C3 External Analysis
C3 External Analysis: The Identification of industry Opportunities and Threats(selected notes/updated periodically)
Objectives-Be able to:
1. Discuss the importance of understanding the forces that shape competition in an organizations external environment.
2. Describe how change in the external environment gives rise to strategic opportunities and threats.
3. Discuss the strategic importance of barriers to new entry in limiting competition within an industry.
4. Discuss the importance of industry competitive structure, demand conditions, and exit barriers as detgerminants of the degree of rivalry among established firms within an industry.
* For an organization to succeed, its strategy must must fit the industy environment in which it operates, or the organization must be able to reshape the industy environment in which it operates to its advantage through its choice of strategy.
An understanding and review of Forces is necessary to strategically plan an above average to excellent fit. This also helps managers to identify opportunities and threats in the external environment in which the industry operates.
Know Figure 3.1 The 5 Forces Model,
Fig. 3.2 The continuum of Industry Structures and the Great European Soap War(3.2 SinA p79)
and Fig. 3.3 The role of the macroenvironment
and associated dialog in the text.(You may recall this was covered in the LEADERSHIP AND MANAGEMENT COURSE B233)
It is REVIEWED HERE for INTEGRATIVE purposes.
*
A strategic Group is a group of firms within an industry that are pusuing the same basic strategy.
*Know Figure 3.4 An example of strategic groups in the Pharmaceutical Industry and associated dialog.
*Know the limitations of the 5 forces and stratgic group models. Refer to figure 3.5 Punctuated Equilibrium and competitive structure. This model implies that the 5 forces and strategic groups models are applicable while the industry is in a static state, but not while the industry is changing in a dynamic way, such as restructuring due to innovation. In essence some discontinuity is at work in the industry.
C3 Sample Questions(I may select some questions from these for the upcoming exam-Others are for review purposes and types of questions that may be asked)
T F Justify
T F 1. An organizations choice of strategy can reshape an industry's environment. Why or why not?
T F 2. Most U.S industries are fragmented.
Why or Why not?
T F 3. Porter's 5 competitive forces affect each strategic group in the same industry in the same way. Why or why not?
T F 4 Wang ignored an opportunity to get into the personal computer industry when the industry was in the embryonic stage. Why or why not?
M/C (Justify why or why not may be an option on these)
1. Which of the following is not a macroeconomic indicator?
a. inflation
b. Growth rate
c. Tax policy
d. Interest rates
e. Currency exchange rates
Essay
1. Discuss the Great European Soap War and how it will affect competion in the future. How did interdependence manifest itself in the European retail detergents market?
Last updated 22 February,1999