Description
Environmental
Scanning and
Industry Analysis
Chapter 4
Learning Objectives
Recognize aspects of an organization’s environment
that can influence its long-term decisions
Identify the aspects of an organization’s environment
that are most strategically important
Conduct an industry analysis to understand the
competitive forces that influence the intensity of
rivalry within an industry
Understand how industry maturity affects industry
competitive forces
Categorize international industries based on their
pressures for coordination and local responsiveness
Copyright © 2015 Pearson Education, Inc.
4-2
Learning Objectives
Construct strategic group maps to assess the
competitive positions of firms in an industry
Identify key success factors and develop an
industry matrix
Use publicly available information to conduct
competitive intelligence
Know how to develop an industry scenario
Be able to construct an EFAS Table that
summarizes external environmental factors
Copyright © 2015 Pearson Education, Inc.
4-3
Environmental Scanning
Environmental scanning
the monitoring, evaluation, and dissemination of
information relevant to the organizational
development of strategy
Copyright © 2015 Pearson Education, Inc.
4-4
Identifying External
Environmental Variables
Natural environment
includes physical resources, wildlife and climate
that are an inherent part of existence on Earth
form an ecological system of interrelated life
Copyright © 2015 Pearson Education, Inc.
4-5
Identifying External
Environmental Variables
Societal environment
mankind’s social system that includes general
forces that do not directly touch on the short-run
activities of the organization, but that can
influence its long-term decisions
economic, technological, political-legal and
sociocultural
Copyright © 2015 Pearson Education, Inc.
4-6
Identifying External
Environmental Variables
Task environment
those elements or groups that directly affect a
corporation and, in turn, are affected by it
government, local communities, suppliers,
competitors, customers, creditors, unions, special
interest groups/trade associations
Copyright © 2015 Pearson Education, Inc.
4-7
Identifying External
Environmental Variables
Industry analysis
an in-depth examination of key factors within a
corporation’s task environment
Copyright © 2015 Pearson Education, Inc.
4-8
Scanning the Societal Environment:
STEEP Analysis
STEEP Analysis
monitoring trends in the societal and natural
environments
sociocultural, technological, economic, ecological
and political-legal forces
Copyright © 2015 Pearson Education, Inc.
4-9
Some Important Variables in the
Societal Environment
Copyright © 2015 Pearson Education, Inc.
4-10
Current U.S. Generations
Copyright © 2015 Pearson Education, Inc.
4-11
Current Sociocultural Trends
Increasing environmental awareness
Growing health consciousness
Expanding seniors market
Impact of Millennials
Copyright © 2015 Pearson Education, Inc.
4-12
Current Sociocultural Trends
Declining mass market
Changing pace and location of life
Changing household composition
Increasing diversity of workforce and markets
Copyright © 2015 Pearson Education, Inc.
4-13
Technological Breakthroughs
Portable information devices
Electronic networking
Alternative energy sources
Precision farming
Virtual personal assistants
Genetically altered organisms
Smart, mobile robots
Copyright © 2015 Pearson Education, Inc.
4-14
Categories of Risk
Regulatory
risk
Supply chain
risk
Product and
technology
risk
Litigation risk
Reputational
risk
Physical risk
Copyright © 2015 Pearson Education, Inc.
4-15
Some Important Variables in
International Societal Environments
Copyright © 2015 Pearson Education, Inc.
4-16
Scanning External Environment
Copyright © 2015 Pearson Education, Inc.
4-17
Forces Driving Industry Competition
Copyright © 2015 Pearson Education, Inc.
4-18
Threat of New Entrants
Threat of new entrants
new entrants to an industry bring new capacity, a
desire to gain market share and substantial
resources
Entry barrier
an obstruction that makes it difficult for a
company to enter an industry
Copyright © 2015 Pearson Education, Inc.
4-19
Barriers to Entry
Economies of scale
Product differentiation
Capital requirements
Switching costs
Access to distribution channels
Cost disadvantages due to size
Government policies
Copyright © 2015 Pearson Education, Inc.
4-20
Rivalry among Existing Firms
In most industries, corporations are mutually
dependent.
A competitive move by one firm can be
expected to have a noticeable effect on its
competitors and thus may cause retaliation.
Copyright © 2015 Pearson Education, Inc.
4-21
Rivalry among Existing Firms
Number of
competitors
Amount of
fixed costs
Rate of
industry
growth
Product or
service
characteristics
Capacity
Height of exit
barriers
Diversity of
rivals
Copyright © 2015 Pearson Education, Inc.
4-22
Threat of Substitute
Products or Services
Substitute product
a product that appears to be different but can
satisfy the same need as another product
The identification of possible substitute products
means searching for products that can perform
the same function, even though they have a
different appearance.
Copyright © 2015 Pearson Education, Inc.
4-23
The Bargaining Power of Buyers
Bargaining power of buyers
ability of buyers to force prices down, bargain for
higher quality and play competitors against each
other
Large purchases, backward integration,
alternative suppliers, low cost to change
suppliers, product represents a high percentage
of buyer’s cost, buyer earns low profits, product is
unimportant to buyer
Copyright © 2015 Pearson Education, Inc.
4-24
The Bargaining Power of Suppliers
Buyers affect an industry through their ability
to force down prices, bargain for higher
quality or more services and play competitors
against each other.
Copyright © 2015 Pearson Education, Inc.
4-25
The Bargaining Power of Suppliers
A buyer or a group of buyers is powerful if some
of the following factors hold true:
Industry is dominated by a few companies
Unique product or service
Substitutes are not readily available
Ability to forward integrate
Unimportance of product or service to the
industry
Copyright © 2015 Pearson Education, Inc.
4-26
Relative Power of Other Stakeholders
Government
Local communities
Creditors
Trade associations
Special interest groups
Unions
Shareholders
Copyright © 2015 Pearson Education, Inc.
4-27
Industry Evolution
Fragmented industry
no firm has a large market share and each firm
only serves a small piece of the total market in
competition with other firms
Consolidated industry
domination by a few large firms, each struggles to
differentiate products from its competition
Copyright © 2015 Pearson Education, Inc.
4-28
Categorizing International Industries
Multi-domestic industries
specific to each country or group of countries
Global industries
operate worldwide with multinational companies
making only small adjustments for countryspecific circumstances
Regional industries
multinational companies primarily coordinate
their activities within regions
Copyright © 2015 Pearson Education, Inc.
4-29
Continuum of
International Industries
Copyright © 2015 Pearson Education, Inc.
4-30
Strategic Groups
Strategic group
a set of business units or firms that pursue similar
strategies with similar resources
Copyright © 2015 Pearson Education, Inc.
4-31
Mapping Strategic Groups in the
U.S. Restaurant Chain Industry
Copyright © 2015 Pearson Education, Inc.
4-32
Strategic Types
Defenders
focus on improving efficiency
Prospectors
focus on product innovation and market
opportunities
Analyzers
focus on at least two different product market areas
Reactors
lack a consistent strategy-structure-culture
relationship
Copyright © 2015 Pearson Education, Inc.
4-33
Hypercompetition
Market stability is threatened by short
product life cycles, short product design
cycles, new technologies, frequent entry by
unexpected outsiders, repositioning by
incumbents and tactical redefinitions of
market boundaries as diverse industries
merge.
Copyright © 2015 Pearson Education, Inc.
4-34
Using Key Success Factors to Create
an Industry Matrix
Key success factors
variables that can significantly affect the overall
competitive positions of companies within any
particular industry
Copyright © 2015 Pearson Education, Inc.
4-35
Industry Matrix
Industry matrix
summarizes the key success factors within a
particular industry
Copyright © 2015 Pearson Education, Inc.
4-36
Competitive Intelligence
Competitive intelligence
a formal program of gathering information on a
company’s competitors
also called business intelligence
Sources of competitive intelligence:
Information brokers
Internet
Industrial espionage
Investigatory services
Copyright © 2015 Pearson Education, Inc.
4-37
Useful Forecasting Techniques
Extrapolation
Brainstorming
Expert
opinion
Delphi
technique
Statistical
modeling
Prediction
markets
Cross impact
analysis
Copyright © 2015 Pearson Education, Inc.
4-38
Synthesis of External Factors—EFAS
Copyright © 2015 Pearson Education, Inc.
4-39
Copyright © 2015 Pearson Education, Inc.
4-40
المملكة العربية السعودية
وزارة التعليم
الجامعة السعودية اإللكترونية
Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
College of Administrative and Financial Sciences
Assignment 1
Strategic Management (MGT 401)
Due Date: 05/10/2024 @ 23:59
Course Name: Strategic Management
Student’s Name:
Course Code: MGT 401
Student’s ID Number:
Semester: First
CRN:
Academic Year:2024-25-1st
For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
Marks Obtained/Out of 10
Level of Marks: High/Middle/Low
General Instructions – PLEASE READ THEM CAREFULLY
•
•
•
•
•
•
•
•
The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
Assignments submitted through email will not be accepted.
Students are advised to make their work clear and well presented, marks may be reduced
for poor presentation. This includes filling your information on the cover page.
Students must mention question number clearly in their answer.
Late submission will NOT be accepted.
Avoid plagiarism, the work should be in your own words, copying from students or other
resources without proper referencing will result in ZERO marks. No exceptions.
All answered must be typed using Times New Roman (size 12, double-spaced) font. No
pictures containing text will be accepted and will be considered plagiarism).
Submissions without this cover page will NOT be accepted.
Learning Outcomes:
CLO1- Recognize the basic concepts and terminology used in Strategic Management.
CLO2-Describe the different issues related to environmental scanning, strategy formulation, and
strategy implementation in diversified organizations
CLO5-Demonstrate how executive leadership is an important part of strategic management .
Assignment Question(s): (2.5 marks for each question)
1. Why is strategic management important for a corporation’s competitive advantage?
2. How does strategic management typically evolve in a corporation? Give examples
3. Why does a corporation need a board of directors? What is the relationship between
corporate governance and social responsibility? Give examples from the actual
market.
4. Choose any corporation from the Saudi market and discuss the forces driving its
industry competition (review chapter 4-slide 18).
Notes:
– Your answers MUST include at least four scholarly peer-reviewed references, using a proper
referencing style (APA). Remember that these scholarly references can be found in the Saudi
Digital Library (SDL).
– Make sure to support your statements with logic and argument, citing all sources referenced.
Answers
1. Answer-
2. Answer-
Scanning and
Industry Analysis
Chapter 4
Learning Objectives
Recognize aspects of an organization’s environment
that can influence its long-term decisions
Identify the aspects of an organization’s environment
that are most strategically important
Conduct an industry analysis to understand the
competitive forces that influence the intensity of
rivalry within an industry
Understand how industry maturity affects industry
competitive forces
Categorize international industries based on their
pressures for coordination and local responsiveness
Copyright © 2015 Pearson Education, Inc.
4-2
Learning Objectives
Construct strategic group maps to assess the
competitive positions of firms in an industry
Identify key success factors and develop an
industry matrix
Use publicly available information to conduct
competitive intelligence
Know how to develop an industry scenario
Be able to construct an EFAS Table that
summarizes external environmental factors
Copyright © 2015 Pearson Education, Inc.
4-3
Environmental Scanning
Environmental scanning
the monitoring, evaluation, and dissemination of
information relevant to the organizational
development of strategy
Copyright © 2015 Pearson Education, Inc.
4-4
Identifying External
Environmental Variables
Natural environment
includes physical resources, wildlife and climate
that are an inherent part of existence on Earth
form an ecological system of interrelated life
Copyright © 2015 Pearson Education, Inc.
4-5
Identifying External
Environmental Variables
Societal environment
mankind’s social system that includes general
forces that do not directly touch on the short-run
activities of the organization, but that can
influence its long-term decisions
economic, technological, political-legal and
sociocultural
Copyright © 2015 Pearson Education, Inc.
4-6
Identifying External
Environmental Variables
Task environment
those elements or groups that directly affect a
corporation and, in turn, are affected by it
government, local communities, suppliers,
competitors, customers, creditors, unions, special
interest groups/trade associations
Copyright © 2015 Pearson Education, Inc.
4-7
Identifying External
Environmental Variables
Industry analysis
an in-depth examination of key factors within a
corporation’s task environment
Copyright © 2015 Pearson Education, Inc.
4-8
Scanning the Societal Environment:
STEEP Analysis
STEEP Analysis
monitoring trends in the societal and natural
environments
sociocultural, technological, economic, ecological
and political-legal forces
Copyright © 2015 Pearson Education, Inc.
4-9
Some Important Variables in the
Societal Environment
Copyright © 2015 Pearson Education, Inc.
4-10
Current U.S. Generations
Copyright © 2015 Pearson Education, Inc.
4-11
Current Sociocultural Trends
Increasing environmental awareness
Growing health consciousness
Expanding seniors market
Impact of Millennials
Copyright © 2015 Pearson Education, Inc.
4-12
Current Sociocultural Trends
Declining mass market
Changing pace and location of life
Changing household composition
Increasing diversity of workforce and markets
Copyright © 2015 Pearson Education, Inc.
4-13
Technological Breakthroughs
Portable information devices
Electronic networking
Alternative energy sources
Precision farming
Virtual personal assistants
Genetically altered organisms
Smart, mobile robots
Copyright © 2015 Pearson Education, Inc.
4-14
Categories of Risk
Regulatory
risk
Supply chain
risk
Product and
technology
risk
Litigation risk
Reputational
risk
Physical risk
Copyright © 2015 Pearson Education, Inc.
4-15
Some Important Variables in
International Societal Environments
Copyright © 2015 Pearson Education, Inc.
4-16
Scanning External Environment
Copyright © 2015 Pearson Education, Inc.
4-17
Forces Driving Industry Competition
Copyright © 2015 Pearson Education, Inc.
4-18
Threat of New Entrants
Threat of new entrants
new entrants to an industry bring new capacity, a
desire to gain market share and substantial
resources
Entry barrier
an obstruction that makes it difficult for a
company to enter an industry
Copyright © 2015 Pearson Education, Inc.
4-19
Barriers to Entry
Economies of scale
Product differentiation
Capital requirements
Switching costs
Access to distribution channels
Cost disadvantages due to size
Government policies
Copyright © 2015 Pearson Education, Inc.
4-20
Rivalry among Existing Firms
In most industries, corporations are mutually
dependent.
A competitive move by one firm can be
expected to have a noticeable effect on its
competitors and thus may cause retaliation.
Copyright © 2015 Pearson Education, Inc.
4-21
Rivalry among Existing Firms
Number of
competitors
Amount of
fixed costs
Rate of
industry
growth
Product or
service
characteristics
Capacity
Height of exit
barriers
Diversity of
rivals
Copyright © 2015 Pearson Education, Inc.
4-22
Threat of Substitute
Products or Services
Substitute product
a product that appears to be different but can
satisfy the same need as another product
The identification of possible substitute products
means searching for products that can perform
the same function, even though they have a
different appearance.
Copyright © 2015 Pearson Education, Inc.
4-23
The Bargaining Power of Buyers
Bargaining power of buyers
ability of buyers to force prices down, bargain for
higher quality and play competitors against each
other
Large purchases, backward integration,
alternative suppliers, low cost to change
suppliers, product represents a high percentage
of buyer’s cost, buyer earns low profits, product is
unimportant to buyer
Copyright © 2015 Pearson Education, Inc.
4-24
The Bargaining Power of Suppliers
Buyers affect an industry through their ability
to force down prices, bargain for higher
quality or more services and play competitors
against each other.
Copyright © 2015 Pearson Education, Inc.
4-25
The Bargaining Power of Suppliers
A buyer or a group of buyers is powerful if some
of the following factors hold true:
Industry is dominated by a few companies
Unique product or service
Substitutes are not readily available
Ability to forward integrate
Unimportance of product or service to the
industry
Copyright © 2015 Pearson Education, Inc.
4-26
Relative Power of Other Stakeholders
Government
Local communities
Creditors
Trade associations
Special interest groups
Unions
Shareholders
Copyright © 2015 Pearson Education, Inc.
4-27
Industry Evolution
Fragmented industry
no firm has a large market share and each firm
only serves a small piece of the total market in
competition with other firms
Consolidated industry
domination by a few large firms, each struggles to
differentiate products from its competition
Copyright © 2015 Pearson Education, Inc.
4-28
Categorizing International Industries
Multi-domestic industries
specific to each country or group of countries
Global industries
operate worldwide with multinational companies
making only small adjustments for countryspecific circumstances
Regional industries
multinational companies primarily coordinate
their activities within regions
Copyright © 2015 Pearson Education, Inc.
4-29
Continuum of
International Industries
Copyright © 2015 Pearson Education, Inc.
4-30
Strategic Groups
Strategic group
a set of business units or firms that pursue similar
strategies with similar resources
Copyright © 2015 Pearson Education, Inc.
4-31
Mapping Strategic Groups in the
U.S. Restaurant Chain Industry
Copyright © 2015 Pearson Education, Inc.
4-32
Strategic Types
Defenders
focus on improving efficiency
Prospectors
focus on product innovation and market
opportunities
Analyzers
focus on at least two different product market areas
Reactors
lack a consistent strategy-structure-culture
relationship
Copyright © 2015 Pearson Education, Inc.
4-33
Hypercompetition
Market stability is threatened by short
product life cycles, short product design
cycles, new technologies, frequent entry by
unexpected outsiders, repositioning by
incumbents and tactical redefinitions of
market boundaries as diverse industries
merge.
Copyright © 2015 Pearson Education, Inc.
4-34
Using Key Success Factors to Create
an Industry Matrix
Key success factors
variables that can significantly affect the overall
competitive positions of companies within any
particular industry
Copyright © 2015 Pearson Education, Inc.
4-35
Industry Matrix
Industry matrix
summarizes the key success factors within a
particular industry
Copyright © 2015 Pearson Education, Inc.
4-36
Competitive Intelligence
Competitive intelligence
a formal program of gathering information on a
company’s competitors
also called business intelligence
Sources of competitive intelligence:
Information brokers
Internet
Industrial espionage
Investigatory services
Copyright © 2015 Pearson Education, Inc.
4-37
Useful Forecasting Techniques
Extrapolation
Brainstorming
Expert
opinion
Delphi
technique
Statistical
modeling
Prediction
markets
Cross impact
analysis
Copyright © 2015 Pearson Education, Inc.
4-38
Synthesis of External Factors—EFAS
Copyright © 2015 Pearson Education, Inc.
4-39
Copyright © 2015 Pearson Education, Inc.
4-40
المملكة العربية السعودية
وزارة التعليم
الجامعة السعودية اإللكترونية
Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
College of Administrative and Financial Sciences
Assignment 1
Strategic Management (MGT 401)
Due Date: 05/10/2024 @ 23:59
Course Name: Strategic Management
Student’s Name:
Course Code: MGT 401
Student’s ID Number:
Semester: First
CRN:
Academic Year:2024-25-1st
For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
Marks Obtained/Out of 10
Level of Marks: High/Middle/Low
General Instructions – PLEASE READ THEM CAREFULLY
•
•
•
•
•
•
•
•
The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
Assignments submitted through email will not be accepted.
Students are advised to make their work clear and well presented, marks may be reduced
for poor presentation. This includes filling your information on the cover page.
Students must mention question number clearly in their answer.
Late submission will NOT be accepted.
Avoid plagiarism, the work should be in your own words, copying from students or other
resources without proper referencing will result in ZERO marks. No exceptions.
All answered must be typed using Times New Roman (size 12, double-spaced) font. No
pictures containing text will be accepted and will be considered plagiarism).
Submissions without this cover page will NOT be accepted.
Learning Outcomes:
CLO1- Recognize the basic concepts and terminology used in Strategic Management.
CLO2-Describe the different issues related to environmental scanning, strategy formulation, and
strategy implementation in diversified organizations
CLO5-Demonstrate how executive leadership is an important part of strategic management .
Assignment Question(s): (2.5 marks for each question)
1. Why is strategic management important for a corporation’s competitive advantage?
2. How does strategic management typically evolve in a corporation? Give examples
3. Why does a corporation need a board of directors? What is the relationship between
corporate governance and social responsibility? Give examples from the actual
market.
4. Choose any corporation from the Saudi market and discuss the forces driving its
industry competition (review chapter 4-slide 18).
Notes:
– Your answers MUST include at least four scholarly peer-reviewed references, using a proper
referencing style (APA). Remember that these scholarly references can be found in the Saudi
Digital Library (SDL).
– Make sure to support your statements with logic and argument, citing all sources referenced.
Answers
1. Answer-
2. Answer-
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