Java Logs You are interested in opening a Java Logs outlet here. What information would you want to collect first? How would you do to get that information?

Ch 3: Environment Scanning and Industry Analysis Societal Environment Industry Environment External Environment 1

Macro (Societal) -environment Socio-cultural forces Demographic changes Social values Lifestyles Economic forces Unemployment Interest rates Imports and exports Corporation Technological Forces - New products and processes - Innovation - Scientific discovery; R&D Political-Legal forces - Political relationships - Taxation / Regulation - Political change

Variables in Societal Environment Economic GDP trends Interest rates Money supply Inflation rates Unemployment Technological Ave. R&D spending Patent laws New products New tech devel. Productivity chgs. Political-Legal Envir. protection Tax laws Foreign trade regs. HR Laws Gov’t stability Socio-cultural Lifestyle changes Consumer activism Family formation Population growth Age distrib. changes

Online News Sources http://online.wsj.com/public/us http://www.cnn.com/ http://www.bakersfield.com/ http://www.latimes.com/

The Role of Forecasting Environmental Scanning Trends Forecast Future Trends Strategic Planning

Popular Forecasting Techniques Extrapolation Brain storming Expert opinion Regression Simulation / What Ifs

Forces Driving Industry Competition 3.6 Forces Driving Industry Competition (Fig. 3.3) Forces Driving Industry Competition Threat of New Entrants Bargaining Power of Suppliers of Buyers Relative of Unions, Governments, etc. Potential Threat of Substitute Products or Services Industry Competitors Rivalry Among Existing Firms Other Stakeholders Buyers Substitutes Suppliers 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.

Some Barriers to Entry: Economies of Scale Capital Requirements Switching Costs Access to Distribution Channels

Rivalry Among Existing Firms # of Competitors Industry Growth Exit Barriers (emotional, fixed assets)

Power of Suppliers High buyer switching costs Unique product Few sellers

Power of Buyers # & Size of sellers Backward integration Low product differentiation

Substitutes How close are the substitutes? Tea? Gasoline? Diamonds depends on context

Industry Analysis Determine Industry Select Force Prepare presentation / Report Link Theory to your Research Findings Headings/subheadings, #’s & %, Tables, Appendices (make clear references)

External Factor Analysis Summary (EFAS) 3.16 External Factor Analysis Summary (EFAS): Blank External Factor Analysis Summary (EFAS) External Strategic Factors Rating Weighted Score Weight Comments 1 2 3 4 5 Opportunities 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.