Use PESTEL to identify the macro characteristics of the external context. Identify the major features of an industry and the forces that affect industry profitability. Understand the dynamic characteristics of the external context. Show how industry dynamics may redefine industrie5 s Use scenario planning to predict the future structure of the external context | Chapter 4 Exploring the External Environment: Macro and Industry Dynamics OBJECTIVES Explain the importance of the external context for strategy and firm performance 1 Use PESTEL to identify the macro characteristics of the external context 2 Identify the major features of an industry and the forces that affect industry profitability 3 Understand the dynamic characteristics of the external context 4 Show how industry dynamics may redefine industries 5 Use scenario planning to predict the future structure of the external context 6 THE COLA WARS (TIMELINE) Coca-Cola Coca-Cola invented “Kick Pepsi's can” Diet Coke New Coke Repair Coke and restore Stock price Diversify product line 1886 1950 1960 1970 1980 1990 2000 Pepsi “Beat Coke” “Pepsi Generation” “Pepsi Challenge” Foster entrepreneurial spirit of Pepsi’s people Jettison slow-growing businesses Diversify beyond soft-drinks EXTERNAL CONTEXT OF STRATEGY An internal analysis is just half of what is needed to build strategy . | Chapter 4 Exploring the External Environment: Macro and Industry Dynamics OBJECTIVES Explain the importance of the external context for strategy and firm performance 1 Use PESTEL to identify the macro characteristics of the external context 2 Identify the major features of an industry and the forces that affect industry profitability 3 Understand the dynamic characteristics of the external context 4 Show how industry dynamics may redefine industries 5 Use scenario planning to predict the future structure of the external context 6 THE COLA WARS (TIMELINE) Coca-Cola Coca-Cola invented “Kick Pepsi's can” Diet Coke New Coke Repair Coke and restore Stock price Diversify product line 1886 1950 1960 1970 1980 1990 2000 Pepsi “Beat Coke” “Pepsi Generation” “Pepsi Challenge” Foster entrepreneurial spirit of Pepsi’s people Jettison slow-growing businesses Diversify beyond soft-drinks EXTERNAL CONTEXT OF STRATEGY An internal analysis is just half of what is needed to build strategy The SWOT and more complicated frameworks help us understand the full picture External environment Internal Strengths Weaknesses Capabilities Relationships Etc. BLURRING OF INDUSTRY BOUNDARIES With fewer companies providing these services, the power of buyers will be impacted. As services are bundled, the cost to switch to another service provider will be greater. Cable Companies Long Distance Telephone Companies Internet Provider Companies THE BALANCE OF POWER Wal-Mart Rubbermaid THE EXTERNAL ENVIRONMENT OF THE ORGANIZATION Macro Environment Political, Economic, Sociocultural, Technological, Environmental, Legal Industry Environment Strategic Group The Organization KEY QUESTION TO ASK What macro environmental conditions will have a material effect on our ability to implement our strategy successfully? How stable are these characteristics? What is our firm’s industry? What are the characteristics of the industry? PRESSURES FAVORING INDUSTRY GLOBALIZATION .
