Opportunities and Threats

Welcome to Global
Strategy and
Sustainability
External Analysis –
Opportunities and Threats

Today’s Agenda
Quick Recap of Previous Week’s Topic (Strategic Leadership)
What is the competitive environment and how do we apply Porter’s Five Forces
model?
• Group Activity. CASE STUDY: Porter’s five forces of Netflix
What is the concept of strategic groups for industry analysis?
BREAK
How do industries evolve using the industry lifecycle?
• Individual Activity: considering external disruptive forces
How do trends in the macro-environment shape the nature of competition?
• Group Activity: CASE STUDY – A PESTEL analysis of NIKE
• Review of Apply Activity
• Recap, Q&A, Discussion
• Next steps

Previous Week Recap –
Strategy leadership – Managing the Strategy Making
Process
Develop an understanding of what is meant by
competitive advantage
Recognise the primary steps in a strategic planning
process and the key players in the process
Critically evaluate the common pitfalls of planning and be
able to assess how these can be avoided
Appreciate and evaluate the role strategic leaders play in
the planning process

Today’s Learning Outcomes
Critically evaluate and review the competitive
environment by application of the five forces model
Explore the concept of strategic groups for industry
analysis
Analyse and discuss how industries evolve with
reference to the industry lifecycle
Demonstrate how trends in the macro-environment can
shape the nature of competition

What is the competitive
environment and
how do we apply Porter’s
Five Forces model?

What’s the goal of external analysis?
Identify the OT
(Opportunities/Threats)
of the
SWOT framework

Different layers of the external environment
The focus of our session:
Macro environment: broad
business environmental factors.
Industry/sector: organisations
producing the same sorts of
products or services.
Competitors: Organisations
competing in the same market
Source: Johnson at al (2017)
Profitability and industry structure
Source: Porter, 2008
Firm’s margins above the average of
the industry depends on three factors:
1. The value of products and service
to customers
2. The level of competition
3. The cost of getting the inputs
from the different stages of the
supply chain.

Porter’s five forces framework
The profit attractiveness of
an industry is determined
by five competitive forces
This Photo by Unknown Author is licensed under CC BY
Porter’s five forces: interpretation
This Photo by Unknown Author is licensed under CC BY-SA
The higher
The higher
The higher
The higher
The lower
the industry
profitability
is!
The higher
Porter’s five forces: structural determinants
Porter’s five forces: example Starbucks
Source: http://enjoystarbucks.blogspot.com/2011/11/competitive-environment-of-starbucks.html
Group Activity: Case Study
Porter’s five forces of Netflix

Other factors influencing industry profitability
The sixth force:
Complementary products
The
network effect
How much value
do Apps add to
iPhone product?
What’s the positive effect
2.7 billion users have on
one Facebook user?

What is the concept of
strategic groups for
industry analysis?

Competition within an industry
Does every brand compete against each other?
Same generic
industry (automobile)
Different impact of the five forces
Positioned in different ways
Different target market
Need for a more finegrained understanding
Strategic group: concept
Strategic groups are firms within the
same industry or sector with similar
• strategic characteristics,
• following similar strategies, or
• competing on similar bases

Strategic group: how to identify
Some characteristics
to identify strategic
groups
Area Parameters for analysis
Resource commitment Marketing effort
Number of brands
Extent of vertical integration
Product/service quality
Size of the organisation
Technological leadership
R&D capability
Scope of activities Product diversity
Geographical scope
Market segments targeted
Distribution channels used
Source: adapted from Johnson et al. (2017)
Strategic group: Global car industry
http://strategicmgt15.blogspot.com/2017/06/global-strategic-analysis-understanding.html
Strategic group: how to identify
Strategic group analysis is mostly used as a descriptive tool and is
useful in several ways:
• Identify the most direct competitors for an organisation
• Identify possible paths for companies willing to move from one
strategic group to another
• Identify strategic opportunities (by showing gaps, or vacant
spaces)

Break Time – 15 minutes
How do industries evolve
using the industry lifecycle?

Industry life cycle: revenue, cash and profit
Source: https://corporatefinanceinstitute.com/resources/knowledge/strategy/industry-life-cycle/
Industry life cycle
shows the pattern
of an industry
development
through five
stages

Porter’s 5 forces evolve with the industry life cycle
Johnson et al. (2017)
Industry life cycle example: Digital camera sector
Industry life cycle revival can be disrupted
Source: https://insuranceblog.accenture.com/digital-disruption-threat-or-opportunity
Industry life cycle revival: TV set compressive
disruption
Source: https://alphabytesoup.wordpress.com/2012/07/15/evolution-of-man-and-technology/
For 45 years, the
TV set sector was
stable (mature)
until the new wave
of technology
innovation
disrupted it.

Industry life cycle revival: Music sector
https://www.visualcapitalist.com/music-industry-sales/
Industry life cycle revival: Blockbuster & Netflix
https://www.slideshare.net/AlessioCuccu/change-growth-disruption-find-inspiration-from-the-netflix-way-121339040/
Individual activity: Case Study
considering external disruptive forces into strategy
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How the macro-environment
can shape the nature of
competition

The firm’s macro-environment
There are factors
affecting the
organisation and the
industry that lie beyond
the industry boundaries.
This Photo by Unknown Author is licensed under CC BY-SA-NC
PESTEL
Opportunities: what should we look for?
o Emerging technologies
o New customer categories
o Changing customer tastes
o Market growth
o New uses for old products
o New distribution or location opportunities
o Positive changes in the competitive environment
https://www.dummies.com/business/start-a-business/business-plans/how-to-identify-opportunities-and-threats-in-business-planning/ (accessed 08/05/20)
Threats: what should we be aware of?
• The impact of shrinking markets (ILC)
• Altered consumer tastes and purchase tendencies
• Economic downturns
• New regulations
• Competitive threats, including new competing businesses
and competitive mergers and alliances
• The impact of expiring patents, labor issues, global
issues, and new products that may make your offering
outdated or unnecessary
https://www.dummies.com/business/start-a-business/businessplans/how-to-identify-opportunities-and-threats-in-businessplanning/ (accessed 08/05/20)
Group Activity: CASE STUDY –
A PESTEL analysis of NIKE
This Photo by Unknown Author is licensed under CC BY
Review of Apply
Activity

Apply Activity Instructions
Discussion Forum (100 words)
Apply the learning from the prepare section by engaging with these questions and answering and discussing
them within the discussion forum.
Answer the following questions in the discussion forum and comment on the answers of your peers (comment on
at least one answer):
1. Choose a company and using Porter’s Five Forces, briefly explain the key factors which affect the industry in
which it operates in. (max 50 words)
2. According to the industry life cycle, the last stage is known as the “decline” stage. Provide an example of an
industry and a company within it that has used “disruption evolution” to revitalise itself? (max 50 words)

Assessment Instructions
For this assessment, in the role of a Management Consultant, you are required to undertake an overall strategy
review of Tesla and provide a business report and a PowerPoint presentation to the CEO on further growth
opportunities using the techniques and concepts you have covered in the module. Background reading has
been provided for the case study which you can access via links on the HUB and via the core textbook also.
The business report comprises 4 tasks (this task is part of both formative and summative assessments):
For this week you can do part of Task 1 i.e., the External Environment. Next week we will cover the Internal
Environment which will then enable you to complete all of Task 1.
Task 1 (LO1): – The External and Internal Environment (15 Marks)
• Identify and critically analyse the external and internal environment for Tesla using relevant models.
• Discuss in more detail what you consider to be the 3 most critical factors emerging from your analysis.
• Determine Tesla’s current sources of competitive advantage and critically evaluate how they maintain
and build on this competitive advantage.
o Support your arguments with academic literature and references to other similar real companies.
Recap, Q&A,
Discussion

Key Takeaways
You should be now be able to:
• Critically evaluate and review the competitive
environment by application of the five forces
model
• Explore the concept of strategic groups for
industry analysis
• Analyse and discuss how industries evolve
with reference to the industry lifecycle
• Demonstrate how trends in the macroenvironment can shape the nature of
competition

Next Steps
• Review this topic
• Go through the Preparation and Apply part of this week (if
not done yet)
• Go through the Consolidation part of this week
• Go through the Preparation and Apply part of next week
Prepare Task 1 of your Assessment
• See you next week same time!