Strategic Management Syllabus F93



Strategic Management

BA 491

First Individual Assignment: External Analysis

Industry Definition

1. Define your company's industry. If appropriate, indicate the NAICS code and description.

2. Is the industry composed of multiple strategic groups? If so, identify the factors or dimensions that differentiate the strategic groups in your industry and sketch a strategic map. What strategic group does your company belong to?

Industry Characteristics

1. What is the market size (total industry sales, in dollars and/or volume)?

2. What is the scope of competitive rivalry (local, regional, national, international, or global)?

3. What is the market growth rate? For what time period?

4. Identify your industry's stage in the growth or life cycle (early development, rapid growth and takeoff, early maturity, late maturity and saturation, stagnation and aging, decline and decay, renewal).

5. How many competitors are there and what are their relative sizes? Is the industry fragmented with many small companies or concentrated and dominated by a few large companies? If there are major competitors in the industry, identify them and indicate their market shares. What is your company's market share?

6. Who (or what type of company) buys your industry's outputs? If there are several buyers, identify the different levels or types of customer (e.g., wholesalers, retailers, final customer). How many buyers are there and what are their relative sizes (at each level, if multiple levels)?

7. Who (or what type of company) supplies inputs, such as raw materials or components, to your industry? Identify the important suppliers. How many suppliers are there and what are their relative sizes?

8. What products or services in other industries could serve as substitutes for those in your industry?

General Environment

1. Identify one or two major trend in the general environment (demographic, sociocultural, political/legal, technological, economic, or global) that may pose a significant opportunity or threat for your company.

2. For each trend that you identified above, briefly describe its potential impact on your company.

Porter's Five-Forces Analysis

1. Threat of New Entrants

a. Economies of scale:

b. Product differentiation:

c. Capital requirements:

d. Cost disadvantage independent of size:

e. Access to distribution channels:

f. Government policy:

Summary assessment: strong moderate weak

Comments:

2. Bargaining Power of Suppliers

a. The supplier group is dominated by a few companies and is more concentrated (few firms dominate the industry) than the industry it sells to:

b. The supplier group’s product is unique or differentiated, or it has built up switching costs:

c. The supplier group is not obliged to contend with substitute products for sale to the industry:

d. The supplier’s product is an important input to the buyer’s business:

e. The supplier group poses a credible threat of integrating forward into the industry’s business:

f. The industry is not an important customer of the supplier group:

Summary assessment: strong moderate weak

Comments:

3. Bargaining Power of Buyers

a. The buyer group is concentrated or purchases large volumes relative to seller sales:

b. The products it purchases from the industry are standard or undifferentiated:

c. The products it purchases from the industry form a component of its product and represent a significant fraction of its cost:

d. It earns low profits:

e. The industry’s product is unimportant to the quality of the buyer’s products or services:

f. The industry’s product does not save the buyer money:

g. The buyers pose a credible threat of integrating backward to make the industry’s product:

Summary assessment: strong moderate weak

Comments:

4. Threat of Substitute Products

a. Availability of substitutes:

b. Relative price of substitutes:

c. Relative performance (or features) of substitutes:

d. Difficulty or costs for buyers to switch to substitute products:

Summary assessment: strong moderate weak

Comments:

5. Intensity of Rivalry among Competitors

a. Competitors are numerous or are roughly equal in size and power:

b. Industry growth is slow:

c. The product or service lacks differentiation or switching costs:

d. Fixed costs are high or the product is perishable:

e. Capacity is normally augmented in large increments:

f. Exit barriers are high:

g. The rivals are diverse in strategies, origins, and “personalities”:

Summary assessment: strong moderate weak

Comments:

Strategic Implications

1. Summarize the five-forces analysis. Which forces are strongest? Collectively, how strong are the five forces and what does this imply about your industry's profit potential?

2. Discuss the implications of the five-forces analysis for how firms can deal successfully with the industry structure. Very generally, how can firms in the industry (1) position the company so that its capabilities provide the best defense against competitive forces, (2) take the offensive by influencing the balance of the forces through competitive moves, and/or (3) anticipate changes in the factors underlying the forces and respond to them (p. 143)?

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