Market Orientation

Session-3

External Strategic Management Audit

Identify & Evaluate factors beyond the control of a single firm

Increased foreign competition Population shifts Information technology

Key External Forces & the Organization

Beyond control of organization!

Key External Forces

Competitors Suppliers Distributors Creditors Customers Employees Communities Managers Stockholders Labor Unions Special Interest Groups Products Services

Opportunitie s & Threats

Performing External Audit

Long-term orientation

External Factors

Measurable Applicable to competing firms Hierarchical

I/O Perspective Firm Performance

Industry Properties
Economies of Scale Barriers to market entry Product differentiation Level of competitiveness

Porters Five Forces

Potential development of substitute products

Bargaining power of suppliers

Rivalry among competing firms

Bargaining power of consumers

Potential entry of new competitors

Social, Cultural, Demographic & Environmental Forces

India. Facts

Young population Less Caucasian Widening gap between rich & poor 2025 = 18.5% population >65 years 2075 = no ethnic or racial majority

Key Social, Cultural, Demographic & Environmental Variables

Childbearing rates Number of special interest groups Number of marriages & divorces Number of births & deaths Immigration & emigration rates

Political, Government & Legal Forces Globalization of Industry

Worldwide trend toward similar consumption patterns Global buyers and sellers E-commerce Technology for instant currency transfers

Competitive Forces
Identifying Rival Firms
Strengths Weaknesses Capabilities Opportunities Threats Objectives Strategies

Competitive Forces
7 Characteristics of most Competitive Firms:
1. Market share matters 2. Understand what business you are in 3. Broke or not, fix it 4. Innovate or evaporate

Competitive Forces
7 Characteristics of most Competitive Firms:
5. Acquisition is essential to growth 6. People make a difference 7. No substitute for quality

The Five-Forces Model of Competition (Porter)

Potential development of substitute products

Bargaining power of suppliers

Rivalry among competing firms

Bargaining power of consumers

Potential entry of new competitors

The Global Challenge

Faced by Firms --

Gain & maintain exports to other nations Defend domestic markets against imported goods

Industry Analysis: The External Factor Evaluation (EFE) Matrix Summarize & Evaluate
Economic Social Cultural Demographic Environmental Political Governmental Technological Competitive

External Factors
Its hard to write them! Exercise: Write the external factors for your

own organization

Industry Analysis EFE

Total weighted score of 4.0
Organization response is outstanding to threats and

weaknesses

Total weighted score of 1.0

Firms strategies not capitalizing on opportunities or avoiding threats

Industry Analysis: Competitive Profile Matrix (CPM)

Identifies firms major competitors and their strengths & weaknesses in relation to a sample firms strategic positions

Gateway

Apple
Rating Wtd Score

Dell
Rating Wtd Score

CSFs
Market share Inventory sys Fin. position Prod. Quality Cons. Loyalty Sales Distr Global Exp. Org. Structure

Wt

Rating

Wtd Score

0.15 0.08 0.10 0.08 0.02 0.10 0.15 0.05

3 2 2 3 3 3 3 3

0.45 0.16 0.20 0.24 0.06 0.30 0.45 0.15

2 2 3 4 3 2 2 3

0.30 0.16 0.30 0.32 0.06 0.20 0.30 0.15

4 4 3 3 4 3 4 3

0.60 0.32 0.30 0.24 0.08 0.30 0.60 0.15

Gateway CSFs (contd)

Prod. Capacity E-commerce Customer Serv Price competitive
Wt Rating Wtd Score

Apple
Rating Wtd Score

Dell
Rating Wtd Score

0.04 0.10 0.10 0.02

3 3 3 4 2

0.12 0.30 0.30 0.08 0.02

3 3 2 1 4

0.12 0.30 0.20 0.02 0.04

3 3 4 3 2

0.12 0.30 0.40 0.06 0.02

Mgt. experience 0.01

Total

1.00

2.83

2.47

3.49

Universal System Technologies Key External Factors Opportunities

Global markets untapped Increased demand Astronomical Internet growth Pinkerton leader in discount market More social pressure to quit smoking

Weight .15

Rating

Weighted score

1 3 1 4 3 2 3 2 2 1

.15 .15 .05 .60 .30 .20 .15 .10 .20 .20 2.10

.05 .05 .15 .10 .10 .05 .05 .10 .20 1.00

Threats
Legislation against the tobacco industry Production limits on tobacco Smokeless market SE region U.S. Bad media exposure from FDA Clinton Administration TOTAL

(Competitive Profile Matrix)

Critical Success Factor Advertising Product Quality Price Competition Management Financial Position Customer Loyalty Global Expansion Market Share

Procter Weight Rating Score Rating Score Rating Score Avon LOreal & Gamble

0.20 0.10 0.10 0.10 0.15 0.10 0.20 0.05 1.00

1 4 3 4 4 4 4 1

0.20 0.40 0.30 0.40 0.60 0.40 0.80 0.05 3.15

4 4 3 3 3 4 2 4

0.80 0.40 0.30 0.30 0.45 0.40 0.40 0.20 3.25

3 3 4 3 3 2 2 3

0.60 0.30 0.40 0.30 0.45 0.20 0.40 0.15 2.80

Total

Mission Statement (proposed)

Our mission is to provide cruise and travel services (2) to travelers worldwide (1, 3), to develop household name brand awareness, to respect and protect the earth and seas on which we sail (6), to serve the communities in which our consumers and employees reside (8,9), and to stay an innovator by bringing cutting edge technology and research for our consumers benefit (4). We recognize that we must stay financially solvent and must make those decisions that will capitalize on opportunities for growth and longevity (5). We believe we must exceed every consumers expectations, supplying lasting memories, and enticing repeat business all at a fair value. We recruit, compensate and retain the best staff and ship employees in the business (7, 9).

Competitive Profile Matrix Royal Caribbean

RCL CCL Critical Success W eight Rating W eighted Rating W eighted Factors Score Score Market Share 0.20 3 0.60 4 0.80 Customer Loyalty 0.15 3 0.45 4 0.60 Distribution Network 0.15 4 0.60 3 0.45 Financial Position 0.10 1 0.10 4 0.40 Global Expansion 0.05 4 0.20 3 0.15 Advertising 0.05 3 0.15 4 0.20 Product Quality 0.15 4 0.60 3 0.45 Expansion of 0.15 4 0.60 3 0.45 departure ports Total 1.00 3.30 3.50

POC Rating W eighted Score 2 0.40 2 0.30 2 0.30 3 0.30 2 0.10 2 0.10 2 0.30 2 0.30 2.10

EFE Matrix
Key External Factors Opportunities Nearly 88% of North Americans have never been on a cruise. Cruise vacations are seen as a choice of older travelers; leaving minorities and young adult markets virtually untapped Distribution networks at home and abroad may be an untapped source for generating increased business Internet use is increasing; commonly the tool used to secure reservations for many travelers Several markets overseas, such as, France, Italy, have a market of would be cruisers Threats Increase in regulation by US regarding environmental issues and economic downturns Alaskan legislators are considering a $50 tax per cruise ship passenger Location and severity of terrorist attacks; namely September 11 th events War and political uprisings Drastic changes in the world oil market and currency exchange Existing and potential litigation Increased capacity of competitors and pricing wars Transfer of information through collective bargaining agreements Competitors: Carnival and P & O Total Weight 0.15 0.08 Rating 4 3 Weighted Score 0.60 0.24

0.07 0.08 0.10 0.08 0.05 0.10 0.10 0.02 0.02 0.05 0.03 0.07 1.00

3 3 2 2 2 3 3 1 1 2 1 2

0.21 0.24 0.20 0.16 0.10 0.30 0.30 0.02 0.02 0.10 0.03 0.14 2.56