CHAPTER 4

Environmental
Scanning and
Industry Analysis

STRATEGIC MANAGEMENT & BUSINESS POLICY

11TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER

Prentice Hall, Inc. 2008 4-1

 Environmental Scanning

Environmental Scanning
the monitoring, evaluation, and dissemination of
information from the external and internal environments
to key people within the corporation.
Variables within a corporations external environment.
Natural environment
Societal environment
Task environment
Internal factors:
Structure
Culture
Resources

Prentice Hall, Inc. 2008 4-2

 Environmental Scanning

Societal environment --

Economic forces - Regulate exchange of

materials, money, energy and information

Technological forces - Generate problem-solving

inventions

Political-legal forces - Allocate power; provide

laws and regulations

Sociocultural forces - Elements or groups that

directly affect a corporation and are affected by it
Prentice Hall, Inc. 2008 4-3
 Variables in Societal Environment

Prentice Hall, Inc. 2008 4-4

 Task Environment

Task environment --

Elements or groups that directly affect a

corporation and are affected by it

Industry Analysis --

In-depth examination of key factors within a

corporations task environment

Prentice Hall, Inc. 2008 4-5

 Demographic Trends

Prentice Hall, Inc. 2008 4-6

 Transformational Sociocultural Trends

8 Current Trends

Increasing environmental awareness

Growing health consciousness
Expanding seniors market
Impact of the Generation Y boomlet
Declining mass market
Changing pace and location of life
Changing household composition
Increasing diversity of workforce & market

Prentice Hall, Inc. 2008 4-7

 International Societal Environments

Prentice Hall, Inc. 2008 4-8

 Scanning the Task Environment

Prentice Hall, Inc. 2008 4-9

 External Strategic Factors

WARNING!
Strategic myopia --

Willingness to reject unfamiliar as well as

negative information

Concept of Receptors for information in an organization.

Prentice Hall, Inc. 2008 4-10

 Issues Priority Matrix

A Portfolio of Issues
Prentice Hall, Inc. 2008 4-11
 Analyzing the Task Environment

Prentice Hall, Inc. 2008 4-12

 Porters Approach to Industry Analysis

Threat of New Entrants

Economies of scale
Product differentiation
Capital requirements
Switching costs
Access to distribution channels
Cost disadvantages
Government policy

Prentice Hall, Inc. 2008 4-13

 Porters Approach to Industry Analysis

Rivalry Among Existing Firms

Number of competitors
Rate of industry growth
Product or service characteristics
Amount of fixed costs
Capacity
Height of exit barriers
Diversity of rivals

Prentice Hall, Inc. 2008 4-14

 Porters Approach to Industry Analysis

Threat of Substitute Products or Services

Bargaining Power of Buyers

Bargaining Power of Suppliers

Relative Power of Other Stakeholders

Prentice Hall, Inc. 2008 4-15

 Industry Evolution

Fragmented Industry

No dominant industry

Consolidated Industry

Dominated by a few large firms (3 +/-)

Prentice Hall, Inc. 2008 4-16

 International Risk Assessment

Continuum of International Industries

Prentice Hall, Inc. 2008 4-17

 Strategic Groups

Prentice Hall, Inc. 2008 4-18

 Competitive Product Matrix
Ericsson IBM
Network IQ Tivoli Netcool
Customer Experience
Large OSI (SRIT)
Management SW
Company Size

(>$100M) Service Nokia

Assurance Mobile Quality
Analyzer
Agilent + Teradata
Customer Experience
Management System
Medium TTI
($10M-$100M) Netrac

Nexus Arantech
Small Netview touchpoint
(<$10M)

Network Service Customer

Service Quality Monitoring Viewpoint
Prentice Hall, Inc. 2008 4-19
 Strategic Types

General Company Approaches to Strategy

Defenders
Prospectors
Analyzers
Reactors

Prentice Hall, Inc. 2008 4-20

 Competitive Intelligence

Called business intelligence

Gathering information on a companys

competitors
Product/offering features, functionality,
pricing, targets, etc.
Company size, profitability, margins,
target markets, apparent strategy, etc.

Prentice Hall, Inc. 2008 4-21

 Forecasting

Forecasting Techniques --

Extrapolation If things keep going the way they

are going now
Brainstorming Free-flowing ideas followed by
triage
Expert opinion Hire a consultant!
Delphi technique Ask a lot of people.
Statistical modeling Trending, curve-fitting, etc.
Scenario writing Map out 3-5 scenarios

Prentice Hall, Inc. 2008 4-22

 Synthesis of External Factors -- EFAS

Prentice Hall, Inc. 2008 4-23