2. strategic analysis - exploring the strategy context

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Preparation for Strategy Development

Sheikh Morshed JahanAssociate Professor

IBA, University of Dhaka1


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1. Stakeholder Analysis

2. PESTLE Analysis3. Porters Diamond4. Five Forces Model5. Life Cycle Model6. Strategic Questions7. Dynamics of Competition

2Sheikh M Jahan, IBA, Univ. Dhaka


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Part 1:

Stakeholder Analysis



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Whoever (person or organization) has astake (or interest) in the actions or

performances of a company is a stakeholderto that company.

Stakeholder analysis is the process ofidentifying such actors-with-stake andanalyzing their interest and influence/powervis--vis the action/strategy of the enterprise



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Primary Stakeholders(Shareholders/Owners, Customers,Employees, and Value ChainPartners)

Secondary Stakeholders(Competitors, Trade and IndustryAssociations & Chambers, LocalCommunities, Educational Institutes,Government, etc.)

Tertiary Stakeholders(Society at Large, DevelopmentPartners, Media, etc.)



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Source: Adapted from A. Mendelow, Proceedings of the Second International Conference on Information Systems, Cambridge, MA, 1991.

Johnson, Scholes & Whittington (2005)

ExploringCorporate Strategy, 7th Edition, Pearson Education



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Stakeholder Analysis helps strategist tobetter understand the likely response (to its

activities and moves) from the stakeholders

It helps better utilization of resources (e.g.attention or time) as it involves managementof stakeholders



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Part 2:

PESTEL Analysis



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PESTEL framework categorizes macro environmentinto six main categories:

Political

Economic

Socio-cultural

Technological

Environmental Legal



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Source: Johnson, Scholes & Whittington (2005)

ExploringCorporate Strategy, 7th Edition, Pearson Education



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These (otherwise somewhat-distant-to-business)

forces have significant influence on howbusinesses should respond to forces of differentnature and dynamics

This may be treated as the starting point ofstrategic thinking process



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Part 3:

Porters Diamond



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Porters diamond suggests that there are some

inherent reasons

why some nations are more competitive than the others

&

why some industries within nations are more competitive

than the others



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Porters Diamond

The Determinants of National Advantage

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

This is an excellent frameworkwhen looking atconditions for business

Johnson, Scholes & Whittington (2005)ExploringCorporate Strategy, 7th Edition, Pearson Education



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Porter suggests that the national home-base of an

organizationplays an important role in creating advantage(for the firm) on a global scale.

Impact of national macro economic factors on the

competitive environment can be better understood by thisanalysis



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Part 4:

5-Forces of Competition



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Source: Adapted from M.E. Porter, Competitive Strategy:Techniques for Analyzing Industries and Competitors 1980, Free Press, 1980, p. 4.Copyright 1980,1988 by The Free Press, a division of Simon & Schuster Inc. Reproduced with permission.



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Buyer power likely to be high when Concentration of buyers

Low cost of switching

Threat of backward integration by buyer

Supplier power likely to be high

Concentration of supplier High switching cost

Threat of forward integration



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Threat of entry Economies of scale and scope

Capital requirement and availability

Access to supply and distribution channels

Access to technology

Customer/supplier loyalty

Expected retaliation from existing firms Legislation/government policy

Differentiation



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Threat of substitution Product-for-product substitution

Substitution of needs

Generic substitution (same wallet substitution)

Competitive rivalry degree depends on-

Equal sized, or one/two dominant? Industry growth rate (life cycle)

Capacity utilization rate

Differentiation potential



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Part 5:

Life Cycle Analysis



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Johnson, Scholes & Whittington (2005)ExploringCorporate Strategy, 7th Edition, Pearson Education


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Part 6:

Competitive Strategy Question Time



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Are some industries more attractive than others? What are the underlying forces in the macro

environment that are driving the competitive forces?

Is it likely that the forces will change? If so, how? How do a particular competitor stand in relation to

these competitive forces? What can the company do to influence these forces or

to navigate through the turbulent wave ofcompetition?

Can barriers to entry be built?

Power over buyer/supplier be increased?



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Part 7:

Dynamics of Competition

Sheikh M Jahan, IBA, Univ. Dhaka 26


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With changes in time, environment changes so does the capabilities and strategies ofthe organization

Erosion in competitive advantage is onlynatural there is nothing called permanent

competitive advantage everything is onlytemporary

This creates a cycle of competition



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Builds or InheritsEntry Barriers

Attacks SoftMarket Segment

Incumbent

No Response

Reinforces Barriers

Entrant

Attacks EntrantsHome Market

Restart the Cycle inAdjacent Market

Starts Price War

Widens Attack toAdjacent Segments

Source: RA DAveniwith Robert Gunther 28Sheikh M Jahan, IBA, Univ. Dhaka


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Market EntryDecision

Lead FirmsResponse



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Part 7:

Team Exercise &Presentation



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Divide into four teams Select an industry of your choice

Perform an extensive analysis using the toolsdiscussed Synthesize the most important discoveries Identify the strategic implications from the

perspective of a prospective entrepreneur Present before the group

2. strategic analysis - exploring the strategy context

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