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Bu 111 - Jan 16.docx

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Roopa Reddy

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Bu 111 – Jan 16  Diamond-E framework - Identifies key variables to be considered in strategic analysis - Management preferences – feelings/risk taking measures of the managers - Organization – inside the organization (culture, structure)  is it relaxed or is riggid - Resources – not just what you can find externally include human resources, capital and knowledge - Strategy – opportunities that the company is pursuing or choosing not to pursue - Environment – everything outside the company - All areas link up to one another, sometimes indirectly (it is always somehow connected) Importance of strategy - What opportunities the business is pursuing  determines needed resources, organizational capabilities and management preferences - Critical linking variable – each variable related to the next  any variable can either drive or constrain strategy - Principle logic – Consistency or alignment  we want to see that each variable is consistant with what the environment says you need and internally you have the skills to achieve it - Examples: 1) P&G Strategy in 2000 (inconsistency)  didn’t have enough money to keep expanding at such a rapid rate 2) Ikea strategy (consistency)  manager worked within what was available to him - Note: absolute alignment is not realistic  you have to strive for alignment Strategy environment linkage - First task – deal with strategy/environment linkage  assess forces at work and their implications - Digital camera market: canon vs. Kodak - Cannon looked at the environment and worked to create digital cameras - Kodak said that film would never go away they didn’t bother looking into external environment - Review: course model/ diamond E - What factors make up the environment? - What are the components of the diamond E model?  what is the most important linkage within it? External analysis - Scanning and evaluating the external environment - How managers determine opportunities (positive trends and negative trends) - Firms face multiple environment: 1) General environment  affects all businesses 2) Specific environment  affects industry participants How to do external analysis General environment - PEST model – considers political, economic, social/demographic and technological factors - Identifies general trends and changes Specific environment - Porters five forces – analyzes five important sources of competitive pressure and intensity  predicts probability of industry - Looks for data, statistics, trends, forecasts, expert options ect. PEST – political / legal - Elements: - Laws and regulations (minimum wage/hazardous materials)  dissuade business from doing bad things - Taxes - Trade agreements or conditions (NAFTA) - Political system - Political stability - ----------------- - Governments can create incentives, constraints or support/bail out when needed - Affects uncertainty, risk and cost faced firm PEST – Economic - Elements: economic growth – GDP and standard of living - Economic stability – inflation, unemployment - Trade balance – importing vs. exporting - National debt – government borrowing - Interest rates - Exchange rates - -------------------- - Influences costs, potential sales and financial uncertainty PEST – Social - Elements: - Customs, values, attitudes and demographic characteristics - Influences customer preferences - Influences worker attitudes and behaviour - Influences standard of business conduct  ethics, social responsibility, stakeholder management - -------------------- - Affects how we live, work, consume and produce PEST – technological - Elements: - Internet affects buying, selling, communication - Information technologies affects information access, inter-firm cooperation, cycle times - Computer technologies have changed our produ
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