Strategic Management

As you review the chapter, identify key concepts and apply those concepts to a company. You may use an organization that you work for or choose a public company that you are familiar with. The total assignment should be about a page, double spaced, although you are welcome to write more if you wish. Grading is based primarily on completion unless it becomes obvious that submission did not take meaningful thought or is not complete. Work may not be submitted late.

2-5 interpreting industry analyses
Effective industry analyses are products of careful study and interpretation of data and information from multiple sources. A wealth of industry-specific data is available for firms to analyze for the purpose of better understanding an industry’s competitive realities. Because of globalization, international markets and rivalries must be included in the firm’s analyses. And, because of the development of global markets, a country’s borders no longer restrict industry structures. In fact, in general, entering international markets enhances the chances of success for new ventures as well as more established firms.106
Analysis of the five forces within a given industry allows the firm to determine the industry’s attractiveness in terms of the potential to earn average or above-average returns. In general, the stronger the competitive forces, the lower the potential for firms to generate profits by implementing their strategies. An unattractive industry has low entry barriers, suppliers and buyers with strong bargaining positions, strong competitive threats from product substitutes, and intense rivalry among competitors. These industry characteristics make it difficult for firms to achieve strategic competitiveness and earn above-average returns. Alternatively, an attractive industry has high entry barriers, suppliers and buyers with little bargaining power, few competitive threats from product substitutes, and relatively moderate rivalry. Next, we explain strategic groups as an aspect of industry competition.

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2-5 interpreting industry analyses
Effective industry analyses are products of careful study and interpretation of data and information from multiple sources. A wealth of industry-specific data is available for firms to analyze for the purpose of better understanding an industry’s competitive realities. Because of globalization, international markets and rivalries must be included in the firm’s analyses. And, because of the development of global markets, a country’s borders no longer restrict industry structures. In fact, in general, entering international markets enhances the chances of success for new ventures as well as more established firms.106
Analysis of the five forces within a given industry allows the firm to determine the industry’s attractiveness in terms of the potential to earn average or above-average returns. In general, the stronger the competitive forces, the lower the potential for firms to generate profits by implementing their strategies. An unattractive industry has low entry barriers, suppliers and buyers with strong bargaining positions, strong competitive threats from product substitutes, and intense rivalry among competitors. These industry characteristics make it difficult for firms to achieve strategic competitiveness and earn above-average returns. Alternatively, an attractive industry has high entry barriers, suppliers and buyers with little bargaining power, few competitive threats from product substitutes, and relatively moderate rivalry.107 Next, we explain strategic groups as an aspect of industry competition.

Chapter 2-6
A set of firms emphasizing similar strategic dimensions and using a similar strategy is called a strategic group. The competition between firms within a strategic group is greater than the competition between a member of a strategic group and companies outside that strategic group. Therefore, intra-strategic group competition is more intense than is inter- strategic group competition. In fact, more heterogeneity is evident in the performance of firms within strategic groups than across the groups. The performance leaders within groups are able to follow strategies similar to those of other firms in the group and yet maintain strategic distinctiveness as a foundation for earning above-average returns.
The extent of technological leadership, product quality, pricing policies, distribution channels, and customer service are examples of strategic dimensions that firms in a strategic group may treat similarly. Thus, membership in a particular strategic group defines the essential characteristics of the firm’s strategy.
The notion of strategic groups can be useful for analyzing an industry’s competitive structure. Such analyses can be helpful in diagnosing competition, positioning, and the profitability of firms competing within an industry. High mobility barriers, high rivalry, and low resources among the firms within an industry limit the formation of strategic groups. However, after strategic groups are formed, their membership remains relatively stable over time. Using strategic groups to understand an industry’s competitive structure requires the firm to plot companies’ competitive actions and responses along strategic dimensions such as pricing decisions, product quality, distribution channels, and so forth. This type of analysis shows the firm how certain companies are competing similarly in terms of how they use similar strategic dimensions.
Strategic groups have several implications. First, because firms within a group offer similar products to the same customers, the competitive rivalry among them can be intense. The more intense the rivalry, the greater the threat to each firm’s profitability. Second, the strengths of the five forces differ across strategic groups. Third, the closer the strategic groups are in terms of their strategies, the greater is the likelihood of rivalry between the groups.
German-based car manufacturers Audi (a part of the Volkswagen group), Bayerische Motoren Werke AG (BMW), and Daimler-Benz (Mercedes-Benz) implement similar strategies (based on the differentiation business-level strategy), emphasize similar strategic dimensions, and compete aggressively against each other. These three firms constitute a strategic group (in the performance/luxury segment) as do Maruti-Suzuki, Tata Motors, and Skoda (these three firms form a passenger car strategic group with the distinctive feature that they sell their products primarily in their domestic markets and very little internationally). We describe the strategic group featuring the three German companies in the Strategic Focus.
2-7 Competitor analysis
The competitor environment is the final part of the external environment requiring study. Competitor analysis focuses on each company against which a firm competes directly. Coca-Cola Company and PepsiCo, Home Depot and Lowe’s, Carrefour SA and Tesco PLC, and Boeing and Airbus are examples of competitors who are keenly interested in understanding each other’s objectives, strategies, assumptions, and capabilities. Indeed, intense rivalry creates a strong need to understand competitors.114 In competitor analysis, the firm seeks to understand the following:

■■ What drives the competitor, as shown by its future objectives.

■■ What the competitor is doing and can do, as revealed by its current strategy. For more information on Strategic Management check on this: https://en.wikipedia.org/wiki/Strategic_management

Impact of International Actors

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