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EXTERNAL ANALYSIS,[object Object],AbhishekSrivastav,[object Object]
LearningOutcomes,[object Object],After studying this topic you should be able to:,[object Object],Understand the role of external analysis in strategy formulation.,[object Object],Use a range of tools to analyse an organisation’s external environment.,[object Object],Explain the limitations of these analytical tools and the role of more subjective analytical approaches.,[object Object]
Link to overall strategic management,[object Object],“Strategic management includes understanding the strategic position of an organisation, strategic choices for the future and managing strategy in action (Johnson et al., 2008:12).”,[object Object],Strategic position identifies the impact of,[object Object],External environment,[object Object],Strategic capability,[object Object],Expectation and influence of stakeholders on strategy ,[object Object]
The Business Environment (Johnson et al. 2008: 54),[object Object],The macro-environment,[object Object],Industry (or sector),[object Object],Competitors,[object Object],The ,[object Object],Organisation,[object Object],2-4,[object Object]
External analysis stages,[object Object],Analysing the external environment involves breaking a complex inter-related reality into sets of issues to make the analysis manageable. The main sets of issues are usually:,[object Object],[object Object]
Micro-environment – this is the operating environment or industry sector in which the firm competes. It addresses a range of issues such as suppliers, customers, competitive intensity, threat of new entry and of substitute products arising (i.e. the ‘five-forces’ analysis).
Competitor analysis – seeks to understand the rival offers from other firms seeking to serve the same customers and to out manoeuvre their managers with our innovation and competitive moves.
Market analysisseeks to evaluate the current needs of today’s customers and the emerging needs of tomorrow’s customers so new products can be anticipated. These will be different in different market segments. ,[object Object]
The PESTEL Framework,[object Object],The PESTEL framework categorises environmental influences into six main types:,[object Object],Political - ,[object Object],Economic,[object Object],Socio-cultural,[object Object],Technological,[object Object],Environmental,[object Object],Legal,[object Object],PESTEL analysis evaluates the broad societal trends that affect many industries. It identifies current and future developments that will shape the micro-environments of each industry sector.,[object Object]
 Good PESTEL Analysis,[object Object],Focuses on society wide.,[object Object],Based on sound research of actual issues. ,[object Object],Provides evidence from the research to validate points made.,[object Object],Future oriented.,[object Object],Interpretive and not descriptive,[object Object]
Major Risk ,[object Object],Like the old-fashioned SWOT technique, PESTEL helps us make lists,[object Object],Lists can help us think, but…,[object Object],A list should be the beginning, not the end of thinking,[object Object],Harrison (2003: Ch 2) integrates this with industry and company analysis,[object Object],Johnson et al. (2008:55-59) look at the way PESTEL factors combine…,[object Object],then at key drivers and trends of business change,[object Object]
Key Drivers and Scenarios Planning,[object Object],Key drivers for change are environmental factors that are likely to have a high impact on the success or failure of strategy.,[object Object],Scenarios are detailed and plausible views of how the business environment of an organisation might develop in the future based on key drivers for change about which there is a high level of uncertainty.,[object Object]
Industries and Sectors Analysis,[object Object],An industry is a group of firms producing the same principal product or service. ,[object Object],The industry analysis involves identifying,[object Object],Competitive forces ,[object Object],Industry life cycles,[object Object],Competitive cycles,[object Object],Porters five forces framework has two main aims:,[object Object],To understand the drivers of competitive behaviour in the sector and;,[object Object],To evaluate the long-run profit potential of the sector,[object Object]
 The Five Forces Framework (Johnson et al. 2008: 60),[object Object],Potential ,[object Object],entrants,[object Object],Competitive ,[object Object],rivalry,[object Object],Buyers,[object Object],Suppliers,[object Object],Substitutes,[object Object]
Five forces model – Details,[object Object],[object Object]
  Differentiation
  Switching costs
  Access to    supply/distribution  ,[object Object],   channels,[object Object],[object Object]
Expected retaliation
Legislation/Government     action,[object Object],[object Object],Threats of Potential ,[object Object],entrants,[object Object],[object Object]
  Differentiation in  product
  Few substitutes
  A few big suppliers
  Threat of backward integrationCompetitive rivalry,[object Object],[object Object]
 Industry growth rate
 High fixed costs

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External Analysis Strategic Management Ljmu

Editor's Notes

  1. Understand the role of external analysis in enabling managers to develop meaningful value proposition’s for customers and credible competitive positions;
  2. Strategic management includes understanding the strategic position of an organisation, strategic choices for the future and managing strategy in action (Johnson et al., 2008: 12).”Strategic position is concerned with identifying the impact on strategy of:External environmentStrategic resources (resources and competences)Expectation and influence of stakeholders