1. Part I: The Strategic Position
Change to 9th Edition and change title to Exploring Strategy. Update design

2. The focus of part I: the strategic position
How to analyse an organisation’s position in the external environment.
How to analyse the determinants of strategic capability – resources, competences and the linkages between them.
How to understand an organisation’s purposes, taking into account corporate governance, stakeholder expectations and business ethics.
How to address the role of history and culture in determining an organisation’s position.

3. Strategic position

4. The Strategic Position 2: The Environment
Update: Change to 9th edition and title to Exploring Strategy

5. Learning outcomes (1)
Analyse the broad macro-environment of organisations in terms of political, economic, social, technological, ecological and legal factors (PESTEL).
Construct alternative scenarios in order to address possible environmental changes.

6. Learning outcomes (2)
Analyze the broad macro-environment of organizations in terms of political, economic, social, technological, ecological and legal forces (PESTEL)
Evaluate different approaches to environment forecasting.
Construct scenarios in order to address possible environment

7. Layers of the business environment

8. The PESTEL framework (1)
The PESTEL framework categorises environmental factors into six key types: Political Economic Social Technological Ecological Legal PESTEL helps to provide a list of potentially important issues influencing strategy. It is important to assess the impact of each factor.

9. The PESTEL framework (2)
Political factors: The role of the state e.g. as an owner, customer or supplier of businesses. Other political factors include government policies, taxation changes, foreign trade regulations, political risk in foreign markets, changes in trade blocks (e.g. expansion of EU).
BP’s PESTEL

10. The PESTEL framework (3)
Figure 2.2 The political environment

11. Political Risk Analysis
The Macro-Micro dimension
The Internal-External dimension

12. The PESTEL framework (4)
Economic factors: The role of macro-economic factors. This includes business cycles, interest rates, personal disposable income, exchange rates, unemployment rates, differential growth rates around the world.
Social factors: Including changing cultures and demographics. Examples are the ageing population in Western societies, income distribution, lifestyle changes, consumerism, changes in culture and fashion.
Technological factors: New discoveries and technology developments. Examples include developments on the internet, nano-technology or the rise of new composite materials.
Sociogram of Social Networks
Technology Roadmap

13. The PESTEL framework (5)
Ecological factors: This refers to ‘green’ environmental issues, such as pollution waste and climate change. Examples are environmental protection regulations, energy problems, global warming, waste disposal and re-cycling.
Legal factors: Legislative and regulatory constraints or changes. Examples are IPR, competition law, health and safety law, employment law, liberalisation of trade law.
UBER example

14. Forecast Approaches Single point forecasting Range Forecasting
Alternative Futures Forecasting

15. Key drivers of change Key drivers for change:
The environmental factors likely to have a high impact on the success or failure of strategy.
Typically key drivers vary by industry or market.
For example, retailers are concerned with social changes and customer behaviour which have driven a move to ‘out of town’ shopping. Personal disposable income also drives demand for retailers.

16. Forecast Approaches Single point forecasting Range Forecasting
Alternative Futures Forecasting
See figure 2.8 Forecasting under conditions of uncertainty

17. Directions of Change (1)
Megatrends – large-scale changes that are slow to form but influence many other activities over decades to come. Examples include ageing populations and increased economic growth in Asia.
Inflexion points – when trends shift sharply upwards or downwards. E.g. sub-Saharan Africa may have reached an inflexion point after decades of stagnation (and may embark on a period of rapid growth).
Weak signals – advanced signs of future trends that may help to identify inflexion points – often unstructured and fragmented bits of information. E.g. mortgage failures in California in 2007 were a weak signal for the financial crisis that hit the global economy in 2008.

18. Directions of Change (2)
Apply selectively – identify specific factors which impact on the industry, market and organisation in question.
Identify factors which are important currently but also consider which will become more important in the next few years.
Use data to support the points and analyse trends using up-to-date information.
Identify opportunities and threats – the main point of the exercise!

19. Scenarios
Scenarios are plausible views of how the environment of an organisation might develop in the future based on key drivers of change about which there is a high level of uncertainty.
Build on PESTEL analysis and drivers of change.
Offer more than a single view. An organisation will typically develop a few alternative scenarios (2–4) to explore and evaluate future strategic options.
Scenario analysis is used in industries with long planning horizons, for example the oil industry or airlines industry.

20. The scenario cube

21. Carrying out scenario analysis (1)
Identify the most relevant scope of the study – the relevant product/market and time span.
Identify key drivers of change – PESTEL factors which will have the most impact in the future but which have uncertain outcomes and are mutually independent.
For each key driver select opposing outcomes where each leads to very different consequences.

22. Carrying out scenario analysis (2)
4) Develop scenario ‘stories’. That is, coherent and plausible descriptions of the environment that result from opposing outcomes.
5) Identify the impact of each scenario on the organisation and evaluate future strategies in the light of the anticipated scenarios.
6) Establish early warning systems. Identify indicators that might give an early warning of the way the environment is changing and monitor such indicators.

23. Scenarios for the global fashion industry, 2025
Illustration 2.2

24. Chapter summary (1)
Environmental influences can be thought of as layers around an organisation, with the outer layer making up the macro-environment, the middle layer making up the industry or sector and the inner layer strategic groups and market segments.
The macro-environment can be analysed in terms of the PESTEL factors, from which key drivers of change can be identified. Alternative scenarios about the future can be constructed according to how the key drivers develop.
Industries and sectors can be analysed in terms of Porter’s five forces – barriers to entry, substitutes, buyer power, supplier power and rivalry. Together, these determine industry or sector attractiveness.

25. Chapter summary (2)
Industries and sectors are dynamic, and their changes can be analysed in terms of the industry life cycle, comparative five forces radar plots. In the inner layer of the environment, strategic group analysis, market segment analysis and the strategy canvas can help identify strategic gaps or opportunities.
Blue Ocean strategies characterised by low rivalry are a better means of avoiding Red Ocean with many similar rivals and low profitability.