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BUS 800 Final: tb02

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BUS 800
Phil Walsh

CHAPTER 2 INDUSTRY ANALYSIS CHAPTER LEARNING OBJECTIVES 1. Be familiar with a number of frameworks used to analyze an organizations external environment and understand how the structural features of an industry influence competition and profitability. You have been introduced to a systematic approach to analyzing a firms industry environment using PESTEL analysis and Porters five forces framework. PESTEL analysis aims to identify those factors that are most likely to shape the competitive conditions within an industry. The five forces framework classifies those features of an industry that drive competition and profitability. Although every industry is unique, industry attractiveness is the result of the systematic influences of the structure of that industry. 2. Be able to use evidence on structural trends within industries to forecast changes in competition and profitability and to develop appropriate strategies for the future. The five forces framework can be used to explore future as well as current competitive conditions. It is useful for predicting industry profitability and identifying how the firm can improve industry attractiveness. Firm strategies can shape, as well as be shaped by, industry structure. 3. Understand the value and challenge of undertaking a remote environmental analysis and an industry analysis and be able to provide a critique of PESTEL analysis, Porters five forces of competition framework, and the competitive positioning plot. Undertaking a PESTEL analysis of the remote environment allowed us to address the impact of political, economic, social, technological, ecological, and legal influences on the industry environment. It also helped to identify critical determinants of the threats and opportunities a company will face in the future. Through practical applications of Porters five forces framework, we became aware of some of the practical challenges of using the model, in particular the problems associated with defining markets and selecting an appropriate level of analysis. We noted the possible need to augment the model by including a sixth force in certain contexts; for example, in markets where complementary products play a significant role. We also recognized the limitations of the framework in dealing with highly dynamic market conditions and in providing a complete explanation of variations in profitability between firms. Using the competitive positioning plot (CPP) helped us determine how firms are positioned within an industry as measured against the identified key success factors and the potential competitive maneuvering that could take place between them. 4. Be able to analyze competition and customer requirements in order to identify opportunities for competitive advantage within an industry (key success factors). By combining the analysis of industry competition with a close examination of customer wants, we were able to see how to identify key success factors, namely what firms need to do well to succeed in a particular industry. Copyright 2015 John Wiley Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
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