MGB 4013 - Week Three

Hi guys! This week we've learnt another chapter which titled Evaluating A Company's External Environment. The objective of this topic is to thinking strategically about a firm's external environment that we have to form a strategic vision of where the firm needs to head, to identify promising strategic options for the firm as well to select the best strategy and business model for the firm to achieve the best result in business. 

Basically, this chapter covered by 7 questions. Let's cover those questions briefly. :)


QUESTION 1: WHAT ARE THE STRATEGICALLY RELEVANT FACTORS
IN THE MACRO-ENVIRONMENT?

   It's known as PESTEL Analysis which focuses on principal components of strategic significance in the macro-environment. 

QUESTION 2: HOW STRONG ARE THE INDUSTRY’S COMPETITIVE FORCES?

   There are 5 competitive forces; 1)competition from rival sellers. 2)competition from potential new entrants. 3)competition from producers of substitute products. 4)supplier bargaining power. and 5)customer bargaining power. 

# Whether an industry's entry barriers ought to be considered high or low depends on the resources and capabilities possessed by the pool of potential entrants.

# High entry barriers and weak entry threats today do not always translate into high entry barriers and weak entry threats tomorrow.

# The strongest of the five forces determines the extent of the downward pressure on an industry's profitability.

# Having more than one strong force means that an industry has multiple competitive challenges with which to cope. 

   A company's strategy is increasingly effective the more it provides some insulation from competitive pressures, shifts the competitive battle in the company's favor, and positions firms to take advantage of attractive growth opportunities.

QUESTION 3: WHAT FACTORS ARE DRIVING INDUSTRY CHANGE, AND WHAT IMPACTS WILL THEY HAVE?

   First, we have to identify what the driving forces are. Then, assessing whether the driving forces are, on the whole, acting to make the industry more or less attractive and next, determine what strategy changes are needed to prepare for the impact of the driving forces as the driving forces are the major underlying causes of change in industry and competitive conditions.

QUESTION 4: HOW ARE INDUSTRY RIVALS POSITIONED IN THE MARKET?

   As we've learned in this topic, a strategic group is a cluster of industry rivals that have similar or identical competitive approaches and market positions while strategic group mapping is a technique for displaying the different market or competitive positions that rival firms occupy in the industry. Thus, the strategic group maps reveal which companies are close competitors and which are distant competitors. 

A Strategic Group Map Example

QUESTION 5: WHAT STRATEGIC MOVES ARE RIVALS LIKELY TO MAKE NEXT?

   Any business company should know some information about rivals that is useful in anticipating their next strategic moves. We have to know and understand those signals of the likelihood of strategic moves as studying competitors past behavior and preferences provides a valuable assist in anticipating what moves rivals are likely to make next in the marketplace.

QUESTION 6: WHAT ARE THE INDUSTRY’S KEY SUCCESS FACTORS?

   KSF's are the strategy elements, product and service attributes, operational approaches, resources, and competitive capabilities that are necessary for competitive success by any and all firms in an industry. Vary from industry, and over time within the same industry, and in importance as drivers of change and competitive conditions change.

QUESTION 7: IS THE INDUSTRY OUTLOOK CONDUCIVE TO GOOD PROFITABILITY?

   The anticipated industry environment is fundamentally attractive if it presents a company with good opportunity for above-average profitability BUT, the industry outlook is fundamentally unattractive if a firm's profit prospects are unappealingly low. 

That's all i can share with you in this entry. see you in the next entry, insyaAllah. :)