After this course, you will be able to explain the strategies managers use to help adapt to the external environment. The organizational environment includes all elements existing outside the boundary of an organization that have the potential to affect it.
Analysis-based answers to these questions are prerequisites for a strategy offering good fit with the external situation. The macro-environment encompasses the broad environmental context in which a company is situated and is comprised of six principal components.
As company managers scan the external environment, they must be alert for potentially important macro-environmental factors developments, assess their impact and influence, and adapt the company’s direction and strategy as needed. Competitive forces are those factors that influence the competitive position of a company in an industry or market.
Scrutinizing each of the five competitive forces one by one provides a powerful diagnosis of what competition is like in a given market. Once the strategist has gained an understanding of the competitive pressures associated with each of the five forces, the next step is to evaluate the collective strength of the five forces and determine if companies in this industry should reasonably expect to earn decent profits. As a rule, the stronger the collective impact of the five competitive forces, the lower the combined profitability of industry participants.
The real payoff of driving forces analysis is to help managers understand what strategy changes are needed to prepare for the impacts of the driving forces. A strategic group is a cluster of industry rivals that have similar competitive approaches and market positions. The best technique for revealing the market positions of industry competitors is strategic group mapping. Strategic group mapping is a technique for displaying the different market or competitive positions that rival firms occupy in the industry.
Some strategic groups are more favorably positioned than others because they confront weaker competitive forces and/or because they are more favorably impacted by industry driving forces. Competitor analysis is about Identifying your competitors and evaluating their strategies to determine their strengths and weaknesses relative to those of your own product or service.
Studying competitors’ past behavior and preferences provides a valuable assist in anticipating what moves rivals are likely to make next and outmaneuvering them in the marketplace. Key success factors are the strategy elements, product attributes, competitive capabilities, or intangible assets with the greatest impact on future success in the marketplace.
Only rarely are there more than five or six key factors for future competitive success. Managers should therefore resist the temptation to label a factor that has only minor importance a KSF. To compile a list of every factor that matters even a little bit defeats the purpose of concentrating management attention on the factors truly critical to long-term competitive success.
The degree to which an industry is attractive or unattractive is not the same for all industry participants and potential new entrants. The attractiveness of an industry depends on the degree of fit between a company’s competitive capabilities and industry key success factors.