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
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

Source: Porter, 2008

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

The higher

The lower
the industry
The higher
The higher The higher profitability
is!
The higher

This Photo by Unknown Author is licensed under CC BY-SA

Porter’s Five Forces: Structural Determinants
 Porter’s Five Forces: Example Starbucks

Source: Starbucks, 2011

 Group Activity: Case Study
Porter’s Five Forces of Netflix
Other Factors Influencing Industry Profitability
The Sixth Force: The
Complementary Products Network Effect

How much value do What’s the positive effect 2.7

Apps add to iPhone billion users have on one
product? Facebook user?
What is the Concept of
Strategic Groups for
Industry Analysis?
Competition Within An Industry:
Does Every Brand Compete Against Each Other?

• Different impact of the five forces

Same generic • Positioned in different ways
industry (automobile) • Different target market

Need for a more fine-grained

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
Area Parameters for analysis
Resource commitment Marketing effort
Number of brands
Extent of vertical integration
Some characteristics Product/service quality
Size of the organisation
to identify strategic Technological leadership
groups 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

strategicmgt15,2017
Strategic Group: How To Identify
Strategic group analysis is mostly used as a descriptive tool and is useful in
several ways:

• To identify the most direct competitors for an organisation

• To identify possible paths for companies willing to move from one strategic
group to another
• To 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

Industry life cycle

shows the pattern
of an industry
development
through five
stages

Source: https://corporatefinanceinstitute.com/resources/knowledge/strategy/industry-life-cycle/
Porter’s Five 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

For 45 years, the TV set

sector was stable
(mature) until the new
wave of technology
innovation disrupted it.

Source: https://alphabytesoup.wordpress.com/2012/07/15/evolution-of-man-and-technology/
Industry Life Cycle Revival: Music Sector

Source: https://www.visualcapitalist.com/music-industry-sales/
Industry Life Cycle Revival: Blockbuster and Netflix

Source: 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

This Photo by Unknown Author is licensed under CC BY-SA

 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.

PESTEL

This Photo by Unknown Author is licensed under CC BY-SA-NC

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

Dummies,2016. How to Identify Opportunities and Threats in Business Planning. [online] Available at: https://www.dummies.com/business/start-a-business/business-plans/how-to-identify-
opportunities-and-threats-in-business-planning/ [Date Accessed: 24 April 2023]
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

Dummies,2016. How to Identify Opportunities and Threats in Business Planning. [online] Available at: https://www.dummies.com/business/start-a-business/business-plans/how-to-identify-
opportunities-and-threats-in-business-planning/ [Date Accessed: 24 April 2023]
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)
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 life cycle

• Demonstrate how trends in the macro-

environment 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!