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Strategy evaluation organisations are most vulnerable

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Strategy EvaluationOrganisations are most vulnerable when they are at the peak of their success(R.T. Lenz)"Strategy evaluation alerts management to potential or actual problems ina timely fashion."It is Complex and sensitive undertakingOveremphasis can be costly and counterproductiveSystematic Review, Evaluation & Control1. Strategies become obsolete2. Internal environments are dynamic3. External environments are dynamic18.3 MICHAEL PORTER'S FIVE FORCESMichaOrganisation (IO) economics to derive 5 forces that determine the attractivenessof a market. Porter referred to these forces as the microenvironment, to contrast itwith the more general term macro environment. They consist of those forces closeto a company that affect its ability to serve its customers and make a profit. Achange in any of the forces normally requires a company to re-assess themarketplace.
© Lyceum College Pty Ltd.Corporate Governance240Assessing the Balance of Power in a Business SituationThe Porter's Five Forces tool is a simple but powerful tool for understanding wherepower lies in a business situation. This is useful, because it helps you understandboth the strength of your current competitive position, and the strength of aposition you're considering moving into.With a clear understanding of where power lies, you can take fair advantage of asituation of strength, improve a situation of weakness, and avoid taking wrongsteps. This makes it an important part of your planning toolkit.Conventionally, the tool is used to identify whether new products, services orbusinesses have the potential to be profitable. However, it can be very illuminatingwhen used to understand the balance of power in other situations.Understanding the ToolFive Forces Analysis assumes that there are five important forces that determinecompetitive power in a business situation. These are:1.Supplier Power:Here you assess how easy it is for suppliers to drive upprices. This is driven by the number of suppliers of each key input, theuniqueness of their product or service, their strength and control over you,the cost of switching from one to another, and so on. The fewer the supplierchoices you have, and the more you need suppliers' help, the more powerfulyour suppliers are.2.Buyer Power:Here you ask yourself how easy it is for buyers to drive pricesdown. Again, this is driven by the number of buyers, the importance of eachindividual buyer to your business, the cost to them of switching from yourproducts and services to those of someone else, and so on. If you deal withfew, powerful buyers, then they are often able to dictate terms to you.3.Competitive Rivalry:What is important here is the number and capability ofyour competitors. If you have many competitors, and they offer equallyattractive products and services, then you'll most likely have little power inthe situation, because suppliers and buyers will go elsewhere if they don'tget a good deal from you. On the other hand, if no-one else can do what youdo, then you can often have tremendous strength.

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