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Environmental Scanning & Industry Analysis 3-1
Ch 3: Environment Scanning and
Industry Analysis
Societal Environment
Industry Environment
Environmental Scanning & Industry Analysis 3-2
External
Environment
Variables in Societal Environment
Economic
Technological
Political-Legal
Socio-cultural
GDP trends
Ave. R&D spending
Envir. protection
Lifestyle changes
Interest rates
Patent laws
Tax laws
Consumer activism
Money supply
New products
Foreign trade regs.
Family formation
Inflation rates
New tech devel.
HR Laws
Population growth
Unemployment
Productivity chgs.
Gov’t stability
Age distrib. changes
Environmental Scanning & Industry Analysis 3-4
Online News Sources
• http://online.wsj.com/public/us
• http://www.cnn.com/
• http://www.bakersfield.com/
• http://www.latimes.com/
Environmental Scanning & Industry Analysis 3-5
3.13 The Role of Forecasting
The Role of Forecasting
Environmental
Scanning
Trends
Environmental Scanning & Industry Analysis 3-6
Forecast
Future Trends
Strategic
Planning
3.14 Popular Forecasting Techniques
Popular Forecasting Techniques
• Extrapolation
• Brain storming
• Expert opinion
• Regression
• Simulation / What Ifs
Environmental Scanning & Industry Analysis 3-7
3.6
Forces Driving Industry Competition (Fig. 3.3)
Forces Driving Industry Competition
Potential
Entrants
Threat
of New
Entrants
Other
Stakeholders
Relative
Power
of Unions,
Governments,
etc.
Industry
Competitors
Bargaining
Power
of Buyers
Buyers
Suppliers
Bargaining
Power
of Suppliers
Rivalry Among
Existing Firms
Threat of
Substitute
Products
or Services
Substitutes
Environmental Scanning & Industry Analysis 3-8
Source: Adapted/reprinted with permission
of The Free Press, an imprint of Simon &
Schuster, from Competitive Strategy:
Techniques for Analyzing Industries and
Competitors by Michael E. Porter. Copyright
© 1980 by The Free Press.
3.7
Some Barriers to Entry
Some Barriers to Entry:
• Economies of Scale
• Capital Requirements
• Switching Costs
• Access to Distribution Channels
Environmental Scanning & Industry Analysis 3-9
3.8
Rivalry Among Existing Firms
Rivalry Among Existing Firms
• # of Competitors
• Industry Growth
• Exit Barriers (emotional, fixed assets)
Environmental Scanning & Industry Analysis 3-10
Power of Suppliers
– High buyer switching costs
– Unique product
– Few sellers
Environmental Scanning & Industry Analysis 3-11
Power of Buyers
– # & Size of sellers
– Backward integration
– Low product differentiation
Environmental Scanning & Industry Analysis 3-12
Substitutes
• How close are the substitutes?
- Tea?
- Gasoline?
- Diamonds
- depends on context
Environmental Scanning & Industry Analysis 3-13
Industry Analysis
• Determine Industry
• Select Force
• Prepare presentation / Report
– Link Theory to your Research Findings
– Headings/subheadings, #’s & %, Tables,
Appendices (make clear references)
Environmental Scanning & Industry Analysis 3-14
3.16 External Factor Analysis Summary (EFAS): Blank
External Factor Analysis Summary
(EFAS)
External
Strategic Factors
Opportunities
Weight
1
Weighted
Score
Rating
2
3
Comments
4
5
Threats
Total Weighted Score
1.00
Notes: 1. List opportunities and threats (5–10 each) in column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2
based on that factor’s probable impact on the company’s strategic position. The total weights must sum to 1.00. 3. Rate each factor from 5 (Outstanding)
to 1 (Poor) in Column 3 based on the company’s response to that factor. 4. Multiply each factor’s weight times its rating to obtain each factor’s
weighted score in Column 4. 5. Use Column 5 (comments) for rationale used for each factor. 6. Add the weighted scores to obtain the total weighted
score for the company in Column 4. This tells how well the company is responding to the strategic factors in its external environment.
Source: T. L. Wheelen and J. D. Hunger, “External Strategic Factors Analysis Summary (EFAS).” Copyright © 1991 by Wheelen and Hunger Associates.
Reprinted by permission.
Environmental Scanning & Industry Analysis 3-15