P 3 BUSINESS ANALYSISENVIRONMENTAL MODELS

Revision Class

RATIONAL MODEL

Mission

Corporate

Appraisal

Strategic Options

ChoicesImplementation

Position Audit

Strategic Control

Environment

Analysis

Position Choice

Action

STRATEGY LENSES A way to understand an organization’s

strategy As design: logical process, forces and

constraints weighed carefully, analytic and evaluative techniques to establish clear strategic direction. Implementation of planned action.

As experience: adaptation of past strategies, what has gone before.

As ideas: innovation, variety and diversity for generating new ideas.

Example: Jaguar, BMW, Mercedes convertible

PESTEL Shows macro-environmental influences

that might affect organization Political: government stability, taxation

policy, foreign trade regulations, social welfare policies

Economic: business cycles, GNP trends, interest rates, money supply, inflation, unemployment, disposable income.

Socio-cultural: population demographics, income distribution, social mobility, lifestyle changes, attitudes to work and leisure, consumerism, levels of education.

PESTEL Technological: govt spending on

research, govt and industry focus on technological effort, new discoveries & developments, speed of technology transfer, rates of obsolescence.

Environmental: EPLs, waste disposal, energy consumption

Legal: competition law, employment law, health and safety, product safety

5 FORCES This framework helps identify the

sources of competition in an industry or sector:

Forces strong – profits are weak Forces weak – profits are strong THREAT OF ENTRY: economies of scale,

capital requirement, access to supply or distribution channels, customer or supplier loyalty, experience, expected retaliation, legislation or government action, differentiation

5 FORCES THREAT OF SUBSTITUTES: e-mail substitutes

postal service, travel substitutes, product substitutes eye glasses, lenses, laser treatment, herbal medicine, medicine free way of life.

POWER OF BUYER OR SUPPLIER: (buyer power) volume purchase, cost of switching, threat of acquiring the supplier (supplier power) few suppliers, switching cost high, competing directly with buyers

RIVALRY: competitors: offer similar products to similar markets, more competition less profit, low growth affects profits, price wars, low differentiation.

PORTER’S DIAMOND Competitive environment will differ

between countries. Some nations are more competitive

than others. The determinants of national

advantage:

Demand Conditions

Firm Strategy, structure,

rivalry

Related & Support

Industries

Factor Conditions

PORTER’S DIAMOND Factor conditions: human resources, physical

resources, knowledge, capital, infrastructure. Home demand conditions: Japanese

customers high expectations of electronic equipment provided impetus for those industries in Japan.

Related and Support Industries: one successful industry may lead to advantage in related and support industry. Italy: leather foot wear, leather machinery, design services. Singapore, port services, ship repair services. Pakistan, textiles, cotton, ginning, weaving.

PORTER’S DIAMOND Firm strategy, industry and rivalry:

bases of advantage. Germany: systematic, hierarchical processes, contributed to reliability and technical excellence in engineering industries. Domestic rivalry: Pharmaceutical industries in Switzerland.

SCENARIO PLANNING Scenarios are detailed and plausible

views of how the business environment of an organization might develop in the future based on groupings of key environmental influences and drivers of change about which there is a high level of uncertainty.

When environment has high level of uncertainty due to complexity or rapid change

SCENARIO PLANNING Approach to understand the future

impact of the environment 10 years, 20 years or even more Predicting plausible futures Improves organizational learning How environment unfolds and influences

strategies

SCENARIO PLANNING Key drivers for change: Market globalization: similar needs, global

customers, transferable marketing Cost globalization: scale economies,

sourcing efficiencies, country specific costs, high product development costs

Globalization of competition: interdependence, competitors global, high exports/imports

Globalization of govt policies: trade policies, technical standards, host government policies

CYCLE OF COMPETITION

Incumbent Entrant

Builds Barriers

Attacks soft market

segments

No responseWidens attack to

adjacent segments

Reinforces barriers

Starts price wars

Attacks entrant’s home

market

Restart the cycle in adjacent

market