1. Strategic ManagementBHRM 31124 R.A.IshankaChathurani Lecturer (prob) Department of Human Resource Management Faculty of Commerce & Management Studies University of Kelaniya

3. Cont…Industries and Sectors Supply led – where organizations start to behave as though there are linkages between the separate industries or sectors Eg: Demand side – where consumers start to behave as though industries have converged Eg:

4. Sources of competition Five forces framework helps identify the sources of competition in an industry or sector It must be used at the level of strategic business units level of the whole organization Understand the connections between competitive forced and the key drivers in the macro environment is essential The five forces are not independent of each other

5. Five forces Threat of entry – forces that need to be overcome by new entrants if they are to compete successfully Economic of scale The capital requirement of entry Access to supply or distribution channels Customer or supplier loyalty Experience Expected retaliation Legislation or government actions Differentiation

6. Cont… Five forces Threat of substitute – Substitutes reduce demand for a particular “class” of products as customers switch to the alterations. Different forms of substitutions Product –for product substitutions Substitution of need Generic substitution

7. Cont… Five forces Power of buyers Concentration of buyers Cost of switching Supplier being acquired by buyers (Backward integration)

8. Cont… Five forces Power of suppliers Concentration of suppliers Switching cost Suppliers competing directly with the buyers (Forward integration)

9. Cont… Five forces Competitive rivalry – Competitive rivals are organizations with similar products and services aimed at the same customer group Factor affect the degree of competitive rivalry in an industry or sector The extent to which competitors are in balance Industry growth rate High fixed costs in an industry High exit barrier to an industry Differentiation

10. Interpreting Industry Analyses UnattractiveIndustry Suppliers and buyers have strong positions Low entry barriers Strong threats from substitute products Intense rivalry among competitors Low profit potential

11. Interpreting Industry Analyses High entry barriers Suppliers and buyers have weak positions Few threats from substitute products Moderate rivalry among competitors High profit potential AttractiveIndustry

12. 3. Competitors and markets An industry or sector may be a too general level to provide for a detailed understanding of competition Strategic groups – Organizations within an industry with similar strategic characteristics, following similar strategies or competing on similar base Market segmentation – group of customers who have similar need that are different from customer needs in other parts of the market

13. Cont… Competitors and markets Strategic customers – the person/s at which the strategy is primarily addressed because they have the most influence over which goods or services are purchased

14. Critical Success Factors Critical success factors are those product features that are particularly valued by a group of customers and therefore where the organization must excel to outperform competition Examples for CSF Threshold product features Reputation of a product After sales service Delivery reliability Technical quality

15. External Factor Evaluation Matrix (EFM) EFM allows strategies to summarized and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological and competitive information. List key external; factors as identified in the external –audit process Assign to each factor a weight that ranges from 0.0 to 1.0 Assign a 1 to 4 rating to each key external factor to indicate how effectively the firm’s current strategies respond to the factor,

16. Cont… External Factor Evaluation Matrix 4 = the response is superior 3 = the response is above average 2 = the response is average 1 = the response is poor 4. Multiply each factor’s weight by its rating to determine a weighted score 5.Sum the weighted scores for each variable to determine the total weighted score for the organization The average total weighted score is 2.5

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