Tutor Peter Considine. (Core Text Exploring (Corporate) Strategy, © Pearson Education Ltd 2008 or 2011) 1 Lecture Week 2 Assessing The Strategic Position

Tutor Peter Considine. (Core Text Exploring (Corporate) Strategy, © Pearson Education Ltd 2008 or 2011) 1

Lecture Week 2

Assessing The Strategic

Position. The External Situation Part 1


Learning Outcomes

• To be able to describe the forces in the macro-environment of an organisation using PESTEL and a range of other frameworks

• Understand key drivers for globalisation and frameworks for National Competitive Advantage

• Be able to develop Scenarios and explain their implications


Exhibit 2.1 Layers of the business environment

The Organisation


The Macro-Environment

PESTEL

Scenarios

Key drivers

• Diversity-Many different influences

• Complexity- Interconnected influences

• Speed of changeParticularly ICT


Macroenvironment – PESTEL (1)

Exhibit 2.2


The PESTEL Framework



Exhibit 2.2

Political• Government stability• Taxation policy• Foreign trade

regulations• Social welfare

policies

Economic• Business cycles• GNP trends• Interest rates• Money supply• Inflation• Unemployment• Disposable income



Exhibit 2.2

Sociocultural• Population

demographics• Income distribution• Social mobility• Lifestyle changes• Attitudes to work and

leisure• Consumerism• Levels of education

Technological• Government spending on

research• Government and industry

focus on technological effort

• New discoveries /developments

• Speed of technology transfer

• Rates of obsolescence



Exhibit 2.2

Environmental• Environmental

protection laws• Waste disposal• Energy consumption

Legal• Competition law• Employment law• Health and safety• Product safety

•Note a PESTEL is not just a list of influences

•We need to understand key drivers for change which have differential impacts on industries, markets and organisations

•Focus is on the future impact of factors (e.g. scenario planning

•The combined effect of some factors likely to be most important


What Are Key Drivers for Change?

Key drivers for change are environmental factors that are likely

to have a high impact on the success or failure of strategy.


Drivers of Globalisation

Source: Based on G. Yip, Total Global Strategy ll, FT/Prentice Hall, 2003, chapter 2.

Exhibit 2.3

See Exploring Corporate Strategy 2011 ed, Page 268. 2008 edition: Page 297


Porter’s Diamond The Determinants of National Advantage

Source: M. Porter, Competitive Advantage of Nations, Macmillan, 1990.

Exhibit 2.4

See Exploring Corporate Strategy, 2011 ed. p270 or 2008.p301


Determinants of National Advantage

• Some nations are more competitive than others– Fostering domestic competition

(Porter 1990,1998)

• Some industries within nations are more competitive than others

• Clusters of organisations from the same industry/sector


SCENARIO PLANNING

• Detailed and plausible views of future development of environment, based on groupings of key environmental influences and drivers of change about which there is a high level of uncertainty

• Different views of possible futures• Long term view of strategy• See Handbook/Blackboard site for the stages in

developing scenarios and the illustration “Building Scenarios” in the core text “Exploring Corporate Strategy” – “Scenarios in the Bio Sciences” page 58


Scenario Planning

• As strategists we should recognise that an industry analysis does not necessarily end with a PESTEL/Five Forces etc.

• We often have to develop future possible scenarios especially when dealing with high levels of uncertainty

• The first step is to identify the key factors which act upon the industry – focusing in particular upon those that will have a high impact and are uncertain in nature


Scenario Planing cont.• Step One: Identify between 5 to 8 key trends – From PESTEL/FIVE Forces

etc• Step Two: Identify and list forces likely to have an high impact on the

industries future development. (list as many as you can think of)• Step 3: Split these into two categories: Which of these are• Certain• Uncertain• Step Four: Identify different possible futures by each of the factors with the

highest likely impact and the greatest uncertainty (try to come up with 3 to 5)• Step Five: For each of the above in step 4 identify in columns

– Big Positive change (i) No Change(ii) Big negative change(iii)

– 1………– 2………

• Step Six: Finally develop the scenarios based on the three possible future states for a

– 1. Benign Change– 2. Moderate Change– 3. Hostile Change

• See example in core text exploring corporate strategy and Blackboard week 2


Industries and Sectors

Competitive forces in the industry:

– Determine attractiveness of industry– Affect the way individual companies compete– Influence decisions on product/market strategy

Industry – a group of firms producing the sameprincipal product, e.g. mobile phones

Sector – a group of organisations providing thesame kinds of services, e.g. healthcare

Industry – a group of firms producing the sameprincipal product, e.g. mobile phones

Sector – a group of organisations providing thesame kinds of services, e.g. healthcare


Changing Boundaries of Industry

• Convergence– Previously separate industries begin to overlap in

activities, technologies, products and customers– Supply-led, e.g.

• bundling and unbundling of sectors in public services• externally driven by government regulation• externally driven by e-commerce trends

– Demand-led, e.g.• Substitution of one product by another • Customers want bundling of complementary products

• Creates new market segments


Competitiveness• Business

– Gaining advantage over competitors• Competitive advantage

• Public sector– Demonstrable excellence in service delivery

Assess attractiveness of different industries/sectorsIdentify sources of competition in an industry/sector

Porter’s Five Forces – Next Week

Assess attractiveness of different industries/sectorsIdentify sources of competition in an industry/sector

Porter’s Five Forces – Next Week


Environment Part 1– Key Points

• PESTEL identifies key drivers of change

• Scenario planning involves building upon a PESTEL analysis to help develop strategies by predicting future uncertainties on important drivers in terms of their environmental forces and levels of importance

• Environmental analysis identifies opportunities and threats

• Scenario Building Portfolio Assessment No2

Documents

Tutor Peter Considine. (Core Text Exploring (Corporate) Strategy, © Pearson Education Ltd 2008 or 2011) 1 Lecture Week 2 Assessing The Strategic Position