1. COURSE TITLE : COMPETITIVE STRATEGY
Ashesi University
COURSE TITLE : COMPETITIVE STRATEGY
SEMESTER : 1ST 2011/2012
MODULE 3: Strategic Analysis: Remote or External Environment
Lecturer : Ebow Spio

2. Learning Objectives
Appreciate the importance of developing forecasts of the business environment.
Understand why environmental scanning, environmental monitoring, and collecting competitive intelligence are critical inputs to forecasting.
Why scenario planning is a useful technique for firms competing in industries characterized by unpredictability and change.
4. Explain the impact of the general environment on a firm’s strategies and performance

3. From Thinking Strategically about the Company’s Situation to Choosing a Strategy

4. The Components of a Company’s Macro-environment

5. Analyzing the external environment
The general or remote environment is composed of trends in broader society that influence an industry or the firms in it.
It is a set of conditions outside the firm that affects the firm’s performance. These trends can a dramatic effect on an industry and the firm.
Analyzing the external environment is about detecting trends and events that create opportunities and serve as a threat.
Once these trends are detected it is important to make a forecast and design scenarios to minimize future threats as well as exploit opportunities
Firms must pay attention to six trends in the general environment : demographic, economic, political/legal, sociocultural, technological and global

6. Creating the Environmentally Aware Organization
2-6

7. Environmental Scanning & Monitoring
External Scanning
Surveillance of a firm’s external environment:
Predict environmental changes to come
Detect changes already under way
Proactive mode
Alerts the firm to critical trends before changes have developed a discernible pattern and before competitors recognize them
2-7

8. Environmental Scanning & Monitoring
External Monitoring
Track evolution of environmental trends, sequence of events or streams of activities
Sources of information:
Business Press: Financial Times, Economist, Business and
Financial Times, The Wall Street Journal,
Online or Internet sites
such as
Investment Bankers such as Databank, EDC etc.
Trade Publications
Read trade publications related to your industry
Add websites like trendhunter.com to your regular surfing
Ask your customers what they think
2-8

9. Competitive Intelligence
A firms activities of collecting and interpreting data on competitors
Define and understand a firm’s industry
Identify rivals’ strengths and weaknesses, objectives, strategies
Intelligence gathering (data)
Interpretation of intelligence data
Helps a firm avoid surprises
2-9

10. Environmental Forecasting
Plausible projections about direction, scope, speed and intensity of environmental change
2-10

11. Environmental Forecasting
Scenario analysis
involves experts’ detailed assessments of societal trends, economics, politics, technology, or other dimensions of the external environment
2-11

12. The General Environment
Factors external to an industry, usually beyond a firm’s control
Demographic
Sociocultural
Legal/Political
Technological
Economic
Global
General environmental trends and events:
Little ability to predict them
Even less ability to control them
Can vary across industries
2-12 12

13. Demographic Trends Demographic trends are changes in population size,
age, structure, geographic distribution, ethnic mix and
income distribution
Aging population
Rising or declining affluence
Changes in ethnic composition
Geographic distribution of population
Greater disparities in income levels
2-13

14. Sociocultural Trends
Sociocultural trends deal with changes in society’s
attitude, cultural values, beliefs and lifestyle.
More women in the workforce
Dual-income families
Increase in temporary workers
Greater concern for healthy diets and physical fitness
Greater interest in the environment
Postponement of having children
Sociocultural forces influence the values, beliefs, and lifestyles of a society
2-14 14

15. Political/Legal Trends
Political/Legal trends pertain to changes in
organizations and interest groups that compete for a
voice in developing and overseeing the body of laws
and regulations that guide interactions among firms
and nations.
Deregulation of utility and other industries
Increases in government mandated minimum wages
Taxation at local, national levels
Legislation on corporate governance reforms (Sarbanes-Oxley Act)
2-15

16. Technological Trends
Technological trends concern changes in the activities involved with creating new knowledge and translating that knowledge into new products, processes and materials.
Genetic engineering
Emergence of Internet technology
Computer-aided design/computer-aided manufacturing systems (CAD/CAM)
Wireless communication
Genetic engineering
Emergence of Internet technology
Computer-aided design/computer-aided manufacturing systems (CAD/CAM)
Research in synthetic and exotic materials
Pollution/global warming
Miniaturization of computing technologies
Wireless communication
Nanotechnology
2-16 16

17. Economic Trends
Economic trends concern the direction of the economy in which a firm competes or may choose compete.
Interest rates
Unemployment
Consumer Price index
Trends in GDP
Income growth or decline
Currency exchange rates.
Changes in stock market valuations
NB: Income trends affect customers/consumers purchasing power.
2-17

18. Global Trends Global Trends concern the changes in relevant emerging
and developed country markets, important international
political events, and critical changes in cultural and
institutional characteristics of global markets
Increasing global trade
Currency exchange rates
Emergence of the Indian and Chinese economies
Trade agreements (NAFTA, EU, ASEAN)
Creation of WTO (decreasing tariffs/free trade in services)
2-18

19. Capturing Environmental Trends for Strategy Development by the firm
Factor
Trends
Opportunity/
Threat
Strategic Implications
Demographic ++
Global Trends --
Economic Trends
+/-
Technological Trends
Sociocultural Trends
Political/Legal Trends +
Significant Opportunity = ++, Opportunity=+, Neutral =0, Threat= -, Critical Threat =--