MPCS external environment.ppt beatiful b

Copyright © 2014 by The McGraw-Hill Education All rights reserved.
19e Global Edition
THOMPSON | PETERAF | GAMBLE | STRICKLAND
CHAPTER 3
EVALUATING A COMPANY’S EXTERNAL
EVALUATING A COMPANY’S EXTERNAL
ENVIRONMENT
ENVIRONMENT
MANAGEMENT POLICIES & CORPORATE STRATEGY

3–2
1. Become aware of factors in a company’s broad
macro-environment that may have strategic
significance.
2. Gain command of the basic concepts and analytical
tools widely used to diagnose the competitive
conditions in a company’s industry.
3. Become adept at mapping the market positions of
key groups of industry rivals.
4. Learn how to use multiple frameworks to determine
whether an industry’s outlook presents a company
with sufficiently attractive opportunities for growth
and profitability.

FIGURE 3.1 From Thinking Strategically about the Company’s Situation
to Choosing a Strategy
Thinking
strategically
about a firm’s
external
environment
Thinking
strategically
about a firm’s
internal
environment
Form a
strategic
vision of
where the
firm needs
to head
Identify
promising
strategic
options
for the firm
Select the
best strategy
and business
model for
the firm
Chapter 3
Chapter 4
3–3

QUESTION 1: WHAT ARE THE
QUESTION 1: WHAT ARE THE
STRATEGICALLY RELEVANT FACTORS
STRATEGICALLY RELEVANT FACTORS
IN THE MACRO-ENVIRONMENT?
IN THE MACRO-ENVIRONMENT?
 PESTEL Analysis
PESTEL Analysis
● Focuses on principal components of strategic
Focuses on principal components of strategic
significance in the macro-environment:
significance in the macro-environment:
 P
Political factors
olitical factors
 E
Economic conditions (local to worldwide)
conomic conditions (local to worldwide)
 S
Sociocultural forces
ociocultural forces
 T
Technological factors
echnological factors
 E
Environmental factors (the natural environment)
nvironmental factors (the natural environment)
 L
Legal/regulatory conditions
egal/regulatory conditions
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FIGURE 3.2 The Components of a Company’s Macro-Environment
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TABLE 3.1 The Six Components of the Macro-Environment
Component
Component Description
Description
Political
factors
These factors include political policies and processes, including the extent to which
a government intervenes in the economy. They include such matters as tax policy,
fiscal policy, tariffs, the political climate, and the strength of institutions such as the
federal banking system. Some political factors, such as bailouts, are industry-
specific. Others, such as energy policy, affect certain types of industries (energy
producers and heavy users of energy) more than others.
Economic
conditions
Economic conditions include the general economic climate and specific factors
such as interest rates, exchange rates, the inflation rate, and the unemployment
rate, the rate of economic growth, trade deficits or surpluses, savings rates, and
per capita domestic product. Economic factors also include conditions in the
markets for stocks and bonds, which can affect consumer confidence and
discretionary income. Some industries, such as construction, are particularly
vulnerable to economic downturns but are positively affected by factors such as
low interest rates. Others, such as discount retailing, may benefit when general
economic conditions weaken, as consumers become more price-conscious.
Sociocultural
forces
Sociocultural forces include the societal values, attitudes, cultural factors, and
lifestyles that impact businesses, as well as demographic factors such as the
population size, growth rate and age distribution. Sociocultural forces vary by
locale and change over time. An example is the trend toward healthier lifestyles,
which can shift spending toward exercise equipment and health clubs and away
from alcohol and snack foods. Population demographics can have large
implications for industries such as health care, where costs and service needs vary
with demographic factors such as age and income distribution.
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TABLE 3.1 The Six Components of the Macro-Environment (cont’d)
Component
Component Description
Description
Technological
factors
Technological factors include the pace of technological change and technical
developments that have the potential for wide-ranging effects on society, such as
genetic engineering and nanotechnology. They include institutions involved in
creating new knowledge and controlling the use of technology, such as R&D
consortia, university-sponsored technology incubators, patent and copyright laws,
and government control over the Internet. Technological change can encourage
the birth of new industries, such as those based on nanotechnology, and disrupt
others, such as the recording industry.
Environmental
forces
This includes ecological and environmental forces such as weather, climate,
climate change, and associated factors like water shortages. These factors can
directly impact industries such as insurance, farming, energy production, and
tourism. They may have an indirect but substantial effect on other industries such
as transportation and utilities.
Legal
and regulatory
factors
These factors include the regulations and laws with which companies must comply
such as consumer laws, labor laws, antitrust laws, and occupational health and
safety regulation. Some factors, such as banking deregulation, are industry-
specific. Others, such as minimum wage legislation, affect certain types of
industries (low-wage, labor-intensive industries) more than others.
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THINKING STRATEGICALLY ABOUT A COMPANY’S
THINKING STRATEGICALLY ABOUT A COMPANY’S
INDUSTRY AND COMPETITIVE ENVIRONMENT
INDUSTRY AND COMPETITIVE ENVIRONMENT
1. How strong are the industry’s competitive forces?
2. What are the driving forces in the industry, and what
impact will they have on competitive intensity and
industry profitability?
3. What market positions do industry rivals occupy—
who is strongly positioned and who is not?
4. What strategic moves are rivals likely to make next?
5. What are the industry’s key success factors?
6. Is the industry outlook conducive to good
profitability?
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QUESTION 2: HOW STRONG ARE THE
QUESTION 2: HOW STRONG ARE THE
INDUSTRY’S COMPETITIVE FORCES?
INDUSTRY’S COMPETITIVE FORCES?
 The Five Competitive Forces:
The Five Competitive Forces:
● Competition from rival sellers
Competition from rival sellers
● Competition from potential new entrants
Competition from potential new entrants
● Competition from producers of substitute products
Competition from producers of substitute products
● Supplier bargaining power
Supplier bargaining power
● Customer bargaining power
Customer bargaining power
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FIGURE 3.3
The Five-Forces Model
of Competition: A Key
Analytical Tool
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USING THE FIVE-FORCES MODEL
USING THE FIVE-FORCES MODEL
OF COMPETITION
OF COMPETITION
Step 1
Step 1
For each of the five forces, identify the different
For each of the five forces, identify the different
parties involved, and the specific factors that
parties involved, and the specific factors that
bring about competitive pressures.
bring about competitive pressures.
Step 2
Step 2
Evaluate how strong the pressures stemming
Evaluate how strong the pressures stemming
from each of the five forces are (strong,
from each of the five forces are (strong,
moderate, or weak).
moderate, or weak).
Step 3
Step 3
Determine whether the collective strength of all
Determine whether the collective strength of all
five competitive forces is conducive to earning
five competitive forces is conducive to earning
attractive profits in the industry.
attractive profits in the industry.
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FIGURE 3.4
Factors Affecting the
Strength of Rivalry
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TABLE 3.2 Common “Weapons” for Competing with Rivals
Competitive Weapons
Competitive Weapons Primary Effects
Primary Effects
Price discounting, clearance sales Lowers price (P), acts to boost total sales volume and market share,
lowers profit margins per unit sold when price cuts are big and/or
increases in sales volume are relatively small
Couponing, advertising items on sale Acts to increase unit sales volume and total revenues, lowers price (P),
increases unit costs (C), may lower profit margins per unit sold (P – C)
Advertising product or service
characteristics, using ads to enhance
a company’s image
Boosts buyer demand, increases product differentiation and perceived
value (V), acts to increase total sales volume and market share, may
increase unit costs (C) and/or lower profit margins per unit sold
Innovating to improve product
performance and quality
Acts to increase product differentiation and value (V), boosts buyer
demand, acts to boost total sales volume, likely to increase unit costs
(C)
Introducing new or improved features,
increasing the number of styles or
models to provide greater product
selection
Acts to increase product differentiation and value (V), strengthens buyer
demand, acts to boost total sales volume and market share, likely to
increase unit costs (C)
Increasing customization of product or
service
Acts to increase product differentiation and value (V), increases
switching costs, acts to boost total sales volume, often increases unit
costs (C)
Building a bigger, better dealer network Broadens access to buyers, acts to boost total sales volume and market
share, may increase unit costs (C)
Improving warranties, offering low-
interest financing
Acts to increase product differentiation and value (V), increases unit
costs (C), increases buyer costs to switch brands, acts to boost total
sales volume and market share
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FIGURE 3.5
Factors Affecting
the Threat of Entry
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FIGURE 3.6
Factors Affecting
Competition from
Substitute Products
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FIGURE 3.7
Factors Affecting
the Bargaining
Power of Suppliers
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FIGURE 3.8
Factors Affecting
the Bargaining
Power of Buyers
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CORE CONCEPT
CORE CONCEPT
♦ The strongest of the five forces determines
The strongest of the five forces determines
the extent of the downward pressure on an
the extent of the downward pressure on an
industry’s profitability.
industry’s profitability.
♦ Having more than one strong force means
Having more than one strong force means
that an industry has multiple competitive
that an industry has multiple competitive
challenges with which to cope.
challenges with which to cope.
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MATCHING COMPANY STRATEGY
MATCHING COMPANY STRATEGY
TO COMPETITIVE CONDITIONS
TO COMPETITIVE CONDITIONS
Effectively matching a firm’s business strategy to
Effectively matching a firm’s business strategy to
prevailing competitive conditions has two aspects:
prevailing competitive conditions has two aspects:
1.
1.Pursuing avenues that shield the firm from as
Pursuing avenues that shield the firm from as
many competitive pressures as possible.
many competitive pressures as possible.
2.
2.Initiating actions calculated to shift competitive
Initiating actions calculated to shift competitive
forces in the firm’s favor by altering underlying
forces in the firm’s favor by altering underlying
factors driving the five forces.
factors driving the five forces.
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QUESTION 3: WHAT FACTORS ARE
QUESTION 3: WHAT FACTORS ARE
DRIVING INDUSTRY CHANGE, AND
DRIVING INDUSTRY CHANGE, AND
WHAT IMPACTS WILL THEY HAVE?
WHAT IMPACTS WILL THEY HAVE?
 Driving forces analysis has three steps:
Driving forces analysis has three steps:
1.
1. Identifying what the driving forces are.
Identifying what the driving forces are.
2.
2. Assessing whether the driving forces are,
Assessing whether the driving forces are,
on the whole, acting to make the industry
on the whole, acting to make the industry
more or less attractive.
more or less attractive.
3.
3. Determining what strategy changes are
Determining what strategy changes are
needed to prepare for the impact of the
needed to prepare for the impact of the
driving forces.
driving forces.
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TABLE 3.3 The Most Common Drivers of Industry Change
1. Changes in the long-term industry growth rate
2. Increasing globalization
3. Emerging new Internet capabilities and applications
4. Changes in who buys the product and how they use it
5. Technological change and manufacturing process innovation
6. Product and marketing innovation
7. Entry or exit of major firms
8. Diffusion of technical know-how across firms and countries
9. Changes in cost and efficiency
10. Reductions in uncertainty and business risk
11. Regulatory influences and government policy changes
12. Changing societal concerns, attitudes, and lifestyles
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ASSESSING THE IMPACT OF THE
ASSESSING THE IMPACT OF THE
FACTORS DRIVING INDUSTRY CHANGE
FACTORS DRIVING INDUSTRY CHANGE
1.
1. Are the driving forces as a whole causing
Are the driving forces as a whole causing
demand for the industry’s product to increase
demand for the industry’s product to increase
or decrease?
or decrease?
2.
2. Is the collective impact of the driving forces
Is the collective impact of the driving forces
making competition more or less intense?
making competition more or less intense?
3.
3. Will
Will the combined impacts
the combined impacts of the driving forces
of the driving forces
lead to higher or lower industry profitability?
lead to higher or lower industry profitability?
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ADJUSTING STRATEGY TO PREPARE
ADJUSTING STRATEGY TO PREPARE
FOR THE IMPACTS OF DRIVING FORCES
FOR THE IMPACTS OF DRIVING FORCES
 What strategy adjustments will be needed
What strategy adjustments will be needed
to deal with the impacts of the driving forces
to deal with the impacts of the driving forces
on industry conditions?
on industry conditions?
● What adjustments must be made immediately?
What adjustments must be made immediately?
● What actions currently being taken should be
What actions currently being taken should be
halted or abandoned?
halted or abandoned?
● What can we do now to prepare for adjustments
What can we do now to prepare for adjustments
we anticipate making in the future?
we anticipate making in the future?
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QUESTION 4: HOW ARE INDUSTRY
QUESTION 4: HOW ARE INDUSTRY
RIVALS POSITIONED IN THE MARKET?
RIVALS POSITIONED IN THE MARKET?
 Strategic Group
Strategic Group
● Consists of those industry members with similar
Consists of those industry members with similar
competitive approaches and positions in the market:
competitive approaches and positions in the market:
 Having comparable product-line breadth
Having comparable product-line breadth
 Emphasizing the same distribution channels
Emphasizing the same distribution channels
 Depending on identical technological approaches
Depending on identical technological approaches
 Offering the same product attributes to buyers
Offering the same product attributes to buyers
 Offering similar services and technical assistance
Offering similar services and technical assistance
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CORE CONCEPTS
CORE CONCEPTS
♦ A
A strategic group
strategic group is a cluster of industry rivals
is a cluster of industry rivals
that have similar competitive approaches and
that have similar competitive approaches and
market positions.
market positions.
♦ Strategic group mapping
Strategic group mapping is a technique for
is a technique for
displaying the different market or competitive
displaying the different market or competitive
positions that rival firms occupy in the industry.
positions that rival firms occupy in the industry.
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USING STRATEGIC GROUP MAPS TO
USING STRATEGIC GROUP MAPS TO
ASSESS THE MARKET POSITIONS
ASSESS THE MARKET POSITIONS
OF KEY COMPETITORS
OF KEY COMPETITORS
 Constructing a strategic group map:
Constructing a strategic group map:
● Identify the competitive characteristics that
Identify the competitive characteristics that
delineate strategic approaches used in the industry.
delineate strategic approaches used in the industry.
● Plot the firms on a two-variable map using pairs of
Plot the firms on a two-variable map using pairs of
the competitive characteristics.
the competitive characteristics.
● Assign firms occupying about the same map
Assign firms occupying about the same map
location to the same strategic group.
location to the same strategic group.
● Draw circles around each strategic group, making
Draw circles around each strategic group, making
the circles proportional to the size of the group’s
the circles proportional to the size of the group’s
share of total industry sales revenues.
share of total industry sales revenues.
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TYPICAL VARIABLES USED IN
TYPICAL VARIABLES USED IN
CREATING GROUP MAPS
CREATING GROUP MAPS
 Price/quality range (high, medium, low)
Price/quality range (high, medium, low)
 Geographic coverage (local, regional, national, global)
Geographic coverage (local, regional, national, global)
 Product-line breadth (wide, narrow)
Product-line breadth (wide, narrow)
 Degree of service offered (no frills, limited, full)
Degree of service offered (no frills, limited, full)
 Distribution channels (retail, wholesale, Internet, multiple)
Distribution channels (retail, wholesale, Internet, multiple)
 Degree of vertical integration (none, partial, full)
Degree of vertical integration (none, partial, full)
 Degree of diversification into other industries (none,
Degree of diversification into other industries (none,
some, considerable)
some, considerable)
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GUIDELINES FOR CREATING
GUIDELINES FOR CREATING
GROUP MAPS
GROUP MAPS
1.
1. Variables selected as map axes should
Variables selected as map axes should not
not be highly correlated.
be highly correlated.
2.
2. Variables should reflect important (sizable) differences among
Variables should reflect important (sizable) differences among
rival approaches.
rival approaches.
3.
3. Variables may be quantitative, continuous, discrete andor
Variables may be quantitative, continuous, discrete andor
defined in terms of distinct classes and combinations.
defined in terms of distinct classes and combinations.
4.
4. Drawing group circles proportional to the combined sales of
Drawing group circles proportional to the combined sales of
firms in each group will reflect the relative sizes of each
firms in each group will reflect the relative sizes of each
strategic group.
strategic group.
5.
5. Drawing maps using different pairs of variables will show the
Drawing maps using different pairs of variables will show the
different competitive positioning relationships present in the
different competitive positioning relationships present in the
industry’s structure.
industry’s structure.
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STRATEGIC MANAGEMENT PRINCIPLE
STRATEGIC MANAGEMENT PRINCIPLE
♦ Strategic group maps reveal which companies
Strategic group maps reveal which companies
are close competitors and which are distant
are close competitors and which are distant
competitors.
competitors.
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ILLUSTRATION CAPSULE 3.1
ILLUSTRATION CAPSULE 3.1
Comparative Market Positions of Producers in the
Comparative Market Positions of Producers in the
U.S. Beer Industry: A Strategic Group Map Example
U.S. Beer Industry: A Strategic Group Map Example
Footnote: Circles are drawn roughly proportional to the sizes of the firms, based on revenues.
3–30

THE VALUE OF STRATEGIC
THE VALUE OF STRATEGIC
GROUP MAPS?
GROUP MAPS?
 Maps are useful in identifying which industry
Maps are useful in identifying which industry
members are close rivals and which are distant
members are close rivals and which are distant
rivals.
rivals.
 Not all map positions are equally attractive:
Not all map positions are equally attractive:
1.
1. Prevailing competitive pressures from the
Prevailing competitive pressures from the
industry’s five forces may cause the profit potential
industry’s five forces may cause the profit potential
of different strategic groups to vary.
of different strategic groups to vary.
2.
2. Industry driving forces may favor some strategic
Industry driving forces may favor some strategic
groups and hurt others.
groups and hurt others.
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QUESTION 5: WHAT STRATEGIC MOVES
QUESTION 5: WHAT STRATEGIC MOVES
ARE RIVALS LIKELY TO MAKE NEXT?
ARE RIVALS LIKELY TO MAKE NEXT?
 Competitive Intelligence
Competitive Intelligence
● Information about rivals that is useful in anticipating
Information about rivals that is useful in anticipating
their next strategic moves.
their next strategic moves.
 Signals of the Likelihood of Strategic Moves:
Signals of the Likelihood of Strategic Moves:
● Rivals under pressure to improve financial
Rivals under pressure to improve financial
performance
performance
● Rivals seeking to increase market standing
Rivals seeking to increase market standing
● Public statements of rivals’ intentions
Public statements of rivals’ intentions
● Profiles developed by competitive intelligence units
Profiles developed by competitive intelligence units
3–32

USEFUL QUESTIONS TO HELP PREDICT THE
USEFUL QUESTIONS TO HELP PREDICT THE
LIKELY ACTIONS OF IMPORTANT RIVALS
LIKELY ACTIONS OF IMPORTANT RIVALS
 Which competitors’ strategies are achieving good results?
Which competitors’ strategies are achieving good results?
 Which competitors are losing in the marketplace or badly
Which competitors are losing in the marketplace or badly
need to increase their unit sales and market share?
need to increase their unit sales and market share?
 Which rivals are likely make major moves to enter new
Which rivals are likely make major moves to enter new
geographic markets or to increase sales and market share
geographic markets or to increase sales and market share
in a particular geographic region?
in a particular geographic region?
 Which rivals can expand product offerings to enter new
Which rivals can expand product offerings to enter new
product segments where they do not have a presence?
product segments where they do not have a presence?
 Which rivals can be acquired? Which rivals are financially
Which rivals can be acquired? Which rivals are financially
able and looking to make an acquisition?
able and looking to make an acquisition?
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FIGURE 3.9 A Framework for Competitor Analysis
3–34

CREATING A STRATEGIC PROFILE
OF A RIVAL COMPETITOR FIRM
OF A RIVAL COMPETITOR FIRM
 Current Strategy
Current Strategy
● How is the competitor positioned in the market?
How is the competitor positioned in the market?
● What is the basis for its competitive advantage?
What is the basis for its competitive advantage?
● What kinds of investments is it making (as an
What kinds of investments is it making (as an
indicator of its expected growth trajectory)?
indicator of its expected growth trajectory)?
 Objectives
Objectives
● What are its financial performance objectives?
What are its financial performance objectives?
● What are its strategic objectives?
What are its strategic objectives?
● How well is it performing in meeting its objectives?
How well is it performing in meeting its objectives?
● Is it under pressure to improve its performance?
Is it under pressure to improve its performance?
3–35

OF A RIVAL COMPETITOR FIRM (cont’d)
OF A RIVAL COMPETITOR FIRM (cont’d)
 Capabilities
Capabilities
● What are the competitor’s current capabilities?
What are the competitor’s current capabilities?
● What weaknesses does it have?
What weaknesses does it have?
● Which capabilities is it making efforts to obtain?
Which capabilities is it making efforts to obtain?
 Assumptions
Assumptions
● What do the competitor’s top managers believe about
What do the competitor’s top managers believe about
their strategic situation?
their strategic situation?
● How will their beliefs affect the competitor’s behavior
How will their beliefs affect the competitor’s behavior
in the market?
in the market?
3–36

QUESTION 6: WHAT ARE THE INDUSTRY’S
QUESTION 6: WHAT ARE THE INDUSTRY’S
KEY SUCCESS FACTORS?
KEY SUCCESS FACTORS?
 Key Success Factors (KSFs)
Key Success Factors (KSFs)
● Are the strategy elements, product and service
Are the strategy elements, product and service
attributes, operational approaches, resources, and
attributes, operational approaches, resources, and
competitive capabilities that are necessary for
competitive capabilities that are necessary for
competitive success by
competitive success by any and all
any and all firms in an
firms in an
industry.
industry.
● Vary from industry to industry, and over time within
Vary from industry to industry, and over time within
the same industry, and in importance as drivers of
the same industry, and in importance as drivers of
change and competitive conditions change.
change and competitive conditions change.
3–37

CORE CONCEPT
CORE CONCEPT
♦ Key success factors
Key success factors are the strategy
are the strategy
elements, product and service attributes,
elements, product and service attributes,
operational approaches, resources, and
operational approaches, resources, and
competitive capabilities that are essential to
competitive capabilities that are essential to
surviving and thriving in the industry.
surviving and thriving in the industry.
3–38

IDENTIFICATION OF
IDENTIFICATION OF
KEY SUCCESS FACTORS
KEY SUCCESS FACTORS
1.
1. On what basis do buyers of the industry’s product
On what basis do buyers of the industry’s product
choose between the competing brands of sellers?
choose between the competing brands of sellers?
That is, what product attributes and service
That is, what product attributes and service
characteristics are crucial to competitive success?
characteristics are crucial to competitive success?
2.
2. Given the nature of competitive rivalry prevailing in
Given the nature of competitive rivalry prevailing in
the marketplace, what resources and competitive
the marketplace, what resources and competitive
capabilities must a firm have to be competitively
capabilities must a firm have to be competitively
successful?
successful?
3.
3. What shortcomings are almost certain to put a firm
What shortcomings are almost certain to put a firm
at a significant competitive disadvantage?
at a significant competitive disadvantage?
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QUESTION 7: IS THE INDUSTRY OUTLOOK
QUESTION 7: IS THE INDUSTRY OUTLOOK
CONDUCIVE TO GOOD PROFITABILITY?
CONDUCIVE TO GOOD PROFITABILITY?
 The anticipated industry environment is
The anticipated industry environment is
fundamentally attractive if it presents a
fundamentally attractive if it presents a
company with good opportunity for above-
company with good opportunity for above-
average profitability.
average profitability.
 The industry outlook is fundamentally
The industry outlook is fundamentally
unattractive if a firm’s profit prospects are
unattractive if a firm’s profit prospects are
unappealingly low.
unappealingly low.
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FACTORS TO CONSIDER IN ASSESSING
INDUSTRY ATTRACTIVENESS
INDUSTRY ATTRACTIVENESS
 The industry’s growth potential.
The industry’s growth potential.
 Whether and to what degree industry profitability will be
Whether and to what degree industry profitability will be
favorably or unfavorably affected by the prevailing
favorably or unfavorably affected by the prevailing
driving forces.
driving forces.
 The anticipated strength of competitive forces—the
The anticipated strength of competitive forces—the
overriding issue here is whether competitive forces
overriding issue here is whether competitive forces
seem likely to intensify and squeeze industry profitability
seem likely to intensify and squeeze industry profitability
to subpar levels or whether the company should be able
to subpar levels or whether the company should be able
to earn good profits despite the expected strength of
to earn good profits despite the expected strength of
competitive forces.
competitive forces.
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INDUSTRY ATTRACTIVENESS (cont’d)
INDUSTRY ATTRACTIVENESS (cont’d)
 Whether the company is strongly or weakly positioned
Whether the company is strongly or weakly positioned
on the industry’s strategic group map.
on the industry’s strategic group map.
 How well the company’s strategy, product offering, and
How well the company’s strategy, product offering, and
capabilities stack up against industry KSFs.
capabilities stack up against industry KSFs.
 The degrees of risk and uncertainty in the industry’s
The degrees of risk and uncertainty in the industry’s
future and whether the industry confronts severe
future and whether the industry confronts severe
problems relating to regulatory or environmental issues,
problems relating to regulatory or environmental issues,
stagnating buyer demand, industry overcapacity, and so
stagnating buyer demand, industry overcapacity, and so
on.
on.
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INDUSTRY ATTRACTIVENESS IS NOT
INDUSTRY ATTRACTIVENESS IS NOT
THE SAME FOR ALL PARTICIPANTS
THE SAME FOR ALL PARTICIPANTS
 Future conditions in a particular industry are not
Future conditions in a particular industry are not
equally attractive or unattractive to all industry
equally attractive or unattractive to all industry
participants and all potential entrants.
participants and all potential entrants.
● Even if a particular industry’s outlook is deemed
Even if a particular industry’s outlook is deemed
unattractive, a favorably situated and competitively
unattractive, a favorably situated and competitively
capable company may see ample opportunity to
capable company may see ample opportunity to
outcompete weaker rivals and significantly grow its
outcompete weaker rivals and significantly grow its
revenues and profits.
revenues and profits.
● A weak competitor in an attractive industry may
A weak competitor in an attractive industry may
conclude that fighting a steep uphill battle against much
conclude that fighting a steep uphill battle against much
stronger rivals holds little promise of eventual market
stronger rivals holds little promise of eventual market
success or even average profitability.
success or even average profitability.
3–43

INDUSTRY ATTRACTIVENESS IS NOT THE
INDUSTRY ATTRACTIVENESS IS NOT THE
SAME FOR ALL PARTICIPANTS (cont’d)
SAME FOR ALL PARTICIPANTS (cont’d)
● Industry outsiders may conclude that they have the
Industry outsiders may conclude that they have the
resources to easily hurdle the barriers to entering an
resources to easily hurdle the barriers to entering an
attractive industry while other outsiders may find the
attractive industry while other outsiders may find the
same industry unattractive because they do not want
same industry unattractive because they do not want
to challenge market leaders and have better
to challenge market leaders and have better
opportunities elsewhere.
opportunities elsewhere.
A particular industry’s attractiveness depends in
A particular industry’s attractiveness depends in
large part on whether a company has the
large part on whether a company has the
resources and capabilities to be competitively
resources and capabilities to be competitively
successful and profitable in that environment.
successful and profitable in that environment.
3–44

WHAT SHOULD A CURRENT COMPETITOR
WHAT SHOULD A CURRENT COMPETITOR
DECIDE ABOUT ITS INDUSTRY?
DECIDE ABOUT ITS INDUSTRY?
 When a competitor decides an industry is attractive, it
When a competitor decides an industry is attractive, it
should invest aggressively to capture the opportunities it
should invest aggressively to capture the opportunities it
sees and to improve its long-term competitive position in
sees and to improve its long-term competitive position in
the business.
the business.
 When a strong competitor concludes its industry is
When a strong competitor concludes its industry is
relatively unattractive and lacking in opportunity, it may
relatively unattractive and lacking in opportunity, it may
elect to protect its present position, investing cautiously
elect to protect its present position, investing cautiously
if at all and looking for opportunities in other industries.
if at all and looking for opportunities in other industries.
 A competitively weak company in an unattractive
A competitively weak company in an unattractive
industry may see its best option as finding a buyer,
industry may see its best option as finding a buyer,
perhaps a rival, to acquire its business.
perhaps a rival, to acquire its business.
3–45

MPCS external environment.ppt beatiful b

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