Explain the 6 dimensions of the PESTEL analysis.
- Political factors that affect the industry.
- Economic influence factors that are relevant to our industry.
- Societal factors that shape our industry.
- Technological developments and trends that affect our industry.
- Environmental influence factors that affect our industry.
- Legal influence factors that play a role.
What is the PESTEL framework?
A broad framework to help managers understand the macro environment in which their business operates.
Name and explain the steps and the two different approaches for industry definition.
Also explain the advantages and disadvantages of such approaches.
First, the main customer groups need to be determined. Then, the following approaches can be used:
- Quantitative approach: focus on calculating the cross-price elasticity of two products and, if the elasticity is high and positive, it means the two products are close competitors and belong to the same industry.
Is a more exact approach but is hard to implement due to unavailable data.
- Qualitative approach: two products belong to the same industry if 3 criteria are fullfilled; similar performance characteristics, similar occasions of use and same regional markets.
Is not as exact but easy to implement and adaptable to different industries.
How does the Porters framework help us with the industry definition?
The Porters framework helps us understand the industry attractiveness and this attractiveness is at the core of the industry definition.
What are the five forces in the Porters framework?
- Buyers: bargaining power of buyers.
- Substitutes: threat of substitutes.
- Suppliers: bargaining power of suppliers.
- Potential entrants: threat of new entrants.
- Competitors: rivalry among existing firms.
How do the five forces affect the producer surplus according to Porter?
- Bargaining power of buyers: buyers demand lower prices and higher quality and thus tend to reduce the prices and increase the production costs.
- Threat of substitutes: put a price ceiling. If a producer increse the prices too much, buyers will buy the substitute.
- Threat of new entrants: same principle as with substitutes.
- Bargaining power of suppliers: demand high supplier prices or deliver low quality of supplies.
- Rivalry among existing firms: price wars and quality wars.
What are the determinants of the intensity of the rivalry between existing firms in the industry?
- Industry growth.
- Number of competitors.
- Exit barriers.
- Heterogeneity between competitors.
- Rivals aspirations (growth and market leadership).
- Low levels of product differentiation.
- High fixed costs, low marginal costs.
- Perishability of products.
What are the determinants of the bargaining power of buyers?
- Buyer concentration.
- Buyer volume.
- Low product differentiation.
- Threat of backward integration.
- Price sensitivity.
What are the determinants of the bargaining power of suppliers?
- Supplier concentration.
- Dependence on industry.
- Level of product differentiation.
- Switching costs.
- Threat of forward integration.
What are the determinants of the threat of substitutes?
- Attractiveness of price-performance ratio.
- Switching costs.
What are the determinants of the threat of new entrants?
- Entry barriers: capital requirements, economies of scale, access to distribution channels, government regulation…
- Expected retaliation.
What are the two questions that need to be answered to analyze the attractiveness of an industry according to Porter?
- Which of the five forces possess an important effect on the attractiveness of the industry?
- Which are the determinants that drive the strength of these forces?
What does customer segmentation mean and which are its steps?
Dividing customers into segments according to their characteristics.
- Identify customer segments.
- Understand customer needs and behavior.
- Make recommendations for strategic positioning.
What are the different MASDA characteristics?
- Measurable: potential segments can be characterized by certain measurable characteristics.
- Accesible: potential customers can be reached to communicate and deliver customer value.
- Substantial: potential target groups can generate an adequate impact (e.g. revenues).
- Differential: potential segments can be clearly distinguished and respond differently.
- Actionable: potential customers can be adressed by specific communication efforts.
What are the first four steps in the competitor analysis?
- Identify competitors with regard to market share.
- Identify their scope of activities and how they approach the market.
- Analyze what specific resources they possess and how they are allocated.
- Analyze their value propositions/success factors.
After completing the first four steps in the competitor analysis, what needs to be done?
Choose different success factors and use these dimentions to design different strategic group matrices, each with 2 dimensions/factors. Then, after developing the matrices, find ways to differentiate from the closest competitors.
What is the definition of core competencies?
Core competencies represent particularly relevant resources or capabilities of organizations.They are a group of production skills and technologies that deliver special value to the customer and therefore define the success of organizations (why some are competent and others dont).
Which characteristics does a core competence need to meet?
VRIO:
- Valuable to costumer
- Rare
- Inimitable
- Organizational appropiation
Aside from delivering special value to costumers, which advantage do core competencies deliver?
Core competencies often serve as the basis for growth into new product areas.
What is a business system analysis?
A business system analysis provides the structure to understand the strenghts and weaknesses of a business.
How is a business system analysis conducted?
First, you need to identify each activity of the business (R&D, Purchasing, Production, Assembly, M&S, Service…).
Then, for each activity, ask the following questions:
- What are the critical success factors from a customers point of view?
- What are the strengths of the business based on these factors?
- What are the weaknesses of the business based on these factors?
