Gregory G. Dess
G. T. Lumpkin
Marilyn L. Taylor
Environmental
Scanning
Surveillance
of a firm’s external environment
•
Predict
environmental changes to come
•
Detect changes already under way
Proactive
mode
Environmental
Monitoring
Track
evolution of
•
Environmental
trends
•
Sequences
of events
•
Streams
of activities
Competitive
Intelligence
•
Define
and understand a firm’s industry
•
Identify
rivals’ strengths and weaknesses
•
Intelligence
gathering (data)
•
Interpretation
of intelligence data
•
Helps
a firm avoid surprises
What
Competitive Intelligence Is and Is Not
Competitive
Intelligence Is …
- Information that has been analyzed to the point where you can make a decision.
- A tool to alert management to early recognition of both threats and opportunities.
- A means to deliver reasonable assessments.
- A way of life, a process.
Competitive
Intelligence Is Not …
- Spying. Spying implies illegal or unethical activities. It is a rare activity.
- A crystal ball. CI is good approximation of reality, it does not predict the future.
- Database search. Data by itself is not good intelligence.
A job for
one smart person
Environmental
Forecasting
•
Plausible
projections about
•
Direction
of environmental change
•
Scope
of environmental change
•
Speed
of environmental change
•
Intensity
of environmental change
•
Scenario
analysis
SWOT
Analysis
•
Managers
need to analyze
•
The
general environment
•
The
firm’s industry and competitive environment
•
SWOT
analysis
•
Strengths
•
Weaknesses
•
Opportunities
•
Threats
•
Basic
technique for analyzing firm and industry conditions
The General
Environment
•
General
environmental trends and events
•
Little
ability to predict them
•
Even
less ability to control them
•
Can
vary across industries
Demographic
Segment
•
Aging
population
•
Rising
affluence
•
Changes
in ethnic composition
•
Geographic
distribution of population
•
Greater
disparities in income levels
Sociocultural
Segment
•
More
women in the workforce
•
Increase
in temporary workers
•
Greater
concern for fitness
•
Greater
concern for environment
•
Postponement
of family formation
Political/Legal
Segment
•
Tort
reform
•
Americans
with Disabilities Act (ADA)
•
Repeal
of Glass-Steagall Act in 1999
•
Deregulation
of utility and other industries
•
Increases
in federally mandated minimum wages
•
Taxation
at local, state, federal levels
•
Legislation
on corporate governance reforms (Sarbanes-Oxley Act)
Technological
Segment
•
Genetic
engineering
•
Emergence
of Internet technology
•
Computer-aided
design/computer-aided manufacturing systems (CAD/CAM)
•
Research
in synthetic and exotic materials
•
Pollution/global
warming
•
Miniaturization
of computing technologies
•
Wireless
technology
Economic
Segment
•
Interest
rates
•
Unemployment
•
Consumer
Price index
•
Trends
in GDP
•
Changes
in stock market valuations
Global
Segment
•
Increasing
global trade
•
Currency
exchange rates
•
Emergence
of the Indian and Chinese economies
•
Trade
agreements among regional blocs (NAFTA, EU, ASEAN)
•
Creation
of WTO (decreasing tariffs/free trade in services)
The
Competitive Environment
•
Sometimes
called the task or industry environment
•
Includes
•
Competitors
(existing and potential)
•
Customers
•
Suppliers
•
Porter’s
five-forces model
The Threat
of New Entrants
•
Profits
of established firms in the industry may be eroded by new competitors
•
High
entry barriers lead to low threat of new entries
•
Economies
of scale
•
Product
differentiation
•
Capital
requirements
•
Switching
costs
•
Access
to distribution channels
•
Cost
disadvantages independent of scale
The
Bargaining Power of Buyers
•
Buyers
threaten an industry
•
Force
down prices
•
Bargain
for higher quality or more services
•
Play
competitors against each other
•
A
buyer group is powerful when
•
It
is concentrated or purchases large volumes relative to seller sales
•
The
products it purchases from the industry are standard or undifferentiated
•
The
buyer faces few switching costs
•
It
earns low profits
•
The
buyers pose a credible threat of backward integration
•
The
industry’s product is unimportant to the quality of the buyer’s products or
services.
The
Bargaining Power of Suppliers
•
Suppliers
can exert power by threatening to raise prices or reduce the
quality of purchased goods and services
•
A
supplier group will be powerful when
•
The
supplier group is dominated by a few companies and is more concentrated than
the industry it sells to
•
The
supplier group is not obliged to contend with substitute products for sale to
the industry
•
The
industry is not an important customer of the supplier group
•
A
supplier group will be powerful when
•
The
supplier’s product is an important input
to the buyer’s business
•
The
supplier group’s products are differentiated or it has built up switching costs
for the buyer
•
The
supplier group poses a credible threat of forward integration
The Threat
of Substitute Products and Services
•
Substitutes
limit the potential returns of an industry
•
Ceiling
on the prices that firms in that industry can profitably charge
•
Price/performance
ratio
The
Intensity of Rivalry among Competitors in an Industry
•
Jockeying
for position
•
Price
competition
•
Advertising
battles
•
Product
introductions
•
Increased
customer service or warranties
•
Interacting
factors lead to intense rivalry
•
Numerous
or equally balanced competitors
•
Slow
industry growth
•
High
fixed or storage costs
•
Lack
of differentiation or switching costs
•
Capacity
augmented in large increments
•
High
exit barriers
Using
Industry Analyses: A Few Caveats
•
Five-forces
analysis implicitly assumes a zero-sum game
•
Five-forces
analysis is essentially a static analysis
•
Value
net
n Suppliers and customers (the vertical
net)
- Substitutes and complements (the horizontal net)
Strategic
Groups within Industries
•
Two
unassailable assumptions in industry analysis
•
No
two firms are totally different
•
No
two firms are exactly the same
•
Strategic
groups
•
Cluster
of firms that share similar strategies
Breadth of product and geographic
scope, Price/quality, Degree of vertical integration and Type of distribution system
Strategic
Groups within Industries
•
Value
of strategic groups as an analytical tool
•
Identify
barriers to mobility that protect a group from attacks by other groups
•
Identify
groups whose competitive position may be marginal or tenuous
•
Chart
the future direction of firms’ strategies
•
Thinking
through the implications of each
industry trend for the strategic group as a whole
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