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Company
- Strategy Formulation
- External Analysis
- Sector
- Group of closely related industries
- Industry
- Group of companies
offering products or
services that are close
substitutes for each other
- Satisfy the same
basic customer needs
- Satisfy the same
basic customer needs
- Opportunities
(profitable)
- Threats
(endanger)
- Life-cycle (not
always followed)
- 1. Embryotic Stage
- Industry just
beginning to develop
- Industry just
beginning to develop
- 2. Growth
- Demand for the industry’s
product begins to increase
- Demand for the industry’s
product begins to increase
- 3. Shakeout
- Growth slows, demand
approaches saturation levels
- Growth slows, demand
approaches saturation levels
- 4. Maturity
- The market is totally saturated,
demand is limited to replacement
demand, and growth is low or zero
- The market is totally saturated,
demand is limited to replacement
demand, and growth is low or zero
- 5. Decline
- Growth becomes negative for a variety of
reasons, including technological
substitution, social changes, demographics,
and international competition
- Growth becomes negative for a variety of
reasons, including technological
substitution, social changes, demographics,
and international competition
- 1. Embryotic Stage
- FIVE FORCES MODEL (static
picture and no individual
company differences)
- Risk of new entry by potential competitors
- Function of the height of barriers to
entry (the higher the barriers, the lower
is the risk and the greater the profits)
- Economies of scale (Reductions in unit
costs attributed to a larger output)
- Massproducing a standardized output
- Discounts on bulk purchases of raw material
- Spreading fixed production costs over a large production volume
- Distributing marketing and advertising costs over a large volume of output
- Massproducing a standardized output
- Brand loyalty
- Preference of consumers for the
products of established companies
- Preference of consumers for the
products of established companies
- Absolute Cost Advantage
- Superior production operations and processes due
to accumulated experience, patents, or trade secrets
- Control of particular inputs required for production
- Access to cheaper funds
- Superior production operations and processes due
to accumulated experience, patents, or trade secrets
- Switching Costs
- Government
Regulations
- Economies of scale (Reductions in unit
costs attributed to a larger output)
- Function of the height of barriers to
entry (the higher the barriers, the lower
is the risk and the greater the profits)
- Extent of Rivalry among
established firms
- Function of an industry’s competitive
structure, demand conditions, cost
conditions, and barriers to exit (Strong
demand conditions moderate the
competition, weak demand conditions
intensive competition can develop)
- Macro-environments that affect rivalry intensity (macroeconomic, global,
technological, demographic and social, and political and legal)
- Macro-environments that affect rivalry intensity (macroeconomic, global,
technological, demographic and social, and political and legal)
- Function of an industry’s competitive
structure, demand conditions, cost
conditions, and barriers to exit (Strong
demand conditions moderate the
competition, weak demand conditions
intensive competition can develop)
- Bargaining power of buyers
- Threat if the company depends on buyers and they don´t
- Threat if the company depends on buyers and they don´t
- Bargaining power of suppliers
- Threat if the company depends on buyers and they don´t
- Threat if the company depends on buyers and they don´t
- Threat of substitute products
- Products serving customer needs similar to the needs served by the industry
- Products serving customer needs similar to the needs served by the industry
- 6th Power of complement providers
- Powerful and vigorous complementors may have a strong positive impact on demand in an industry
- Powerful and vigorous complementors may have a strong positive impact on demand in an industry
- Risk of new entry by potential competitors
- Group of companies
offering products or
services that are close
substitutes for each other
- Industry
- Group of closely related industries
- Sector
- Internal Analysis
- Weaknesses
- Strengths
- Distinctive competencies (firm-specific
strengths that allow a company to differentiate
its products and/or achieve substantially lower
costs to achieve a competitive advantage)
- Resources (its financial,
physical, human, technological,
and organizational assets)
- Tangibles
- Intangibles
- Tangibles
- Capabilities (its skills at
coordinating resources and
putting them to productive use)
- COMPETITIVE ADVANTAGE
- Build on its existing resources and capabilities
and formulate strategies that build additional
resources and capabilities
- Superior value creation
- Low Costs
- Differentiate Product
- Both
- Low Costs
- Building blocks
- Efficiency (enables a
company to lower its costs)
- Quality (allows it to
charge a higher price
and lower its costs)
- Innovation (can lead to
higher prices or lower unit
costs ... product/process)
- Responsiveness to
customers (allows it to
charge a higher price)
- Efficiency (enables a
company to lower its costs)
- Durability depends on the height of
barriers to imitation, the capability of
competitors, and environmental
dynamism.
- Build on its existing resources and capabilities
and formulate strategies that build additional
resources and capabilities
- Resources (its financial,
physical, human, technological,
and organizational assets)
- Distinctive competencies (firm-specific
strengths that allow a company to differentiate
its products and/or achieve substantially lower
costs to achieve a competitive advantage)
- Analyze the financial
performance (ROE, ROI, etc)
- Absortive Capacity
- The ability of an enterprise to identify,
value, assimilate, and use new
knowledge.
- The ability of an enterprise to identify,
value, assimilate, and use new
knowledge.
- Weaknesses
- External Analysis
- Strategic Groups
- Groups of companies pursuing
the same or a similar strategy
- Its members constitute its immediate competitors
- Switching strategic group may
improve a company´s performance
- Feasibility depends on the
height of mobility barriers
- Feasibility depends on the
height of mobility barriers
- Its members constitute its immediate competitors
- Groups of companies pursuing
the same or a similar strategy
- ULTIMATE GOAL GENERATE VALUE
- Failure factors: organizational inertia in the face of
environmental change, the nature of a company’s prior
strategic commitments, and the Icarus paradox
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