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Unformatted text preview: 343 Section 6 Lecture Notes for Chapter 3 Chapter 3 Evaluating a Company’s External Environment Chapter Summary Chapter Three presents the concepts and analytical tools for assessing a single-business company’s external environment. Attention centers on the competitive arena in which a company operates, the drivers of market change, and rival companies actions. Lecture Outline I. Introduction 1. In the opening paragraph of Chapter 1, we said that one of the three central questions that managers must address in evaluating their company business prospects is “What’s the company’s present situation?” Two facets of a company’s situation are especially pertinent; a. the industry and competitive environment in which the company operates. b. the company’s collection of resources and capabilities, its strengths and weaknesses as compared to its rivals, and its windows of opportunities. II. Company Performance and the “Macroenvironment” 1. Strictly speaking, a company’s “macroenvironment” includes all relevant factors and infl uences outside the company’s boundaries; by relevant, we mean these factors are important enough that they should shape management’s decisions regarding the company’s long-term direction, objectives and business model. 2. Figure 3.1 presents a depiction of macroenvironmental factors with a high potential to affect a company’s business situation. 3. The factors and forces in a company’s macroenvironment that have the biggest strategy shaping impact typically pertain to the company’s immediate industry and competitive environment – competitive pressures, the actions of rival fi rms, buyer behavior and supplier related considerations. III. Assessing the Company’s Industry and Competitive Environment 1. Thinking strategically about a company’s industry and competitive environment entails using some well-validated concepts and analytical tools to get clear answers to seven questions: a. What are the dominant economic features of the industry in which the company operates? b. What kinds of competitive forces are industry members facing and how strong is each force? 343 Section 6 Instructor’s Manual for Essentials of Strategic Management 344 c. What forces are driving changes in the industry and what impact will these changes have on competitive intensity and industry profi tability? d. What market positions do industry rivals occupy – who is strongly positioned and who is not? e. What strategic moves are rivals likely to make next? f. What are the key factors for future competitive success? g. Does the outlook for the industry present the company with suffi ciently attractive prospects for profi tability?...
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- Fall '11
- Driving Forces