57. Environmental Uncertainty
3.1 Environmental Uncertainty p. 53
Environmental Uncertainty
Degree of complexity
Degree of change 57

58. Some Important Variables in the Societal Environment
3.2 Some Important Variables in the Societal Environment (Table 3.1) p. 55
Some Important Variables in the Societal Environment
Economic
GDP trends
Interest rates
Money supply
Inflation rates
Unemployment levels
Wage/price controls
Devaluation/revaluation
Energy availability and cost
Disposable and discretionary income
Technological
Total government spending for R&D
Total industry spending for R&D
Focus of technological efforts
Patent protection
New products
New developments in technology transfer from lab to marketplace
Productivity improvements through automation
Political-Legal
Antitrust regulations
Environmental protection laws
Tax laws
Special incentives
Foreign trade regulations
Attitudes toward foreign companies
Laws on hiring and promotion
Stability of government
Sociocultural
Lifestyle changes
Career expectations
Consumer activism
Rate of family formation
Growth rate of population
Age distribution of population
Regional shifts in population
Life expectancies
Birth rates 58

59. GIVE AN EXAMPLE IN EACH CATEGORY OF SOCIETAL ENVIRONMENT ECONOMIC TECHNOLOGICAL POLITICAL-LEGAL SOCIOCULTURAL

60. Scanning the External Environment
3.3 Scanning the External Environment (Fig. 3.1) p. 60
Scanning the External Environment
Analysis of Societal Environment
Economic, Sociocultural, Technological, Political-Legal Factors
Market
Analysis
Community
Competitor
Analysis
Analysis
Supplier
Analysis
Selection of
Strategic Factors
Interest Group
Governmental
Analysis
Analysis
• Opportunities
• Threats 59

61. Strategic Issues and Strategic Factors
3.4 Strategic Issues and Strategic Factors p. 59
Strategic Issues and Strategic Factors
Strategic Issues
Trends likely to affect future environment
Strategic Factors
Those strategic issues with high probability of occurrence and high probable impact on corporation 60

62. Critical Success Factors and Strategic Group
3.4 Strategic Issues and Strategic Factors p. 59
Critical Success Factors and Strategic Group
Critical Success factors are:
those strategic factors that you must do correctly to succeed with a strategy.
Strategic Group are:
those business units pursuing similar strategies with similar resources. 60

63. Issues Priority Matrix
3.5 Issues Priority Matrix (Fig. 3.2) p. 61
Issues Priority Matrix
High
Priority
Medium
Probable Impact on Corporation
Low
Probability of Occurrence
Source: Adapted from L. L. Lederman, “Foresight Activities in the U.S.A.: Time for a Reassessment?” Long Range Planning (June 1984), p. 46. Copyright © 1984 by Pergamon Press, Ltd. Reprinted with permission. 61

64. Forces Driving Industry Competition
3.6 Forces Driving Industry Competition (Fig. 3.3) p. 62
Forces Driving Industry Competition
Threat
of New
Entrants
Bargaining
Power
of Suppliers
of Buyers
Relative
of Unions,
Governments,
etc.
Potential
Threat of
Substitute
Products
or Services
Industry
Competitors
Rivalry Among
Existing Firms
Other
Stakeholders
Buyers
Substitutes
Suppliers
Source:  Adapted/reprinted with permission of The Free Press, an imprint of Simon & Schuster, from Competitive Strategy: Techniques for Analyzing Industries and Competitors by Michael E. Porter. Copyright © 1980 by The Free Press. 62

65. Some Barriers to Entry:
3.7 Some Barriers to Entry p. 62–63
Some Barriers to Entry:
Economies of Scale
Product Differentiation
Capital Requirements
Switching Costs
Access to Distribution Channels
Cost Disadvantages Independent of Size
Government Policy 63

66. Rivalry Among Existing Firms
3.8 Rivalry Among Existing Firms p. 63
Rivalry Among Existing Firms
Intense Rivalry is Related To:
Number of Competitors
Rate of Industry Growth
Product or Service Characteristics
Amount of Fixed Costs
Capacity
Height of Exit Barriers
Diversity of Rivals 64

67. Continuum of International Industries
3.9 Continuum of International Industries (Fig. 3.4) p. 67
Continuum of International Industries
Multidomestic
Industry in which companies tailor their products to the specific needs of consumers in a particular country.
Retailing
Insurance
Banking
Global
Industry in which companies manufacture and sell the same products, with only minor adjustments made for individual countries around the world.
Automobiles
Tires
Television sets 65

68. Mapping Strategic Groups in the U.S. Restaurant Chain Industry
3.10 Mapping Strategic Groups in the U.S. Restaurant Chain Industry (Fig. 3.5) p. 69
Mapping Strategic Groups in the U.S. Restaurant Chain Industry
Product-Line Breadth
High
Low
Limited Menu
Full Menu
Arby's Wendy's
Domino's Dairy Queen
Hardee's Taco Bell
Burger King McDonald's
Shoney's
Denny's
Country Kitchen
Kentucky Fried Chicken
Pizza Hut
Long John Silver's
Ponderosa
Bonanza
Perkins
International House
of Pancakes
Red Lobster
Olive Garden
ChiChi's
Price 66

69. Strategic Types Defenders Prospectors Analyzers Reactors
3.11 Strategic Types p. 68
Strategic Types
Defenders
Prospectors
Analyzers
Reactors 67

70. Industry Matrix 3.12 Industry Matrix (Table 3.3) p. 71 Company A
Rating
Company A
Weighted Score
Company B
Rating
Company B
Weighted Score
Strategic Factors
Weight 1 2 3 4 5 6
Total
1.00
Source: T. L. Wheelen and J. D. Hunger, “Industry Matrix.” Copyright © 1997 by Wheelen and Hunger Associates. Reprinted by permission. 68

71. The Role of Forecasting
Environmental Scanning
Present Trends and Fashions
Forecasting Future Trends and Fashions
Assumptions for Strategic Planning and Decision Making 69

72. Popular Forecasting Techniques
3.14 Popular Forecasting Techniques p. 73–74
Popular Forecasting Techniques
Extrapolation
Brain storming
Expert opinion
Statistical modeling
Scenario writing 70

73. 3.15 Industry Scenarios p. 75
Industry Scenarios
1. Examine possible shifts in societal variable globally.
2. Identify uncertanties in each of the six forces of the task environment.
3. Make a range of plausible assumptions about future trends.
4. Combine assumptions into internally consistent scenarios.
5. Analyze the industry situation under each scenario.
6. Determine sources of competitive advantage under each scenario.
7. Predict competitors’ behavior under each scenario.
8. Select most likely scenario to use in strategy formulation. 71

74. External Factor Analysis Summary (EFAS)
3.16 External Factor Analysis Summary (EFAS): Blank p. 76
External Factor Analysis Summary (EFAS)
External Strategic Factors
Rating
Weighted Score
Weight
Comments 1 2 3 4 5
Opportunities
Threats
Total Weighted Score
1.00
Notes: List opportunities and threats (5–10 each) in column Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2 based on that factor’s probable impact on the company’s strategic position. The total weights must sum to Rate each factor from 5 (Outstanding) to 1 (Poor) in Column 3 based on the company’s response to that factor Multiply each factor’s weight times its rating to obtain each factor’s weighted score in Column Use Column 5 (comments) for rationale used for each factor Add the weighted scores to obtain the total weighted score for the company in Column 4. This tells how well the company is responding to the strategic factors in its external environment.
Source: T. L. Wheelen and J. D. Hunger, “External Strategic Factors Analysis Summary (EFAS).” Copyright © 1991 by Wheelen and Hunger Associates. Reprinted by permission. 72

75. External Factor Analysis Summary (EFAS): Maytag as Example
3.17 External Factor Analysis Summary (EFAS): Maytag as Example (Table 3.4) p. 76
External Factor Analysis Summary (EFAS): Maytag as Example
External Strategic Factors
Rating
Weighted Score
Weight
Comments
Opportunities
• Economic integration of European Community
• Demographics favor quality appliances
• Economic development of Asia
• Opening of Eastern Europe
• Trend to “Super Stores”
Threats
• Increasing government regulations
• Strong U.S. competition
• Whirlpool and Electrolux strong globally
• New product advances
• Japanese appliance companies
Total Scores 1
.20
.10
.05
.15 2 4 5 1 2 3 3
.80
.50
.05
.10
.20
.40
.45 4
Acquisition of Hoover
Maytag quality
Low Maytag presence
Will take time
Maytag weak in this channel
Well positioned
Hoover weak globally
Questionable
Only Asian presence is Australia 5
1.00
3.15 73