Think Globally Act Locally Think Globally Act Locally 1 Part 2 Analyzing Environments Chap 3 : Analyzing the External Environment Chap 4 : Analyzing the Firm

Think Globally Act Locally Think Globally Act Locally 2 External Environment Analysis Macro-environment Industry attractiveness Product/market segments Internal Organization Analysis Company performance Business system Capabilities and resources Strategy Formulation Strategy Imple- mentation Strategy Evaluation Generation of strategic options Evaluation of strategic alternatives Selection of optimal strategies Detailed action plan Respon- sibilities and timing Resource allocation Monitoring system Performance evaluation Feedback and adjustment Corporate Mission and Vision 목표수립 전략수립전략실행전략평가 SWOT 분석 Strategy Development Process( 경영전략 수립과정 )

Think Globally Act Locally Think Globally Act Locally 3 Strategic Management Process Model Company Vision & Mission External environment Company profile Strategic analysis & choice Long-term objectives Generic & Grand strategies Action plans & Short-term objectives Functional tactics Policies that Empower action Restructuring Reengineering Refocusing in the organization Strategic control and continuous improvement feedback Desired? Possible? Major impact Minor impact

Think Globally Act Locally Think Globally Act Locally 4 Knowledge Objectives Reading and studying this chapter should enable you to: Reading and studying this chapter should enable you to: Explain the importance of analyzing the firm’s external environment. Identify the categories of trends in the general environment that create opportunities or threats for the firm. Describe the five forces of an industry analysis. Understand how to complete a competitor analysis. Identify potential reactions to significant strategic moves by competitors. Understand how complementors support value creation for the firm in a competitive situation.

Think Globally Act Locally Think Globally Act Locally 5 Opening Case Opening Case Changing Population Bases in the U.S Lead Business to Change their Focus. Changing Population Bases in the U.S Lead Business to Change their Focus. This feature focuses on the growth of a distinct Hispanic populationin the U.S. which represents a major independent market forbusiness. This feature illustrates one of many changes in theexternal environment to which organization must be attuned.

Think Globally Act Locally Think Globally Act Locally 6 The External Environment External Environment External Environment The set of conditions outside the firm that affect the firm’s performance. The set of conditions outside the firm that affect the firm’s performance. General, Industry, Competitor environment General, Industry, Competitor environment Environmental Change Environmental Change Affects the firm’s choice and use of strategy. Affects the firm’s choice and use of strategy. Creates opportunities that enable the firm to use its core competencies to achieve its vision Creates opportunities that enable the firm to use its core competencies to achieve its vision Creates threats with the potential to prevent a firm from successfully using its core competencies. Creates threats with the potential to prevent a firm from successfully using its core competencies.

Think Globally Act Locally Think Globally Act Locally 7 Analyzing the General Environment General Environment General Environment The trends in the broader society that influence an industry and the firms in it The trends in the broader society that influence an industry and the firms in it Types of Trends Types of Trends Demographic Demographic Economic Economic Political/legal Political/legal Sociocultural Sociocultural Technological Technological Global trends Global trends Each condition affects the firm’s strategy; no firm can control. Each condition affects the firm’s strategy; no firm can control.

Think Globally Act Locally Think Globally Act Locally 8 General Environment Trends General Environment Trends Demographic Trends Demographic Trends Changes in population size, age structure, geographic distribution, ethnic mix, and income distribution Changes in population size, age structure, geographic distribution, ethnic mix, and income distribution Economic Trends Economic Trends The direction of the economy in which a firm competes or may choose to compete The direction of the economy in which a firm competes or may choose to compete GNP, Interest & Inflation rates, Income growth & Decline etc. GNP, Interest & Inflation rates, Income growth & Decline etc. Political/Legal Trends Political/Legal Trends The changes in organizations and interest groups that compete for a voice in developing and overseeing the body of laws and regulations that guide interactions among firms and nations The changes in organizations and interest groups that compete for a voice in developing and overseeing the body of laws and regulations that guide interactions among firms and nations must be ethical, moral, & consistent with the laws must be ethical, moral, & consistent with the laws

Think Globally Act Locally Think Globally Act Locally 9 Sociocultural Trends Sociocultural Trends Changes in a society’s attitudes and cultural values Changes in a society’s attitudes and cultural values Technological Trends Technological Trends Changes in the activities involved with creating new knowledge and translating that knowledge into new products, processes, and materials Changes in the activities involved with creating new knowledge and translating that knowledge into new products, processes, and materials Global Trends Global Trends Changes in relevant emerging and developed country global markets, important international political events, and critical changes in cultural and institutional characteristics of global markets. Changes in relevant emerging and developed country global markets, important international political events, and critical changes in cultural and institutional characteristics of global markets.

Think Globally Act Locally Think Globally Act Locally 10 Five Important Global Trends Five Important Global Trends The advent of Nanotechnology Globalization Global warming Water shortage The employment power shift Small, stronger product gulf between rich & pool countries Earth ’ s surface temperature rising, Human health, agriculture, water Blue Gold Worker deficit Employee > Companies

Think Globally Act Locally Think Globally Act Locally 11 Analyzing the Industry Environment Five-Forces Model of Competition (Porter) Five-Forces Model of Competition (Porter) examines competitive forces that influence the profitability potential in an industry or of a segment within an industry. Each force can reduce the probability that a firm can earn profits while competing in an industry. 구매자공급자 잠재적 진출기업 대체품 산업내 경쟁기업 구매자의 교섭력 공급자의 교섭력 새로운 기업의 진출 ( 입 ) 에 따른 위협 대체품이나 대체용역의 압력 기존기업간 경쟁

Think Globally Act Locally Think Globally Act Locally 12 Potential entrants Potential entrants Can be a threat to firms already competing in an industry. May take market share away from current competitors. Bring additional production capacity that can lead to overcapacity May force incumbent firms to learn new ways to compete by changing their strategies and their implementations Barriers to Entry into an Industry Economies of Scale Capital Requirements Switching Costs Differentiation Access to Distribution Channels Government Policy

Think Globally Act Locally Think Globally Act Locally 13 잠재적 진출기업 위협 산업내 경쟁기업 대체품 잠재적인 진출기업 구매자공급자 ( 진입장벽 ) 1. 규모의 경제 2. 제품차별화 3. 소요자본 4. 교체비용 5. 유통경로의 접근 6. 정부의 제도적 정책 7. 절대적 원가우위 8. 상표 이미지 ( 예상되는 보복 ) 기존기업들이 신규 진입 기업에 보이는 반응 1. M&A 2. 가격인하와 물량공세 3. 적극적 반대 잠재적 : 새로인 산업에 진입하여 실제적인 경쟁기업으로 변화도리 가능성이 있는 기업으로 현재에는 산업밖에 존재하고 있는 기업의 경쟁력

Think Globally Act Locally Think Globally Act Locally 14 Substitute Products Substitute Products Goods or services that perform similar functions to an existing product Cassette tapes – CD – MP3 - USB 대체재 위협 ( 대체품의 위협 ) 1. 상표충성도 (Brand Loyalty) - 대체품에 대한 구매자 성향 - 교체비용 2. 대체품의 가격 및 효능 - 대체품의 유용성에 따른 교체매매 발생 (DVD: 영화산업 ) 산업내 경쟁기업 대체품 잠재적인 진출기업 구매자공급자 대체재 : 동일한 기능을 수행하는 이질적 제품 대체품 구입에 따른 기존고객 상실

Think Globally Act Locally Think Globally Act Locally 15 Bargaining Power of Suppliers Bargaining Power of Suppliers There are a few large suppliers and the buying firms’ industry is not concentrated. Substitute products are not available to the buying firms. The buying firms are not a significant customer for the suppliers. The suppliers’ goods are essential to the buyers’ marketplace success. The suppliers’ products have high switching costs for the buyers. The suppliers pose a credible threat to integrate forward into the buyers’ industry.

Think Globally Act Locally Think Globally Act Locally 16 공급자 교섭력 산업내 경쟁기업 대체품 잠재적인 진출기업 구매자공급자 ( 공급자의 교섭력 결정요인 ) 1. 공급량의 비중 ( 공급자 : 독점 ) 2. 제품 / 원료 / 부품의 차별화 정도 3. 제공제품의 대체품 존재여부 4. 공급제품의 중요성 ( 구매자 ) 정도 5. 공급자의 전방통합능력 6. 교체비용

Think Globally Act Locally Think Globally Act Locally 17 Bargaining Power of Buyers Bargaining Power of Buyers They buy a large portion of the selling firm’s total output. The selling firm is dependent on the buyers for a significant portion of its sales revenue. They can switch to another seller’s product with few switching costs. The selling industry’s products are undifferentiated or similar to a commodity. They present a credible threat to integrate backward into the sellers’ industry.

Think Globally Act Locally Think Globally Act Locally 18 구매자 교섭력 ( 구매자 교섭력 결정요인 ) 1. 구매자들의 가격 민감도 2. 집중적 구매형태 ( 구매량 ) 3. 구매자 정보력 4. 구매자 교체비용 5. 구매자 후방통합능력 예 : Nike vs Foot Locker 산업내 경쟁기업 대체품 잠재적인 진출기업 구매자공급자

Think Globally Act Locally Think Globally Act Locally 19 Competitive Rivalry Competitive Rivalry The set of actions and reactions between competitors as they compete for an advantageous market position Rivalry among existing firms increases due to: Rivalry among existing firms increases due to: Degree of differentiation Switching costs Numerous or equally balanced competitors Slow industry growth High strategic stakes High fixed costs or high storage costs High exit barriers Specialized Assets Fixed Costs of Exit Strategic Inter- relationship Emotional Barriers Gov ’ t & Social Restrictions

Think Globally Act Locally Think Globally Act Locally 20 기존기업간 경쟁 분석 산업내 경쟁기업 대체품 잠재적인 진출기업 구매자공급자 ( 기존기업간 경쟁결정요인 ) 1. 규모가 비슷한 경쟁업체 수 2. 시장특성에 따른 제품차별화 3. 고정비와 재고비용 - 시설확장비용 ( 과잉설비 ) 4. 철수장벽의 견고성 5. 산업 성장률 ( 산업수명주기 ) 6. 전략적 이해관계 - 조미료전쟁과 가전제품경쟁 경쟁에서 유리한 위치를 차지하기 위한 여러 가지 전략을 도출함

Think Globally Act Locally Think Globally Act Locally 21 Competitor Analysis Strategic Intent Strategic Intent The firm’s motivation to leverage its resources and capabilities to reach its vision Understanding a competitor’s strategic intent increase a firm’s ability to predict how that competitors will react to a competitive action Market Dependence Market Dependence The extent to which a firm’s revenues or profits are derived from a particular market. Competitors with high market dependence are likely to respond strongly to attacks threatening their market position.

Think Globally Act Locally Think Globally Act Locally 22 Current Competitor Strategy Current Competitor Strategy Information about a competitor’s current strategy helps the firm predict that competitor’s behavior. Correct interpretation of information is important. Strengths and Weaknesses of the Competitor Strengths and Weaknesses of the Competitor Assessing whether a competitor represents an opportunity or a threat and what that competitor’s strengths and weaknesses are is extremely important. Firms should consider competitors’ financial resources, marketing capability, human resource management, and innovation capability

Think Globally Act Locally Think Globally Act Locally 23 Basic Questions for Conducting an Industry Analysis to Screen Key Competitors Threat of new entrants: Which firms have developed economies of scale and how strong are they? How differentiated are the industry’s products and services? Would buyers encounter switching costs to purchase from a new entrant? Which firms pose the most significant threat of potential new entry? Substitute products: What product functionalities can be duplicated in some other fashion? Are there lower-cost alternatives to current products? Bargaining power of suppliers: Is the supply chain dominated by only a few companies? How important is the industry to its suppliers? How differentiated are suppliers ’ products? Do suppliers pose a threat of forward integration into the industry? Bargaining power of buyers: Are there large concentrations of buyers in the industry? Are products a high percentage of buyers ’ costs? Do buyers pose a threat of backward integration into the industry? Rivalry among existing competitors: How many competitors are there? How differentiated are they? What are the exit barriers? Which competitors are most likely to respond to a specific competitive move?

Think Globally Act Locally Think Globally Act Locally 24 Potential Strategies for Neutralizing Industry Threats 진입장벽 구축 : - 방어적 목적의 규모의 경제 개발 및 구축 -R&D, brand image, service 를 통한 제품 차별화 구축 - 유통채널에 대한 접근 차단 및 봉쇄 - 정부로비를 통한 진입규제 구축 - 즉각적이고 단호한 보복의지 전달 Threat of New Entrants 대체품 대비 제품과 서비스의 매력도 향상 - 비용우위 전략 실행 -Product/service 차별화 - 고객 친밀감 증대 Threat of substitutes 공급자의 유일성과 bargaining power 의 축소 - 제 2 차 공급자 ( 원 ) 개발 - 장기적 공급체계 구축 - 후방 수직통합 시도 Power of Suppliers 수요자 유일성과 bargaining power 의 축소 - 매력적인 고객 세분화에 집중 - 신규 고객 및 새로운 가치 범위 개발 - 전방 수직 통합 Power of Buyers 산업의 구조적 특성과 대응전략

Think Globally Act Locally Think Globally Act Locally 25 Complements to Competitive Interaction Complementors Complementors The network of companies that sell products or services that are complementary to another firm’s product or service If a complementor’s product or service adds value to the sale of a firm’s product or service, it is likely to also create value for that firm. A firm can increase its chances of achieving value creation by paying attention to customers, suppliers, competitors, and complementors. Value Creation in an Industry

Think Globally Act Locally Think Globally Act Locally 26 Key Terms competitive rivalry complementors demographic trends economic trends economies of scale general environment global trends industry political/legal trends sociocultural trends strategic intent substitute products switching costs technological trends

Think Globally Act Locally Think Globally Act Locally 27 Case Discuss : Chap 3  Learning for Failure : Nokia misses a significant trend in Cell Phone The case notes that Nokia has not focused on high-end products such as “ clamshell ” phones in rich markets, but on low-end phones in emerging market. The case illustrates the need for firms to keep abreast of technological trends & consumer fashions. Critical thinking questions: 1. Is a “ clamshell ” phone a fashion or a technological innovation? Does it make a difference to the firm? 2. The cell phone industry is a global industry. Why may Nokia be at a disadvantage in having concentrated on emerging markets? What would be the advantages?

Think Globally Act Locally Think Globally Act Locally 28 Case Discuss : Chap 3  Learning for Success : Airbus surpasses Boeing as the leading marker of commercial jets. Critical thinking questions: 1. Analyze the competition between Airbus & Boeing. Which of the questions in table 3.3 are most relevant? Is the competition between the two companies intense or not intense? 2. Why would Boeing be turning to the U.S. government for support in developing a new design?