Strategic Management

Environmental
Scanning and
Industry Analysis
Chapter 4
Learning Objectives
 Recognize aspects of an organization’s environment
that can influence its long-term decisions
 Identify the aspects of an organization’s environment
that are most strategically important
 Conduct an industry analysis to understand the
competitive forces that influence the intensity of
rivalry within an industry
 Understand how industry maturity affects industry
competitive forces
 Categorize international industries based on their
pressures for coordination and local responsiveness
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Learning Objectives
 Construct strategic group maps to assess the
competitive positions of firms in an industry
 Identify key success factors and develop an
industry matrix
 Use publicly available information to conduct
competitive intelligence
 Know how to develop an industry scenario
 Be able to construct an EFAS Table that
summarizes external environmental factors
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Environmental Scanning
Environmental scanning
 the monitoring, evaluation, and dissemination of
information relevant to the organizational
development of strategy
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Identifying External
Environmental Variables
Natural environment
 includes physical resources, wildlife and climate
that are an inherent part of existence on Earth
 form an ecological system of interrelated life
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Identifying External
Environmental Variables
Societal environment
 mankind’s social system that includes general
forces that do not directly touch on the short-run
activities of the organization, but that can
influence its long-term decisions
 economic, technological, political-legal and
sociocultural
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Identifying External
Environmental Variables
Task environment
 those elements or groups that directly affect a
corporation and, in turn, are affected by it
 government, local communities, suppliers,
competitors, customers, creditors, unions, special
interest groups/trade associations
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Identifying External
Environmental Variables
Industry analysis
 an in-depth examination of key factors within a
corporation’s task environment
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Scanning the Societal Environment:
STEEP Analysis
STEEP Analysis
 monitoring trends in the societal and natural
environments
 sociocultural, technological, economic, ecological
and political-legal forces
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Some Important Variables in the
Societal Environment
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Current U.S. Generations
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Current Sociocultural Trends
Increasing environmental awareness
Growing health consciousness
Expanding seniors market
Impact of Millennials
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Current Sociocultural Trends
Declining mass market
Changing pace and location of life
Changing household composition
Increasing diversity of workforce and markets
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Technological Breakthroughs
Portable information devices
Electronic networking
Alternative energy sources
Precision farming
Virtual personal assistants
Genetically altered organisms
Smart, mobile robots
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Categories of Risk
Regulatory
risk
Supply chain
risk
Product and
technology
risk
Litigation risk
Reputational
risk
Physical risk
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Some Important Variables in
International Societal Environments
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Scanning External Environment
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Forces Driving Industry Competition
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Threat of New Entrants
Threat of new entrants
 new entrants to an industry bring new capacity, a
desire to gain market share and substantial
resources
Entry barrier
 an obstruction that makes it difficult for a
company to enter an industry
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Barriers to Entry
Economies of scale
Product differentiation
Capital requirements
Switching costs
Access to distribution channels
Cost disadvantages due to size
Government policies
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Rivalry among Existing Firms
In most industries, corporations are mutually
dependent.
A competitive move by one firm can be
expected to have a noticeable effect on its
competitors and thus may cause retaliation.
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Rivalry among Existing Firms
Number of
competitors
Amount of
fixed costs
Rate of
industry
growth
Product or
service
characteristics
Capacity
Height of exit
barriers
Diversity of
rivals
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Threat of Substitute
Products or Services
Substitute product
 a product that appears to be different but can
satisfy the same need as another product
 The identification of possible substitute products
means searching for products that can perform
the same function, even though they have a
different appearance.
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The Bargaining Power of Buyers
Bargaining power of buyers
 ability of buyers to force prices down, bargain for
higher quality and play competitors against each
other
 Large purchases, backward integration,
alternative suppliers, low cost to change
suppliers, product represents a high percentage
of buyer’s cost, buyer earns low profits, product is
unimportant to buyer
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The Bargaining Power of Suppliers
Buyers affect an industry through their ability
to force down prices, bargain for higher
quality or more services and play competitors
against each other.
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The Bargaining Power of Suppliers
A buyer or a group of buyers is powerful if some
of the following factors hold true:
 Industry is dominated by a few companies
 Unique product or service
 Substitutes are not readily available
 Ability to forward integrate
 Unimportance of product or service to the
industry
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Relative Power of Other Stakeholders
Government
Local communities
Creditors
Trade associations
Special interest groups
Unions
Shareholders
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Industry Evolution
Fragmented industry
 no firm has a large market share and each firm
only serves a small piece of the total market in
competition with other firms
Consolidated industry
 domination by a few large firms, each struggles to
differentiate products from its competition
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Categorizing International Industries
Multi-domestic industries
 specific to each country or group of countries
Global industries
 operate worldwide with multinational companies
making only small adjustments for countryspecific circumstances
Regional industries
 multinational companies primarily coordinate
their activities within regions
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Continuum of
International Industries
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Strategic Groups
Strategic group
 a set of business units or firms that pursue similar
strategies with similar resources
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Mapping Strategic Groups in the
U.S. Restaurant Chain Industry
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Strategic Types
 Defenders
 focus on improving efficiency
 Prospectors
 focus on product innovation and market
opportunities
 Analyzers
 focus on at least two different product market areas
 Reactors
 lack a consistent strategy-structure-culture
relationship
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Hypercompetition
Market stability is threatened by short
product life cycles, short product design
cycles, new technologies, frequent entry by
unexpected outsiders, repositioning by
incumbents and tactical redefinitions of
market boundaries as diverse industries
merge.
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Using Key Success Factors to Create
an Industry Matrix
Key success factors
 variables that can significantly affect the overall
competitive positions of companies within any
particular industry
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Industry Matrix
Industry matrix
 summarizes the key success factors within a
particular industry
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Competitive Intelligence
Competitive intelligence
 a formal program of gathering information on a
company’s competitors
 also called business intelligence
Sources of competitive intelligence:
 Information brokers
 Internet
 Industrial espionage
 Investigatory services
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Useful Forecasting Techniques
Extrapolation
Brainstorming
Expert
opinion
Delphi
technique
Statistical
modeling
Prediction
markets
Cross impact
analysis
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Synthesis of External Factors—EFAS
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‫المملكة العربية السعودية‬
‫وزارة التعليم‬
‫الجامعة السعودية اإللكترونية‬
Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
College of Administrative and Financial Sciences
Assignment 1
Strategic Management (MGT 401)
Due Date: 05/10/2024 @ 23:59
Course Name: Strategic Management
Student’s Name:
Course Code: MGT 401
Student’s ID Number:
Semester: First
CRN:
Academic Year:2024-25-1st
For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
Marks Obtained/Out of 10
Level of Marks: High/Middle/Low
General Instructions – PLEASE READ THEM CAREFULLY
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The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
Assignments submitted through email will not be accepted.
Students are advised to make their work clear and well presented, marks may be reduced
for poor presentation. This includes filling your information on the cover page.
Students must mention question number clearly in their answer.
Late submission will NOT be accepted.
Avoid plagiarism, the work should be in your own words, copying from students or other
resources without proper referencing will result in ZERO marks. No exceptions.
All answered must be typed using Times New Roman (size 12, double-spaced) font. No
pictures containing text will be accepted and will be considered plagiarism).
Submissions without this cover page will NOT be accepted.
Learning Outcomes:
CLO1- Recognize the basic concepts and terminology used in Strategic Management.
CLO2-Describe the different issues related to environmental scanning, strategy formulation, and
strategy implementation in diversified organizations
CLO5-Demonstrate how executive leadership is an important part of strategic management .
Assignment Question(s): (2.5 marks for each question)
1. Why is strategic management important for a corporation’s competitive advantage?
2. How does strategic management typically evolve in a corporation? Give examples
3. Why does a corporation need a board of directors? What is the relationship between
corporate governance and social responsibility? Give examples from the actual
market.
4. Choose any corporation from the Saudi market and discuss the forces driving its
industry competition (review chapter 4-slide 18).
Notes:
– Your answers MUST include at least four scholarly peer-reviewed references, using a proper
referencing style (APA). Remember that these scholarly references can be found in the Saudi
Digital Library (SDL).
– Make sure to support your statements with logic and argument, citing all sources referenced.
Answers
1. Answer-
2. Answer-

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