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(M) David - sm15 - Inppt - 03

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157 views

(M) David - sm15 - Inppt - 03

Uploaded by

Saurabh Kumar Gautam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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The External Assessment

Chapter Three

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A COMPREHENSIVE STRATEGIC-
MANAGEMENT MODEL

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RELATIONSHIPS BETWEEN KEY EXTERNAL
FORCES AND AN ORGANIZATION

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THE INDUSTRIAL ORGANIZATION
(I/O) VIEW
► TheIndustrial Organization (I/O) approach to
competitive advantage advocates that
external (industry) factors are more important
than internal factors in a firm for achieving
competitive advantage.

Copyright ©2015 Pearson Education, Inc 3-4


THE INDUSTRIAL ORGANIZATION
(I/O) VIEW
► Firm
performance is based more on industry
properties
Economies of scale

Barriers to market entry

Product differentiation

The economy

Level of competitiveness

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COMPETITIVE INTELLIGENCE
PROGRAMS
► Competitive intelligence (CI)
►a systematic and ethical process for gathering
and analyzing information about the
competition’s activities and general business
trends to further a business’s own goals

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COMPETITIVE INTELLIGENCE
PROGRAMS
The three basic objectives of a CI program are:

1. to provide a general understanding of an industry


and its competitors

2. to identify areas in which competitors are


vulnerable and to assess the impact strategic
actions would have on competitors

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COMPETITIVE INTELLIGENCE
PROGRAMS
3. to identify potential moves that a competitor
might make that would endanger a firm’s
position in the market

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INDUSTRY ANALYSIS: THE
EXTERNAL FACTOR EVALUATION
(EFE) MATRIX
► Economic ► Political

► Social ► Governmental

► Cultural ► Technological

► Demographic ► Competitive

► Environmental ► Legal

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EFE MATRIX STEPS

1. List key external factors


2. Weight from 0 to 1
3. Rate effectiveness of current strategies
4. Multiply weight * rating
5. Sum weighted scores

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EFE MATRIX FOR A LOCAL TEN-
THEATER CINEMA COMPLEX
TABLE 3-8 EFE Matrix for a Local 10-Theater Cinema Complex
▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬
Key External Factors Weight Rating Weighted Score
Opportunities___________________________________________________________________________
1. Rowan County is growing 8 percent annually in population 0.05 3 0.15
2. TDB University is expanding 6 percent annually 0.08 4 0.32
3. Major competitor across town recently ceased operations 0.08 3 0.24
4. Demand for going to cinema growing 10 percent annually 0.07 2 0.14
5. Two new neighborhoods being developed within 3 miles 0.09 1 0.09
6. Disposable income among citizens grew 5 percent in prior year 0.06 3 0.18
7. Unemployment rate in county declined to 3.1 percent 0.03 2 0.06
Threats________________________________________________________________________________
8. Trend toward healthy eating eroding concession sales 0.12 4 0.48
9. Demand for online movies and DVDs growing 10 percent annually 0.06 2 0.12
10. Commercial property adjacent to cinemas for sale 0.06 3 0.18
11. TDB University installing an on-campus movie theater 0.04 3 0.12
12. County and city property taxes increasing 25 percent this year 0.08 2 0.16
13. Local religious groups object to R-rated movies being shown 0.04 3 0.12
14. Movies rented from local Blockbuster store up 12 percent 0.08 2 0.16
15. Movies rented last quarter from Time Warner up 15 percent 0.06 1 0.06
Total 1.00 2.58

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INDUSTRY ANALYSIS: COMPETITIVE
PROFILE MATRIX (CPM)
► Identifies firm’s major competitors and their
strengths & weaknesses in relation to a
sample firm’s strategic positions
► Critical success factors include internal and
external issues

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AN EXAMPLE COMPETITIVE
PROFILE MATRIX
TABLE 3-10 An Example Competitive Profile Matrix
▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬
Company 1 Company 2 Company 3____________
Critical Success
Factors_ ___ _ Weight Rating Score Rating Score Rating Score____ ____
Advertising 0.20 1 0.20 4 0.80 3 0.60
Product Quality 0.10 4 0.40 3 0.30 2 0.20
Price Competitiveness 0.10 3 0.30 2 0.20 1 0.10
Management 0.10 4 0.40 3 0.20 1 0.10
Financial Position 0.15 4 0.60 2 0.30 3 0.45
Customer Loyalty 0.10 4 0.40 3 0.30 2 0.20
Global Expansion 0.20 4 0.80 1 0.20 2 0.40
Market Share 0.05 1 0.05 4 0.20 3 0.15
Total 1.00 3.15 2.50 2.20

Note: The ratings values are as follows: 1 = major weakness, 2 = minor weakness, 3 = minor strength, 4 =
major strength. As indicated by the total weighted score of 2.50, Competitor 2 is weakest. Only eight
critical success factors are included for simplicity; this is too few in actuality.

Copyright ©2015 Pearson Education, Inc 3-13

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