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Unformatted text preview: MGO403 FOUNDATION OF STRATEGIC MANAGEMENT
Template of Team Project 1 February 2012 Instructor : Akie Iriyama ROA (or ROE) of Key Players in the U.S. Steel Industry: 2006-2009 Here you discuss your evaluation on the overall industry profitability and each firm's profitability (ROA). Then discuss the companies' competitive advantage based on your analysis. The below chart is an example of the U.S. steel industry. ROA of Key Firms in the U.S. Steel Industry (%) Source: Calculated based on the data from Google Finance 2 Stock Price of Key Players in the U.S. Steel Industry: 2001-2010 Discuss the long-term movement of stock prices of the three companies in your assigned industry. Obtain the data from Google Finance. Discuss the companies' competitive advantage based on your analysis. Stock Price of Key Firms in the U.S. Steel Industry (%): 2001-2010 3 Source: Google Finance Five-Forces Analysis (1): Threat of Potential Entrants In this slide and next two slides, you discuss your analysis on three of the five-forces. In this slide, for example, I show the fixed asset / total asset ratio of each steel manufacturer using the data from Google Finance. As you see, their fixed-asset ratios are high. This suggests that the entry barrier is high, and thus the threat of potential entrants is weak. Fixed Asset / Total Asset Ratio of Key Firms in the U.S. Steel Industry (%) 4 Source: Calculated based on the data from Google Finance Five-Forces Analysis (2): Threats of Rivalry and Suppliers In this example, in addition to threat from potential entrants and threat of rivalry I selected threat of suppliers. For threats of rivalry, suppliers, and buyers, try analyzing CR3. The U.S. steel industry's CR3 is 54.0%, which suggests rivalry threat is modest. The iron & ore industry's CR3 is high while that of the coal industry is modestly low. Thus, I conclude the overall suppliers threat is modestly high. arket Share of Key Firms in the U.S. Steel Industry in 2009 (%) CR3 of Steel Industry: 54.0% CR3 of Supplier Industries Iron & Ore: 89% Coal: 31.5%
5 Source: Calculated based on the data from IBIS World Five-Forces Analysis (3): Summary of Analysis In this example, I summarize the five-forces analysis as below. You wrap-up the five-forces analysis by discussing whether your assigned industry faces strong threats or not overall. Entrants Low Modestly Low Suppliers Modestly High Rivalry Buyers Not Analyzed Substitutes Not Analyzed
6 Industry Lifecycle Analysis
ompare annual growth rate of your assigned industry and U.S. GDP growth rate. Also, calculate compound annual growth rate of the industry. You then evaluate which stage of industry life cycle your industry is in. The U.S. steel industry was in the declining stage in 1990s. But it has been in the growth stage in 2000s because of increasing steel demand from emerging countries. nnual Growth Rate & Compound Annual Growth Rate (CAGR) of Steel Industry and Annual U.S. GDP Growth Rate (%) 7 Source: Calculated based on the data from IBIS World Environment Forecasting (1) To forecast external environments for the next 10 years, you take the following two-steps. First, you identify "key factors" of important dimensions of General Environments for your industry. For the U.S. steel industry, I first identify that sustainability of emerging countries' economic growth is a key. Second, technological development to reduce CO2 emission may become important for steel manufacturers. International Dimension: Emerging markets (China, India, & Brazil) may continue to grow for the next 10 years. At the same time, analysts suggest that their "bubble" economies may burst. Technology Dimension: Steel manufacturers may be required to develop operative technologies to reduce CO2 emission. 8 Environment Forecasting (2) You forecast how the key dimensions will be for the next 10 years. You also forecast their impacts on the industry's lifecycle (opportunities) and fiveforces (threats). Note that, in practice, strategic planners typically develop two or three "scenarios" (e.g. "optimistic" and "pessimistic"). For brevity, in this project, you develop one "standard" scenario. Lifecycle International Dimension Technology Dimension
Economic boom of China and Brazil slows down while India will keep its growth. CAGR will be 8~10%. Five-Forces
Competitors from emerging countries will penetrate the market with low-price strategy. Differentiation by environmentfriendly technology may mitigate rivalry. But it's still questionable.
9 Not Applicable Conclusion: Competitive Environment of U.S. Steel Industry You wrap-up your analysis by positioning your assigned industry on BCG matrix. In case of the U.S. steel industry, for example, I evaluate that this industry was in "Dog" in 1990's but it's been shifted to "Star" in 2000's. For the next 10 years, U.S. steel manufactures will still enjoy rich opportunities but threats will be increased. The industry will move to "Question Mark". Star Opportunities Rich Opportunities Scarce 2000s Question Mark
2010s Cash Cow Dog 1990s Few Threats Many Threats 10 Key Points Use Charts and Graphs. Use few sentences. You can write texts in note pages. Support your argument with the quantitative/qualitative information from other sources. thoughtlessly believe the industry reports. Develop your own ideas.
11 Don't ...
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