Professional Documents
Culture Documents
Environmental Scanning
Environmental scanning is the monitoring, evaluation and dissemination of information from the external and internal environments to key people within the corporation. It is in the environment that all the opportunities are embedded. By tapping the opportunities, the firm achieves its objectives of sales, profits, growth, et al. In the environment only all the threats lie.
IKEA (Slide 1)
As a young person in Sweden after the Second World War, Kamprad observed that many young families had a hard time buying Swedish furniture because of its high price. He saw a way to offer good quality furniture at substantially lower prices.
IKEA (Slide 2)
What were the options available with Kamprad? His cost cutting strategy included:
Buy large volumes The furniture would be designed in knockdown form Customers would see the assembled furniture in showroom, make selection, locate furniture items, pay and drive home avoiding delivery costs Customers would assemble the furniture themselves Ikea stores work on a low markup and high volume
The Swedish manufacturer of home furnishings, Ikea group, wants to double the goods it sources from India to 1 billion. But plans to sell the companys products in the country are hampered by restrictions on overseas investments in retail.
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IKEA (Slide 3)
Their idea is to provide good design, good function, but at very, very low prices. The company does not prefer to be in joint ventures (JV). There is a very high urbanization rate in India and that will only continue. Entry barrier is that the firms plan to sell its products in India, are hampered by restrictions on overseas investments in retail. Economic conditions are improving dramatically in India, for all people. There is really room for all the traditional local home furnishing firms and also for Ikea because the market and the need will grow so dramatically in the coming 10-20 years.
Analysis helps the firm highlight opportunities for growth within and outside the existing businesses of the firm.
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Fad
A fad is any form of behavior that develops among a large population and is collectively followed with enthusiasm for some period, generally as a result of the behavior's being perceived as novel in some way.
Though the term trend may be used interchangeably with fad, a fad is generally considered a fleeting behavior whereas a trend is considered to be a behavior that evolves into a relatively permanent change.
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Fad
Fads of the 2000s
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Fad
Fads of the 2000s
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Political Factors
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Components of Environment
Political factors
Stability of the government Government type (dictatorship, democratic, monarchy, etc) Economic policy of the government Diplomatic events in surrounding countries Taxation policy Foreign policy Trade regulations and trade policy Social welfare policies
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Economic Factors
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Components of Environment
Economic factors
GNP/GDP trends Business cycles Interest rates Money supply Inflation Unemployment Disposable income
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Socio-cultural Factors
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Components of Environment
Socio-cultural factors
Population demographics Income distribution Social mobility Cultural diversity Lifestyle changes Attitude towards work and leisure Consumerism Levels of education Skilled manpower availability
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Technological Factors
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Components of Environment
Technological Factors
Government spending on research and development Government and industry focus on technological efforts New discoveries, innovations and development Speed of technology transfer Rates of obsolescence
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Environmental Factors
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Components of Environment
Environmental factors
Environmental protection laws Waste disposal regulations Energy consumption and production Competition law
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Legal Factors
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Components of Environment
Legal factors
Monopolies legislation Employment law Health and safety Product safety and liability regulations Exit policy
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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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Business Ethics
Argument that there is no such thing it is an oxymoron
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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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Strategic Myopia
Willingness to reject unfamiliar as well as negative information
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Industry Analysis
An industry is a group of firms producing a similar product or service An examination of the important stakeholders group in a particular corporations task environment is a part of industry analysis
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Barriers to Entry
Switching Costs
Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy
Expected Retaliation
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Economies of scale means where companies are able to drive down unit costs of a product or service as the volume increases. An entrant has two options, either to match or outperform the level of economies of scale or to start at a level where the economies of scale are less and accept that there will be cost disadvantages.
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Barriers to Entry
Switching Costs
Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy
Expected Retaliation
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Barriers to Entry
Switching Costs
Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy
Expected Retaliation
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Switching costs means costs incurred in changing suppliers. These costs will occur because of retraining staff, installation and testing of new equipment, acquisition of ancillary materials and time needed to build relationships with new suppliers.
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Barriers to Entry
Switching Costs
Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy
Expected Retaliation
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Barriers to Entry
Switching Costs
Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy
Expected Retaliation
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Supplier industry is dominated by a few firms Suppliers products have few substitutes Buyer is not an important customer to supplier Suppliers product is an important input to buyers product
Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases
OPEC
The Organization of the Petroleum Exporting Countries (OPEC) was founded in Baghdad, Iraq, with the signing of an agreement in September 1960 by five countries, the founder members, Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. These countries were later joined by Qatar, Indonesia, Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador, Gabon and Angola. Gabon terminated its membership in 1995. Indonesia suspended its membership in January 2009. Currently, the Organization has a total of 12 Member Countries.
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Staging advertising battles Increasing consumer warranties or service Making new product introductions
Industry Evolution
Over time industries evolve through a series of stages from growth through maturity to eventual decline The strength of each force of the six forces varies according to the stage of industry evolution Fragmented industry : no firm has large market share and each firm serves only a small piece of the total market in competition with others Consolidated industry : dominated by a few large firms, each of which struggle s to differentiate its products from the competition
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Industry in which companies tailor their products to the specific needs of consumers in a particular country. Retailing Insurance Banking
Industry in which companies manufacture and sell the same products, with only minor adjustments made for individual countries around the world. Automobiles
Tyres
Television sets
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Strategic Groups
Is a set of business units or firms that pursue similar strategies with similar resources To understand the competitive environment in an industry, firms can be categorized into a set of strategic groups Strategic groups of an industry can be plotted on a two dimensional graph (price, product line breadth, quality, service, location)
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Strategic Types
Defenders Prospectors Analyzers Reactors
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Strategic Types
Defenders Companies with a limited product line that focus on improving the efficiency of their existing operations Prospectors Companies with fairly broad product lines that focus on product innovation and market opportunities
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Strategic Types
Analyzers Corporations that operate at least in 2 different product-market areas. Emphasis on efficiency in stable areas. Emphasis on innovation in variable areas Reactors Corporations that lack a consistent strategystructure- culture relationship. Ineffective responses to environmental pressures
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Hyper-competition
In hyper-competition the frequency, boldness, and agressiveness of dynamic movement by the players accelerates to create a condition of constant disequilibrium and change Market stability is threatened by short product life cycles, short product design cycles, new technologies, frequent entry by unexpected outsiders, redefinition of market boundaries as diverse industries merge Environments escalate towards higher levels of uncertainty, dynamism, heterogeneity of the players and hostility
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Hyper-competition
Companies must be willing to cannibalize their own products (replacing popular products before competitors do so) in order to sustain their competitive advantage As a result, it is important to study industry or competitive intelligence
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Competitive Intelligence
Is a formal program of gathering information on a companys competitors Most corporations rely on outside organizations to provide them with environmental data. Information on market conditions, government regulations, competitors and new products can be bought from information brokers
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Competitive Intelligence
Industrial espionage is considered illegal Unethical tactics; bribery, wiretapping, computer break-ins should never be used to get information
Forecasting
Intuition and luck are needed to predict trends in the future, These trends are based on assumptions. Faulty assumptions are cause of forecasting errors. Many long-range plans are based on projections of the current situation.
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Environmental Scanning
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