© 2008 Knud Jensen, Rein Petersen, Neil Wolff 1 Knud Jensen Ted Rogers School of Management, Ryerson University Industry Dynamics and Change

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 2 Understanding how to grow requires an in-depth understanding and clarification of the external environment in which the organization exists. Industry Dynamics and Change

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 3 Information is Important Information about the following is important:  Industry  Market  Industry structure  Competitors  Buyers/consumers  Technology

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 4 The Big Three 1.Where are we currently ? 2.Where do we want to go ? 3.How do we get there ?

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 5 The Why of Why?  Asking why ? – questions basic beliefs and gets to the real cause of problems, issues, roadblocks, etc.  Challenges lead to insight  Toyota’s 5 whys

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 6 More Questions Externally Focused Questions:  How and at what pace is the company’s market evolving ?  What factors are driving market change and what impact will they have ?  What are competitors up to ? In what ways are competitive conditions growing stronger or weaker ?  What does the changing market and competitive landscape mean for the company’s business over the next five years and beyond ?

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 7 THE OBJECTIVES OF THE INFORMATION MUST ALWAYS BE KEPT IN MIND: 1.To develop a deep understanding of where the company is now with respect to the external environment. 2.To clarify the complex forces impacting on the company. Industry Dynamics and Change

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 8 We need to understand magnitudes, market limitations, and most important, prospects for future growth. Example:  Size and 2 – 5 years historical growth  Simple growth trends can generate a lot of discussion Industry Dynamics and Change

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 9 Complexity:  You may be part of one industry  You may be part of several industries (via products/services, customers, suppliers) Industry Dynamics and Change

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 10 Tools For The Industry:  Boundaries (What is your sandbox ? )  Industry structure  Driving forces  Key success factors  Competitor analysis  Maps Industry Dynamics and Change

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 11  Rivalry amongst competing sellers  Threat of new competitors  Threat of substitute products  Supplier bargaining power  Buyer bargaining power Analyzing Competitive Forces

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 12 Driving forces are variables that have the capacity to change not only demand, but also the very nature of an industry. Driving forces should be identified for your industry. Changes result in:  Buyer behaviour modification  Structural change  Competitive reaction  Product portfolios  Disruptions Driving Forces

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 13  Demographics  Technology  Innovations, inventions  Social and cultural changes  New products/services  Changes in buyer attitudes  Government regulations, policy, changes in law Typical Driving Forces

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 14 Strategic Group Map Illustration

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 15  Identify competitive characteristics that differentiate firms in your industry. Choose two possible axes that you consider appropriate. Some possible axes to consider are:  Price/Quality (high, medium, low)  Geographic coverage (local, national, international)  Degree of vertical integration (none, partial, full)  Product-line breadth (wide, average, low)  Use of distribution channels (narrow, average, low)  Degree of service offered (no-frills, limited, full) Strategic Group Map

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 16 Complete Your Own Map

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 17  Think about what it takes to be successful in your industry  There are “must have” and there are “nice to have”  Identify the gap or gaps that exist between your success factors and those in the industry  If you want to grow, you have to fill the gaps  KSFs are not stable and they are not equal, but they are necessary Key Success Factors (KSFs)

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 18 A summary of the characteristics of strengths, weaknesses, opportunities, and threats Strengths:  Something we do well  Valuable know-how  Competitive capability  Attributes  Ventures, alliances SWOT

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 19 A summary of the characteristics of strengths, weaknesses, opportunities, and threats con’t Weaknesses:  Something we do poorly  A disadvantage  A deficiency in expertise or competence  Lack of assets (physical, human, intangible)  Missing capabilities SWOT

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 20 A summary of the characteristics of strengths, weaknesses, opportunities, and threats con’t Opportunities:  Best prospects  Competitive advantage  New customers, markets, products  Change in industry structure SWOT

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 21 A summary of the characteristics of strengths, weaknesses, opportunities, and threats con’t Threats:  Competitive behaviour  New product/service  Demographics  Technology SWOT

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 22 A summary of the characteristics of strengths, weaknesses, opportunities, and threats con’t Growing From SWOT Analysis:  Build on the organization’s strengths  Recognize weaknesses and correct, where possible  Take advantage of opportunities – this is what drives growth  Recognize threats to the organization and take steps to minimize the effects SWOT

© 2008 Knud Jensen, Rein Petersen, Neil Wolff 23 “Before executives can chart a new strategy, they must reach common understanding of the company’s current position.” W. Chan Kim and Renee Mauborgne