Strategic ManagementEnvironmental Scanning, Corporate & Business Strategy 1 Session 4: Today’s agenda  Put directional and business strategy in context  Development of Opportunities and Threats through environmental scanning Environmental analysis  Areas of concern  Issues and priorities  O & T Industry analysis (Porter model)  Areas of concern  O & T  Generic business strategies

Strategic ManagementEnvironmental Scanning, Corporate & Business Strategy 2 Revisiting O/E analysis for Southwest  What is your overall O/E rating for Southwest?  What issues (problems or opportunities) are evident from the O/E analysis Goals/objectives approach Internal processes approach Resource-based approach Stakeholder approach

Strategic ManagementEnvironmental Scanning, Corporate & Business Strategy 3 Putting directional & business strategy in perspective  Corporate strategy addresses Directional strategy: growth, stability or retrenchment Portfolio strategy: businesses, industries, or markets to compete in Parenting strategy: managing units in the portfolio for superior performance  Business strategy: how to compete  Corporate directional strategy is relevant even when there is only one business unit.

Strategic ManagementEnvironmental Scanning, Corporate & Business Strategy 4 Environmental scanning  Why do it?  What work output should an environmental scan produce?

Strategic ManagementEnvironmental Scanning, Corporate & Business Strategy 5 Environmental Scan Sociocultural Forces Political - Legal Forces Technological Forces Economic Forces Task Environment Shareholders Communities Governments Special Interest Groups Customers Creditors Trade Association Competitors Employees/ Labor Unions Suppliers Internal Environment Structures Culture Resources Which elements are most relevant? What are the implications for management?

Strategic ManagementEnvironmental Scanning, Corporate & Business Strategy 6 Environmental & industry analysis  Fig. 3-1 Environment Note distinction between inside and outside External focus is on Opportunities and Threats  Table 3.1 Environmental variables Identify important variables.  Fig. 3.2 Scanning external environment Which factors are key  Fig 3.3 Issues priority matrix What issues, e.g., opportunities and threats, need to be addressed?

Strategic ManagementEnvironmental Scanning, Corporate & Business Strategy 7 Industry Competitors Rivalry Among Existing Firms Potential Entrants Suppliers Other Stakeholders Buyers Substitutes Threat of Substitute Products or Services Bargaining Power Of Buyers Threat of New Entrants Relative Power of Unions, Government, Etc. Bargaining Power Of Suppliers Industry Analysis (Porter)

Strategic ManagementEnvironmental Scanning, Corporate & Business Strategy 8 Session 4: Environmental scanning, corporate and business strategy.  Evaluate Southwest’s environment using Fig. 3-1 & Table 3-1. Identify the “high priority” issues in Fig Categorize the issues as Opportunities or Threats  Characterize Southwest’s generic business strategy Fig. 5-3.

Strategic ManagementEnvironmental Scanning, Corporate & Business Strategy 9 Generic business strategies  Focuses on how the firm will compete  Competitive strategies (Porter) Address scope (broad or narrow) and advantage (cost or differentiation) 4 options Cost leadership Differen- tiation Cost Focus Focused differenti- ation Competitive Advantage Competitive Scope

Strategic Management Environmental Scanning, Corporate & Business StrategyPage 10 STRENGTHS – SWEAKNESSES - W OPPORTUNITIES – O SO STRATEGIES WO STRATEGIES THREATS - T ST STRATEGIESWT STRATEGIES Internal External SWOT analysis & Alternative Strategies See the Assignments and Forms web page for versions of this table in Word and PowerPoint. See description of each cell in H&W Figure 5.2

Strategic ManagementEnvironmental Scanning, Corporate & Business Strategy 11 Margin The internal value chain Primary Activities Support Activities Procurement Serv- ice Technology Development Human resource management Firm infrastructure Inbound Logistics Opera- tions Out- bound Logistics Market- ing and sales Which cells are strong? Which are weak? Which offer competitive opportunities? Which cells are strong? Which are weak? Which offer competitive opportunities? What strengths and weaknesses are revealed by this analysis?