located in a specific geographic environment.

Institutions

providing

support

Suppliers Firms in the same business

Distributing

firms and

customers

Firms from related industries providing products that complement the main one

TYPES OF AGENTS

Why is it important to study industrial districts?

To determine how companies’ location affects their competitiveness

The location in an industrial district can improve firm

competitiveness for the following reasons:

▪ Increase in productivity

▪ Innovation

▪ New start-ups development

2.2. External analysis

2.2.2. Analysis of the general environment

Industrial districts

✓The specific environment inclueds all the external factors related to the industrial sector in which the company operates. ✓ Specific environment analysis Objective : Examine industry attractiveness (a factor that conditions the profitability of the firm) Steps of the analysis :

1. Establish boundaries of the competitive environment
2. Assess industry attractiveness
3. Identify those segments that represent more specific competitive environments
4. Analyze the practices and behaviors of rival firms 2.2. External analysis

2.2.3. Analysis of the industry and the competitive environment

Industry

1. Delimit the competitive environment

¿WHO ARE OUR MAIN COMPETITORS?

Two criteria to establish industry boundaries Industry classifications: CNAE (Spain), NACE (international)  Industry concept : Group of companies that offer products or services that are close substitutes for each other (Hill and Jones, 2009). Technological (supply side) Market (demand side) 2.2. External analysis

2.2.3. Analysis of the industry and the competitive environment

2. Analyze industry attractiveness

✓ OBJECTIVE : Analyze competitive forces in an industry to identify opportunities and threats  effects on firm profitability.

PORTERS’ FIVE FORCES

MODEL

2.2. External analysis

2.2.3. Analysis of the industry and the competitive environment

Hill & Jones, (2009). Adapted from Porter (1982, 24)

1. INTENSITY OF RIVALRY

The greater the intensity of competition , the lower the possibility of obtaining higher

returns. Therefore, the attractiveness of the industry decreases

Factors that

condition the

intensity of

competition

1. Number of competitors and equilibrium among them
2. Industry growth rate
3. Mobility barriers
4. Exist barriers
5. Product diferentiation
6. Costs due to change in suppliers
7. Cost structure of the firm
8. Competitors diversity
9. Strategic interests PORTERS’ FIVE FORCES MODEL 2.2. External analysis

2.2.3. Analysis of the industry and the competitive environment