Download Industry life cycle

External Analysis
External Environments:
Forces that exist outside of the firm that have
the potential to affect it in some way
External Environments:
General environment
Specific environment
General environment:
Economic
Technological
Sociocultural
Political/Legal
• Identify opportunities and threats among
these trends that influence your business
Economic trend:
State of the economy in the country/location
where the business operates
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Inflation rates
Interest rates
Trade deficits or surpluses
Budget deficits or surpluses
Personal savings rate
Business savings rates
Gross domestic product
Technological trend:
Knowledge, tools, techniques, used to transform
inputs into outputs.
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Product innovations
Applications of knowledge
Focus of private and government-supported
R&D expenditures
New communication technologies
Sociocultural trend:
Demographic characteristics, behavior, attitudes,
beliefs of people in a society.
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Population size
Age structure
Geographic distribution
Ethnic mix
Income distribution
Political/ Legal trend:
Legislation, regulation, and court decisions that
govern/ regulate the business.
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Antitrust laws
Taxation laws
Deregulation philosophies
Labor training laws
Educational philosophies and policies
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Global trends
Red Thread on General environment
External Environments:
General environment
Specific environment
Industry
Competitor
Industry Environment
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Industry economic structure (market share)
Industry life cycle
Economic Structure:
% Market Cap. Share of
Investment Banking Firms
5%
14%
Other
31%
6%
4%
13%
2%
4%
11%
5%
5%
UBS
Bank of America
Goldman Sachs
Merrill Lynch & Co.
Lehman Brothers
Credit Suisse
Deutsche Bank
Citigroup
Morgan Stanley
JP Morgan Chase
Other
Oligopoly with Fragmented Powers
Industry Life Cycle
Demand
Innovators
Early adopters
Majority
Laggards
Competitors
Very few
Some
Many players,
Competition high,
M&A begins
Few
competitors
Profit
Uncertain
High
Decline
Minimal
Risk
High
Low
Moderate (Starts
to become high)
High
Competitor Environment
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Strategic groups
Definitions
• Competitors
• firms operating in the same market, offering similar products and targeting
similar customers
• Competitive rivalry
• the ongoing set of competitive actions and responses occurring between
competitors
• competitive rivalry influences an individual firm’s ability to gain and sustain
competitive advantages
Competitor Analysis
• Identify scope of competitive market through strategic
group analysis
• Clarify the components of competition through key
success factor analysis
• Predict competitor moves and responses through
dynamics assessment
Strategic Groups
Strategic group: a group of firms in an industry following the same or
similar strategy along the same strategic dimensions. They compete
along similar dimensions.
The strategy followed by a strategic group differs from strategies being
implemented by other companies in the industry.
Strategic Group Analysis
$40,000
Total
Writedowns
($US Millions)
0
1
Market to Book
2
5 Force Analysis