Tracks the evolution of environmental trends, sequences of events, or streams of activities.

Enables firms to evaluate how dramatically environmental trends are changing the competitive landscape. 

a firm's activities of collecting and interpreting data on competitors, defining and understanding the industry, and identifying competitors' strengths and weaknesses.

Make sure not to ignore new competitors. 

framework for analyzing a company's internal and external environment and that stands for strengths, weaknesses, opportunities, and threats.

General idea is that a firm's strategy must:

-build on its strengths,

-try to remedy the weaknesses or work around them,

-take advantage of the opportunities presented by the environment

-protect the firm from threats 

factors external to an industry, and usually beyond a frim's control, that affect a firm's strategy

Divided into six segments:

Demographic Segment- Include elements such as the aging population, rising or declining affluence, changes in ethnic composition, geographic distribution of the population, and disparities in income level. They are at the root of many changes in society.

Sociocultural Segment- influence the values, beliefs, and lifestyles of a society. Examples- higher % of women in workforce, dual-income families, increases in the number of temporary workers, greater concern for healthy diets and physical fitness, greater interest in the environment, and postponement of having children.

 Political/Legal Segment- Political processes and legislation influence the environmental regulations with which industries must comply.

 Technological Segment- developments in technology lead to new products and services and improve how they are produced and delivered to the end user. Innovations can create entirely new industries and alter the boundaries of existing industries.

 Economic Segment- Economy has an impact on all industries. Key economic indicators include interest rates, unemployment rates, the Consumer Price Index, the gross domestic product and net disposable income.

Global Segment- an increasing trend for globalization. Provides both opportunities to access larger potential markets and a broad base of production factors such as raw materials, labor, skilled managers and technical professionals. Also carry many political, social, and economic risks. Automobile industry is one of the most.

1) The threat of new entrants- the possibility that the profits of established firms in the industry may be eroded by new competitors. Six major sources of entry barriers: economies of scale, product differentiation, capital requirements, switching costs, access to distribution channels, cost disadvantages independent of scale

2) The Bargaining Power of Buyers- buyers threaten an industry by forcing down prices, bargaining for higher quality or more services, and playing competitors against each other. A buyer is powerful when: purchases larger volumes relative to seller sales, products purchases are standard or undifferentiated, buyer faces few switching costs, it earns low profits, buyers pose a credible threat of backward integration, industry's product is unimportant to the quality of the buyer's products or services.

3) The Bargaining Power of Suppliers- suppliers can exert bargaining power over participants in an industry by threatening to raise prices or reduce the quality of purchased goods and services. Powerful when: more concentrated than the industry it sells to, supplier is not obliged to content with substitute products for sale to the industry, the industry is not an important customer of the supplier group, the supplier's product is an important input to the buyer's business, the supplier's products are differentiated or it has built up switching costs for the buyer, the supplier poses a credible threat of forward integration

 4) The Threat of Substitute Products and Services- substitutes limit the potential returns of an industry by placing a ceiling on the prices that firms in that industry can profitably charge. The more attractive the price/performance ratio of substitute products, the tighter the lid on an industry's profits.

5) The Intensity of Rivalry among Competitors in an Industry- firms use tactics like price competition, advertising battles, product introductions, and increased customer service or warranties. Rivalry between firms is often based solely on price, but it can involve other factors.

Managers must not always avoid low profit industries

Five-forces analysis implicitly assumes a zero-sum game, determining how a firm can enhance its position relative to the forces

Five-forces analysis also has been criticized for being essentially a static analysis 

clusers of firms that share similar strategies.

They help a firm identify barriers to mobility that protect a group from attacks by other groups, help a firm identify groups whose competitive position may be marginal or tenuous, help char the future directions of firms' strategies, helpful in thinking through implications of each industry trend for the strategic group as a whole. 

Two assumptions are unassailable: 1) No two firms are totally different and 2) no two firms are exactly the same 

a strategic analysis of an organization that uses value-creating activities.

Value is the amount that buyers are willing to pay for what a frimi provides them. 

activities of the value chain that either add value by themselves or add value through important relationships with both primary activities and other supportive activities; including procurement, technology development, human resource management, and general administration.

Each category of the support activitiy is divisble into a number of distinct value activities that are specific to a particular industry. 

Inbound logistics- primarily associated with receiving, storing and distributing inputs to the product. It includes material handling, warehousing, inventory control, vehicle scheduling, and returns to the suppliers.

Operations- all activities associated with transforming inputs into the final product form, such as machining, packaging, assembly, testing, printing and facility operations.

Outbond Logistics- collecting, storing, and distributing the product or service to the buyers. These activities include finished goods, warehousing, material handling, delivery vehicle operation, order processing and scheduling.

Marketing and sales- purchases of products and services by end users and the inducements used to get them to make purchases. They include advertising, promotion, sales force, quoting, channel selection, channel relations and pricing.

Service- includes all actions associated with providing service to enhance or maintain the value of the product, such as installation, repair, training, parts supply and product adjustment. 

Procurement- the function of purchasing inputs used in the firm's value chain, not to the purchased inputs themselves. Purchased inputs include raw materials, supplies, and other consumable items as well as assets such as machinery, laboratory equipment, office equipment, and buildings

Technology Development- supports the entire value chain while other technology development is associated with particular primary or support activities. Every value activities embodies technology.

Human Resource Management- activities involved in the recruiting, hiring, training, development and compensation of all types of personnel. Supports both individual primary and support activities.

General Administration- consists of a number of activities, including general management, planning, finance, accounting, legal and government affairs, quality management, and information systems. Administration typically supports the entire value chain and not individual activities. 

Two levels:

Interrelationships among activities within the firm

Relationships among activities within the firm and with other organizations taht are a part of the firm's expanded value chain 

Resource-based view of the firm

(two perspectives) 

The internal analysis of phenomena within a company

An external analysis of the industry and its competitive environment

Goes beyond SWOT by integrating internal and external perspectives.  

1) must be valuable in the sense that it exploits opportunities and/or neutralizes threats in the firm's environment.

2) must be rare among the firm's current and potential competitors

3) resource must be difficult for competitors to imitate (physical uniqueness, path dependency, causal ambiguity, social complexity

4) resource must have no strategically equivalent substitutes 

Employee bargaining power

Employee replacement cost

Employee exit costs

Manager bargaining power 

a meaningful ratio analysis must go beyond the calculation and interpretation of finaicial ratios. Must include an analysis of how ratios change over time as well as how they are interrelated.

Some issues that must be taken into account to make analysis more meaningful:

 Historical Comparisons

Comparison with Industry Norms

Comparison with Key Competitors 

a method of evaluating a firm's performance using performance measures from the customers', internal, innovation and learning, and financial perspectives.

Customer Perspective

Internal Business Perspective

Innovation and Learning Perspective

Financial Perspective 

an economy where wealth is created through the effective management of knowledge workers instead of by the efficient control of physical and financial assets.

Someone who invests in a company is, in essence, buying a set of talents, capabilities, skills and ideas-intellectual capital-not physical and financial resources. 

1) Cost

2) Resource acquisition- firms with excellent reputations as prospective employers for minorities will have an advantage in the competition for top talent.

3) Marketing- the insight and cultural sensitivity that members with roots in other countries bring to marketing efforts will be very useful

4) Creativity- less emphasis on conformity to norms of the past

5) Problem-solving- heterogeniety in decision-making an dproblem solving groups produces better decisions and a more thorough and critical analysis of issues

6) Organizational Flexibility- ability to react to environmental changes, reactions should be faster and less costly

closure- the degree to which all members of a social network have relationships (or ties) with other group members. Better in firms competing in a stable evironment or if the firm is following an overall low cost strategy.

Bridging relationships- relationships in a social network that connect otherwise disconnected people (structural holes). Better for firms in competitive environments characterized by rapidly changing technology and market factors or firms with more complex, multifaceted strategies.

a team of individuals that completes tasks primarily through e-mail communication

Either work in geographically separated work place or they may work in the same space but at different times. Most of the interactions among members of e-teams occur through electronic communication channels.

Advantages- acquire a broader range of human capital and can be effective in generating social capital

Challenges- eteams require that members identify who among them can provide the most appropriate knowledge and resources and leaders/key members know how to combine individual contributions in the most effective manner for a coordinated and appropriate response