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CHAPTER 4

Environmental
Scanning and
Industry Analysis
STRATEGIC MANAGEMENT & BUSINESS POLICY
10TH EDITION
THOMAS L. WHEELEN

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J. DAVID HUNGER

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Environmental Scanning

Societal environment -Economic forces


Technological forces
Political-legal forces
Sociocultural forces

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Societal Environment

Economic Forces -Regulate exchange of materials, money,


energy and information

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Societal Environment

Technological Forces -Generate problem-solving inventions

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Societal Environment

Political-legal Forces -Allocate power; provide laws and regulations

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Societal Environment

Sociocultural Forces -Regulate values, mores, and customs of


society

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Task Environment

Task environment -Elements or groups that directly affect a


corporation and are affected by it

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Task Environment

Industry Analysis -In-depth examination of key factors within a


corporations task environment

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Variables in Societal Environment

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Demographic Trends

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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

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International Societal Environments

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Scanning the Task Environment

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Ethical Behavior

business ethics
Argument that there is no such thing it is an
oxymoron

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Ethical Decision Making

Corporate practices -Massive write-downs and restatements of profit


Misclassification of expenses as capital
expenditures
Pirating corporate assets for personal gain

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External Strategic Factors

Strategic myopia -Willingness to reject unfamiliar as well as


negative information

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Issues Priority Matrix

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Analyzing the Task Environment

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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

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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

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Porters Approach to Industry Analysis

Threat of Substitute Products or Services


Bargaining Power of Buyers
Bargaining Power of Suppliers
Relative Power of Other Stakeholders

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Industry Evolution

Fragmented Industry
No dominant industry

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Industry Evolution

Consolidated Industry
Dominated by a few large firms

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International Risk Assessment

Continuum of International Industries

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Strategic Groups

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Strategic Types

General Types
Defenders
Prospectors
Analyzers
Reactors

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Competitive Intelligence

Called business intelligence

Gathering information on a companys


competitors

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Forecasting

Forecasting Techniques -Extrapolation


Brainstorming
Expert opinion
Delphi technique
Statistical modeling
Scenario writing

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Synthesis of External Factors -- EFAS

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