Ch2-1 Dr. Djoko Poernomo, M.Si Dosen Matakuliah Manajemen Stratejik Program Studi Magister Ilmu Administrasi Fakultas Ilmu Sosial dan Ilmu Politik Universitas

Ch2-1

Dr. Djoko Poernomo, M.Si

Dosen Matakuliah Manajemen Stratejik

Program Studi Magister Ilmu Administrasi

Fakultas Ilmu Sosial dan Ilmu Politik

Universitas Jember

7 Maret 2015

Ch2-2

Chapter 2Chapter 2

The External Environment:Opportunities, Threats, Industry

Competition, and Competitor Analysis

The External Environment:Opportunities, Threats, Industry

Competition, and Competitor Analysis

Michael A. HittR. Duane Ireland

Robert E. Hoskisson

Michael A. HittR. Duane Ireland

Robert E. Hoskisson

Ch2-3

Key Words of Chapter 1

• Strategic Competitiveness

• Sustainable Competitive Advantage

• Above Average Returns

• Core Competence

• Stakeholders

Ch2-4

What we will learn in Chapter2

• Importance of understanding what is happening outside of the firm

• How that can affect the firm’s ability to achieve strategic competitiveness.

• Importance of firm’s management cope with these changes of environment

Ch2-5

Key words of chapter 2

• General Environment

• Industry Environment

• Opportunity

• Threat

• Industry and Strategic Group

Ch2-6

GE Values• Have a passion for excellence and hate bureaucracy.• Are open to ideas from anywhere and committed to Work-Out.• Live quality and drive cost and speed for competitive advantage.• Have the self-confidence to involve everyone and behave in a

boundaryless fashion.• Create a clear, simple,reality-based vision and communicate it to all

constituencies.• Have enormous energy and the ability to energize others.• Stretch, set aggressive goals and reward progress, yet understand

accountability and commitment.• See change as opportunity, not threat.• Have global brains and build diverse and global team.

Ch2-7

GE’s expansion in Japanese Market

• GE Capital Edison Life-1998.2– Acquisition of former Toho Life

• Acquisition of Lake-1998.7

• Purchase of 80 % of Ryoshin Leasing– 1998.8

• GE Capital Leasing-1999– Acquisition of Nihon Leasing

Ch2-8

The StrategicThe StrategicManagementManagement

ProcessProcess

The StrategicThe StrategicManagementManagement

ProcessProcessChapter 3Chapter 3InternalInternal

EnvironmentEnvironment

Chapter 2Chapter 2ExternalExternal

EnvironmentEnvironmentStrategic IntentStrategic Intent

Strategic MissionStrategic Mission

Strategy FormulationStrategy Formulation Strategy ImplementationStrategy Implementation

Chapter 4Chapter 4Business-LevelBusiness-Level

StrategyStrategy

Chapter 5Chapter 5CompetitiveCompetitiveDynamicsDynamics

Chapter 6Chapter 6Corporate-LevelCorporate-Level

StrategyStrategy

Chapter 8Chapter 8InternationalInternational

StrategyStrategy

Chapter 9Chapter 9CooperativeCooperative

StrategiesStrategies

Chapter 7Chapter 7Acquisitions &Acquisitions &RestructuringRestructuring

Chapter 10Chapter 10CorporateCorporate

GovernanceGovernance

Chapter 11Chapter 11StructureStructure& Control& Control

Chapter 12Chapter 12StrategicStrategic

LeadershipLeadership

Chapter 13Chapter 13Entrepreneurship & InnovationEntrepreneurship & Innovation

Str

ateg

icIn

puts

Feedback

Str

ateg

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utc

omes

Str

ateg

icS

trat

egic

Act

ion

sA

ctio

ns

StrategicStrategicCompetitivenessCompetitivenessAbove AverageAbove Average

ReturnsReturns

Ch2-9

Political/Legal

Political/Legal

EconomicEconomic

TechnologicalTechnological

GlobalGlobal

DemographicDemographicSocioculturalSociocultural

CompetitiveCompetitiveEnvironmentEnvironment

Industry Environment


Components of the General EnvironmentComponents of the General Environment

Ch2-10

Components of the General EnvironmentComponents of the General Environment

Ch2-11

External Environmental AnalysisExternal Environmental Analysis

The external environmental analysis process should be The external environmental analysis process should be conducted on a continuous basis. This process includes conducted on a continuous basis. This process includes four activities:four activities:

ScanningScanning

MonitoringMonitoring

ForecastingForecasting

AssessingAssessing

Identifying early signals of environmental Identifying early signals of environmental changes and trendschanges and trends

Detecting meaning through ongoing observations Detecting meaning through ongoing observations of environmental changes and trendsof environmental changes and trends

Developing projections of anticipated outcomes Developing projections of anticipated outcomes based on monitored changes and trendsbased on monitored changes and trends

Determining the timing and importance of Determining the timing and importance of environmental changes and trends for firms' environmental changes and trends for firms' strategies and their managementstrategies and their management

Ch2-12

Threat of Substitute Products


Threat of New

Entrants

Threat of New

Entrants

Threat of New

Entrants

Rivalry Among Competing Firms

in Industry

Rivalry Among Competing Firms

in Industry

Bargaining Power of Buyers


Bargaining Power of Suppliers


Porter’s Five Forces Model of CompetitionPorter’s Five Forces Model of Competition

Ch2-13

Threat of New

Entrants

Threat of New

Entrants

Threat of New

Entrants

Threat of New

Entrants


Ch2-14

Threat of New EntrantsThreat of New Entrants

Barriers to Entry

Barriers to Entry

Expected RetaliationExpected Retaliation

Government PolicyGovernment Policy

Economies of ScaleEconomies of Scale

Product DifferentiationProduct Differentiation

Capital RequirementsCapital Requirements

Switching CostsSwitching Costs

Access to Distribution ChannelsAccess to Distribution Channels

Cost Disadvantages Independent Cost Disadvantages Independent of Scaleof Scale

Ch2-15



Threat of New

Entrants

Threat of New

Entrants

Threat of New

Entrants


Ch2-16

Bargaining Power of SuppliersBargaining Power of Suppliers

Suppliers exert power in the industry by:Suppliers exert power in the industry by:

* Threatening to raise* Threatening to raiseprices or to reduce qualityprices or to reduce quality

Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases

Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases

Suppliers are likely to be powerful if:Suppliers are likely to be powerful if:

Supplier industry is dominated by a Supplier industry is dominated by a few firmsfew firms

Suppliers’ products have few substitutesSuppliers’ products have few substitutes

Buyer is not an important customer to Buyer is not an important customer to suppliersupplier

Suppliers’ product is an important Suppliers’ product is an important input to buyers’ productinput to buyers’ product

Suppliers’ products are differentiatedSuppliers’ products are differentiated

Suppliers’ products have high Suppliers’ products have high switching costsswitching costs

Supplier poses credible threat of Supplier poses credible threat of forward integrationforward integration

Ch2-17



Threat of New

Entrants

Threat of New

Entrants

Threat of New

Entrants




Ch2-18

Bargaining Power of BuyersBargaining Power of Buyers

Buyers compete with the supplying

industry by:

Buyers compete with the supplying

industry by:

* Bargaining down prices* Bargaining down prices

* Forcing higher quality* Forcing higher quality

* Playing firms off of* Playing firms off ofeach othereach other

Buyer groups are likely to be powerful if:Buyer groups are likely to be powerful if:

Buyers are concentrated or purchases Buyers are concentrated or purchases are large relative to seller’s salesare large relative to seller’s sales

Purchase accounts for a significant Purchase accounts for a significant fraction of supplier’s salesfraction of supplier’s sales

Products are undifferentiatedProducts are undifferentiated

Buyers face few switching costsBuyers face few switching costs

Buyers’ industry earns low profitsBuyers’ industry earns low profits

Buyer presents a credible threat of Buyer presents a credible threat of backward integrationbackward integration

Product unimportant to qualityProduct unimportant to quality

Buyer has full informationBuyer has full information

Ch2-19



Threat of New

Entrants

Threat of New

Entrants

Threat of New

Entrants






Ch2-20

Threat of Substitute ProductsThreat of Substitute Products

Products with similar function limit the prices firms can charge

Products with similar function limit the prices firms can charge

Keys to evaluate substitute products:Keys to evaluate substitute products:

Products with improving Products with improving price/performance tradeoffs price/performance tradeoffs relative to present industry relative to present industry productsproducts

Example:Example:

Electronic security systems in Electronic security systems in place of security guardsplace of security guards

Fax machines in place of Fax machines in place of overnight mail deliveryovernight mail delivery

Ch2-21

Rivalry Among Existing CompetitorsRivalry Among Existing Competitors

Intense rivalry often plays out in the following ways:Intense rivalry often plays out in the following ways:

Jockeying for strategic positionJockeying for strategic position

Using price competitionUsing price competition

Staging advertising battlesStaging advertising battles

Making new product introductionsMaking new product introductions

Increasing consumer warranties or serviceIncreasing consumer warranties or service

Occurs when a firm is pressured or sees an opportunityOccurs when a firm is pressured or sees an opportunity

Price competition often leaves the entire industry worse offPrice competition often leaves the entire industry worse off

Advertising battles may increase total industry demand, but Advertising battles may increase total industry demand, but may be costly to smaller competitorsmay be costly to smaller competitors

Ch2-22

CutthroatCutthroat competitioncompetition is more likely to occur when: is more likely to occur when:


Numerous or equally balanced competitorsNumerous or equally balanced competitors

Slow growth industrySlow growth industry

High fixed costsHigh fixed costs

Lack of differentiation or switching costsLack of differentiation or switching costs

High storage costsHigh storage costs

Capacity added in large incrementsCapacity added in large increments

High strategic stakesHigh strategic stakes

High exit barriersHigh exit barriers

Diverse competitorsDiverse competitors

Ch2-23

High exit barriersHigh exit barriers are economic, strategic and are economic, strategic and emotional factors which cause companies to remain emotional factors which cause companies to remain in an industry even when future profitability is in an industry even when future profitability is questionable.questionable.

Specialized assetsSpecialized assets

Fixed cost of exit (e.g., labor agreements)Fixed cost of exit (e.g., labor agreements)

Emotional barriersEmotional barriers

Government and social restrictionsGovernment and social restrictions

Strategic interrelationshipsStrategic interrelationships


Ch2-24

Effects of Entry Barriers and Exit Barriers on Industry Profits


Entry Barriers

Exit Barriers

High

Low

HighLow

Ch2-25

Low, Stable Returns

Low, Stable Returns

Entry Barriers

Exit Barriers

High

Low

HighLow



Ch2-26

High, Stable Returns


Entry Barriers

Exit Barriers

High

Low

HighLow

Low, Stable Returns

Low, Stable Returns



Ch2-27

Low, Risky Returns

Low, Risky Returns

Entry Barriers

Exit Barriers

High

Low

HighLow

Low, Stable Returns

Low, Stable Returns





Ch2-28

High, Risky Returns

High, Risky Returns

Entry Barriers

Exit Barriers

High

Low

HighLow

Low, Stable Returns

Low, Stable Returns



Low, Risky Returns

Low, Risky Returns



Ch2-29

Problems of Industry Analysis

• Boundary of Industry blurred– Technology advance

• New competitors from other indutry– Bookstore from internet company

Ch2-30

Strategic Group

• A group of firms in an industry following the same or similar strategy

• Have a proper barriers of entry

• Automobile– Mercedes., BMW, Jaguar vs. Toyota, FordHome Electronics– Funai , Aiwa, Sanyo vs. Sony, Panasonic

Ch2-31

Competitor AnalysisCompetitor Analysis

The follow-up to Industry Analysis is The follow-up to Industry Analysis is effective analysis of a firm’s effective analysis of a firm’s CompetitorsCompetitors

CompetitiveCompetitiveEnvironmentEnvironment



Ch2-32


AssumptionsAssumptionsWhat assumptions do our competitors hold about the future of industry and themselves?

Current StrategyCurrent StrategyDoes our current strategy support changes in the competitive environment?

Future ObjectivesFuture ObjectivesHow do our goals compare to our competitors’ goals?

CapabilitiesCapabilitiesHow do our capabilities compare to our competitors?

ResponseResponseWhat will our competitors do in the future?

What will our competitors do in the future?

Where do we have a competitive advantage?

Where do we have a competitive advantage?

How will this change our relationship with our competition?


Ch2-33


How do our goals compare to our competitors’ goals?Where will emphasis be placed in the future?Where will emphasis be placed in the future?

What is the attitude toward risk?What is the attitude toward risk?

What Drives the competitor?


Ch2-34

What is the competitor doing?

What can the competitor do?




Current StrategyCurrent StrategyHow are we currently competing?How are we currently competing?

Does this strategy support changes in the competitive structure?

Does this strategy support changes in the competitive structure?


Ch2-35

What does the competitor believe about itself and the industry?





Does this strategy support changes in the competition structure?


Do we assume the future will be volatile?Do we assume the future will be volatile?

Are we assuming stable competitive conditions?Are we assuming stable competitive conditions?

What assumptions do our competitors hold about the industry and themselves?


AssumptionsAssumptions


Ch2-36

What are the competitor’s capabilities?








Are we operating under a status quo?Are we operating under a status quo?




What are my competitors’ strengths and weaknesses?What are my competitors’ strengths and weaknesses?

How do our capabilities compare to our competitors?


CapabilitiesCapabilities


Ch2-37








Are we operating under a status quo?Are we operating under a status quo?




ResponseResponseWhat will our competitors do in the future?What will our competitors do in the future?

Where do we have a competitive advantage?Where do we have a competitive advantage?



CapabilitiesCapabilities

What are my competitors’ strengths and weaknesses?What are my competitors’ strengths and weaknesses?




Ch2-38

How Nintendo Reshaped the Video Game Landscapeafter their sales declined in 1985

CustomersKid’s, ParentsToys”R”Us, WalMart,others•Control supply of game cartridges

CompetitorsAtari, Commodore and othersTV, books, sports•Develop cheap hardware and hit gamesto start virtuous curve•Move down experience curve•Bring in outside game developers and require exclusively

Complementors Acclaim, Electronic Arts and others•“Sideways-integrate” into softwareBusiness•Limit number of titles per year per licenseTo keep developers symmetric

SuppliersRicoh, Sharp and others(microchips)Marvel, Disney and others(game characters)•Use trailing-edge technology•Develop the Mario characters internally

Documents

Ch2-1 Dr. Djoko Poernomo, M.Si Dosen Matakuliah Manajemen Stratejik Program Studi Magister Ilmu Administrasi Fakultas Ilmu Sosial dan Ilmu Politik Universitas