1. BUS 411
DAY 5

2. Agenda
Question?
Finish Discussion on the External Assessment (15 mins)
Assignment 1
We will develop a class wide SWOT this class for use in future assignments (1 hour)
Will be graded by next class
Assignment 2 posted
Due Feb 15

3. Assignment 2
External Assessment: Developing an EFE Matrix and Competitive Profile Matrix for Walt Disney
Using the information gathered in assignment 1 and the Walt Disney SWOT analysis prepared in class, develop an EFE matrix for Walt Disney (50 points)
Using the information gathered in assignment 1, the McDonald’s SWOT analysis prepared in class, and additional research materials available for Time Warner, Inc and News Corporation develop a CPM matrix comparing Walt Disney, Time Warner, Inc and News Corporation (50 points)
You may use the templates provided with this assignment or develop your own.
Upload your completed matrixes.

4. The External Assessment
Chapter Three

5. The Five-Forces Model of Competition
Identify key aspects or elements of each competitive force that impact the firm.
Evaluate how strong and important each element is for the firm.
Decide whether the collective strength of the elements is worth the firm entering or staying in the industry.

6. The Five-Forces Model of Competition

7. The Five-Forces Model Rivalry among competing firms
Most powerful of the five forces
Focus on competitive advantage of strategies over other firms

8. The Five-Forces Model

9. The Five-Forces Model Potential Entry of New Competitors
Barriers to entry are important
Quality, pricing, and marketing can overcome barriers

10. Barriers to Entry Need to gain economies of scale quickly
Need to gain technology and specialized know-how
Lack of experience
Strong customer loyalty
Strong brand preferences
Large capital requirements
Lack of adequate distribution channels

11. Barriers to Entry Government regulatory policies Tariffs
Lack of access to raw materials
Possession of patents
Undesirable locations
Counterattack by entrenched firms
Potential saturation of the market

12. The Five-Forces Model Potential development of substitute products
Pressure increases when:
Prices of substitutes decrease
Consumers’ switching costs decrease

13. The Five-Forces Model
Bargaining Power of Suppliers is increased when there are:
Large numbers of suppliers
Few substitutes
Costs of switching raw materials is high
Backward integration is gaining control or ownership of suppliers

14. The Five-Forces Model Bargaining power of consumers
Customers being concentrated or buying in volume affects intensity of competition
Consumer power is higher where products are standard or undifferentiated (commodity products)

15. Conditions Where Consumers Gain Bargaining Power
If buyers can inexpensively switch
If buyers are particularly important
If sellers are struggling in the face of falling consumer demand
If buyers are informed about sellers’ products, prices, and costs
If buyers have discretion in whether and when they purchase the product

16. Sources of External Information
Unpublished sources include customer surveys, market research, speeches at professional and shareholders’ meetings, television programs, interviews, and conversations with stakeholders.
Buy stock in competitors' companies
Published sources of strategic information include periodicals, journals, reports, government documents, abstracts, books, directories, newspapers, and manuals.

17. Sources of External Information: Web Sites
UMFK Databases
These are clickable links in slideshow mode.

18. Forecasting Tools and Techniques
Forecasts
educated assumptions about future trends and events
quantitative, qualitative techniques
Forecasting is complex because of factors such as technological innovation, cultural changes, new products, improved services, stronger competitors, shifts in government priorities, changing social values, unstable economic conditions, and unforeseen events

19. Making Assumptions Assumptions Document your assumptions
Best present estimates of the impact of major external factors, over which the manager has little if any control, but which may exert a significant impact on performance or the ability to achieve desired results.
Document your assumptions
Will be tested by time and actual outcomes

20. Industry Analysis: The External Factor Evaluation (EFE) Matrix
Economic
Social
Cultural
Demographic
Environmental
Political
Governmental
Technological
Competitive
Legal
EFE matrix.xlt

21. 5 Steps (Page 80-82) List key external factors
10-20 (balanced 5&5  10&10)
Opportunities then threats (from SWOT)
Assign weights from 0.0 to 1.0 based on importance
Sum of all weights across all factors = 1
Assign a rating from 1 to 4 for all factors where
4 = the firm’s response is superior
3 = the firm’s response is above avg
2 = the firm’s response is average
1 = the firm’s response is poor
Multiply the rating by the weight
Sum the weighted scores

24. Industry Analysis EFE Total weighted score of 4.0
Organization response is outstanding to threats and weaknesses
Total weighted score of 1.0
Firm’s strategies not capitalizing on opportunities or avoiding threats
Average is 2.5

25. Critical success factors include internal and external issues
Industry Analysis: Competitive Profile Matrix (CPM)
Identifies firm’s major competitors and their strengths & weaknesses in relation to a sample firm’s strategic positions
Critical success factors include internal and external issues
CPM_matrix.XLT

26. Steps to a CPM Identify Critical Success Factors (CSF)
Broad issues
Internal and external (5 of each is a good mix)
Assign a weight to each CSF
Must add up to 1
Assign a rating for your firm and each of your competitors
4 = major strength
3 = minor strength
2 = minor weakness
1 = major weakness
Multiply weight by rating
Sum the weighted ratings and compare

27. Poor Example CSF’s Gateway Apple Dell Market share 0.15 3 0.45 2 0.30Wt
Rating
Wt’d Score
Market share
0.15 3
0.45 2
0.30 4
0.60
Inventory sys
0.08
0.16
0.32
Fin position
0.10
0.20
Prod. Quality
0.24
Cons. Loyalty
0.02
0.06
Sales Distr
Global Exp.
Org. Structure
0.05

28. Poor Example Gateway Apple Dell CSF’s (cont’d) Prod. Capacity 0.04 3Wt
Rating
Wt’d Score
Prod. Capacity
0.04 3
0.12
E-commerce
0.10
0.30
Customer Serv 2
0.20 4
0.40
Price competitive
0.02
0.08 1
0.06
Mgt. experience
0.01
Total
1.00
2.83
2.47
3.49

30. An Example Competitive Profile Matrix

31. Industry Analysis CPM
Important –
Just because one firm receives a 3.2 rating and another receives a 2.8 rating, it does not follow that the first firm is 20 percent better than the second.

32. SWOT Group Process Entire process to be competed in one hour
Work to be done in 3 groups (30 mins)
Instructor acts as a facilitator
Each group will
For each category
Collaboratively produce a list of Strengths, Weakness Opportunities and Threats
Work to be done by entire class (30 mins)
In each category (S, W, O, & T)
Role of instructor is to act as a consultant and facilitator
Publish and distribute Final SWOT for use on future assignments
Produce a master list in each category
Merge the 3 lists of factors
IF there are 25 or more factors eliminate those that only one team selected
If there are factors
Class wide vote on each factor (in or out) till we have between 5 and 10 factors
Aggregate the remaining factors in the final SWOT

33. Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall