2. Strategic Analysis is the critical starting point of strategic thinking. — Kenichi Ohmae

4. 1. Strategic Analysis

6. Strategic Analysis Leads to Strategic Choices Identify Strategic Options for the Company Select the Best Strategy for the Company 1. Industry’s dominant economic traits 2. Nature of competition & strength of competitive forces 3. Drivers of industry change 4. Competitive position of rivals 5. Strategic moves of rivals 6. Key success factors 7. Conclusions about industry attractiveness Assess Industry & Competitive Conditions 1. Assessment of company’s present strategy 2. Resource strengths and weaknesses, market opportunities, and external threats 3. Company’s costs compared to rivals 4. Strength of company’s competitive position 5. Strategic issues that need to be addressed Assess Company Situation

7. 2. Industry & Competitive Analysis Learning from the Strengths and Weaknesses of Others

8. External Environment Legislation and Regulation Societal Values and Lifestyles Population Demographics Technology The Economy at Large COMPANY Suppliers Substitutes Buyers New Entrants Rival Firms  IMMEDIATE INDUSTRY AND COMPETITIVE ENVIRONMENT

9. PORTER’S FIVE FORCES MODEL OF COMPETITION Threat of New Entrants Threat of New Entrants

10. Threat of New Entrants Threat of New Entrants Porter’s Five Forces Model of Competition Bargaining Power of Suppliers

11. Threat of New Entrants Threat of New Entrants Bargaining Power of Suppliers Porter’s Five Forces Model of Competition Bargaining Power of Buyers

12. Threat of New Entrants Threat of New Entrants Bargaining Power of Buyers Bargaining Power of Suppliers Porter’s Five Forces Model of Competition Threat of Substitute Products

13. Threat of Substitute Products Threat of New Entrants Threat of New Entrants Bargaining Power of Buyers Bargaining Power of Suppliers Porter’s Five Forces Model of Competition Rivalry Among Competing Firms in Industry

15. COMPETITOR ANALYSIS The follow-up to Industry Analysis is effective analysis of a firm’s Competitors Competitive Environment Industry Environment

18. COMPETITOR ANALYSIS Assumptions What assumptions do our competitors hold about the future of industry and themselves? Current Strategy Does our current strategy support changes in the competitive environment? Future Objectives How do our goals compare to our competitors’ goals? Capabilities How do our capabilities compare to our competitors? Response What will our competitors do in the future? Where do we have a competitive advantage? How will this change our relationship with our competition?

19. Future Objectives How do our goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? What Drives the competitor? COMPETITOR ANALYSIS

20. What is the competitor doing? What can the competitor do? Future Objectives How do our goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? Current Strategy How are we currently competing? Does this strategy support changes in the competitive structure? COMPETITOR ANALYSIS

21. What does the competitor believe about itself and the industry? Do we assume the future will be volatile? Are we assuming stable competitive conditions? What assumptions do our competitors hold about the industry and themselves? Assumptions COMPETITOR ANALYSIS Future Objectives How do our goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? Current Strategy How are we currently competing? Does this strategy support changes in the competition structure?

22. What are the competitor’s capabilities? What are my competitors’ strengths and weaknesses? How do our capabilities compare to our competitors? Capabilities COMPETITOR ANALYSIS Future Objectives How do our goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? Current Strategy How are we currently competing? Does this strategy support changes in the competition structure? Do we assume the future will be volatile? Are we operating under a status quo? What assumptions do our competitors hold about the industry and themselves? Assumptions

23. Response What will our competitors do in the future? Where do we have a competitive advantage? How will this change our relationship with our competition? COMPETITOR ANALYSIS Future Objectives How do our goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? Current Strategy How are we currently competing? Does this strategy support changes in the competition structure? Do we assume the future will be volatile? Are we operating under a status quo? What assumptions do our competitors hold about the industry and themselves? Assumptions Capabilities What are my competitors’ strengths and weaknesses? How do our capabilities compare to our competitors?

24. 3. Seven Questions

26. Industry and Competitive Environment Industry’s economic traits Competitive forces and strength of each force Drivers of change in the industry Competitor analysis Key success factors Conclusions: Industry attractiveness

27. 1. Industry’s Economic Traits

29. Cost Advantages of Different Experience Curve Effects $1 $1 .90 .80 .70 .81 .64 .49 .729 .512 .343 10% Cost Reduction 20% Cost Reduction 30% Cost Reduction 1 Million Units 2 Million Units 4 Million Units 8 Million Units Cost per Unit

30. Relevance of Key Economic Features Economic Feature Market Size Market growth rate Capacity surpluses/shortages Industry profitability Entry/exit barriers Product is big-ticket item for buyers Standard products Rapid technological change Capital requirements Vertical integration Economies of scale Rapid product innovation Strategic Importance Small markets don’t tend to attract new firms; large markets attract firms looking to acquire rivals with established positions in attractive industries Fast growth breeds new entry; slow growth spawns increased rivalry & shake-out of weak rivals Surpluses push prices & profit margins down; shortages pull them up High-profit industries attract new entrants; depressed conditions lead to exit High barriers protect positions and profits of existing firms; low barriers make existing firms vulnerable to entry More buyers will shop for lowest price Buyers have more power because it’s easier to switch from seller to seller Raises risk; investments in technology facilities/equipment may become obsolete before they wear out Big requirements make investment decisions critical; timing becomes important; creates a barrier to entry and exit Raises capital requirements; often creates competitive & cost differences among fully vs. partially vs. non-integrated firms Increases volume & market share needed to be cost competitive Shortens product life cycle; increases risk because of opportunities for leapfrogging

31. 2. Industry’s Competitive Forces

33. Five Forces Model of Competition Substitute Products (of firms in other industries) Suppliers of Key Inputs Buyers Potential New Entrants Rivalry Among Competing Sellers

39. 3. Drivers of Industry Change

43. 4. Competitive Positions of Rivals

46. 5. Competitive Moves of Rivals

49. 6. Industry’s Key Success Factors

52. Types of Key Success Factors Distribution-related Marketing-related Skills-related Organizational capability Other types Technology-related Manufacturing-related Scientific research expertise; Product innovation capability; Expertise in a given technology; Capability to use Internet to conduct various business activities Low-cost production efficiency; Quality of manufacture; High use of fixed assets; Low-cost plant locations; High labor productivity; Low-cost product design; Flexibility to make a range of products Strong network of wholesale distributors/dealers; Gaining ample space on retailer shelves; Having company-owned retail outlets; Low distribution costs; Fast delivery Fast, accurate technical assistance; Courteous customer service; Accurate filling of orders; Breadth of product line; Merchandising skills; Attractive styling; Customer guarantees; Clever advertising Superior workforce talent; Quality control know-how; Design expertise; Expertise in a particular technology; Ability to develop innovative products; Ability to get new products to market quickly Superior information systems; Ability to respond quickly to shifting market conditions; Superior ability to employ Internet to conduct business; More experience & managerial know-how Favorable image/reputation with buyers; Overall low-cost; Convenient locations; Pleasant, courteous employees; Access to financial capital; Patent protection

54. 7. Conclusions: Overall Industry Attractiveness

59. THANK YOU