Crafting and Executing Strategy slide
Chapter 3: Evaluating a Company’s External Environment
Screen graphics created by:
Jana F. Kuzmicki, Ph.D.
What are the industry’s dominant economic traits?
How strong are competitive forces?
What forces are driving change in the industry?
How attractive is the industry from a profit perspective?
What are the key factors for competitive success?
What market positions do rivals occupy? What moves will they make next?
Step 1:Identify the specific competitivepressures associated with each ofthe five forces
Step 2:Evaluatethe strength of eachcompetitive force – fierce, strong,moderate to normal, or weak?
Step 3:Determinewhether the collectivestrength of the five competitive forcesis conducive to earning attractive profits
Substitutes matter when customersare attracted to the products offirms in other industries
STEP 1: Identify forces likely to exert greatest influence over next 1 - 3 years
STEP 2:Assess impact
STEP 3:Determine what strategy changes are needed to prepare for impacts of driving forces
STEP 1: Identify competitive characteristics that differentiate firms in an industry from one another
STEP 2: Plot firms on a two-variable map using pairs of these differentiating characteristics
STEP 3: Assign firms that fall in about the same strategy space to same strategic group
STEP 4: Draw circles around each group, making circles proportional to size of group’s respective share of total industry sales
for earning good profits
The degreeto which an industryis attractive or unattractive is not the same for all industry participantsor potential entrants.
The opportunities an industrypresents depend partly on acompany’s ability to capture them.