using table 3.1 and 3.2 and the exercise for simulation participants on page 79 of your textbook, discuss the external factors most relevant for your company. Company is Organic Coffee and Beverages in Orangeburg, SC. Â using table 4.2 and 4.3 and the exercise for simulation participants (#3, 4, 5) on page 118, evaluate your companys strengths, weaknesses, resources, capabilities and compatitiveness. Â
here is the textbook info.
TABLE 3.1 The Six Components of the Macro-Environment
ComponentDescriptionPolitical factorsPertinent political factors include matters such as tax policy, fiscal policy, tariffs, the political climate, and the strength of institutions such as the federal banking system. Some political policies affect certain types of industries more than others. An example is energy policy, which clearly affects energy producers and heavy users of energy more than other types of businesses.Economic conditionsEconomic conditions include the general economic climate and specific factors such as interest rates, exchange rates, the inflation rate, the unemployment rate, the rate of economic growth, trade deficits or surpluses, savings rates, and per-capita domestic product. Some industries, such as construction, are particularly vulnerable to economic downturns but are positively affected by factors such as low interest rates. Others, such as discount retailing, benefit when general economic conditions weaken, as consumers become more price-conscious.Sociocultural forcesSociocultural forces include the societal values, attitudes, cultural influences, and lifestyles that impact demand for particular goods and services, as well as demographic factors such as the population size, growth rate, and age distribution. Sociocultural forces vary by locale and change over time. An example is the trend toward healthier lifestyles, which can shift spending toward exercise equipment and health clubs and away from alcohol and snack foods. The demographic effect of people living longer is having a huge impact on the health care, nursing homes, travel, hospitality, and entertainment industries.Technological factorsTechnological factors include the pace of technological change and technical developments that have the potential for wide-ranging effects on society, such as genetic engineering, nanotechnology, and solar energy technology. They include institutions involved in creating new knowledge and controlling the use of technology, such as R&D consortia, university-sponsored technology incubators, patent and copyright laws, and government control over the Internet. Technological change can encourage the birth of new industries, such as the connected wearable devices, and disrupt others, such as the recording industry.Environmental forcesThese include ecological and environmental forces such as weather, climate, climate change, and associated factors like water shortages. These factors can directly impact industries such as insurance, farming, energy production, and tourism. They may have an indirect but substantial effect on other industries such as transportation and utilities.Legal and regulatory factorsThese factors include the regulations and laws with which companies must comply, such as consumer laws, labor laws, antitrust laws, and occupational health and safety regulation. Some factors, such as financial services regulation, are industry-specific. Others, such as minimum wage legislation, affect certain types of industries (low-wage, labor-intensive industries) more than others.
As company managers scan the external environment, they must be alert for potentially important outer-ring developments, assess their impact and influence, and adapt the companyâ€™s direction and strategy as needed. However, the factors in a companyâ€™s environment having the biggest strategy-shaping impact typically pertain to the companyâ€™s immediate industry and competitive environment. Consequently, it is on a companyâ€™s industry and competitive environment that we concentrate the bulk of our attention in this chapter.
TABLE 3.2 Common â€œWeaponsâ€ for Competing with Rivals
Types of Competitive WeaponsPrimary EffectsDiscounting prices, holding clearance salesLowers price (P), increases total sales volume and market share, lowers profits if price cuts are not offset by large increases in sales volumeOffering coupons, advertising items on saleIncreases sales volume and total revenues, lowers price (P), increases unit costs (C), may lower profit margins per unit sold (P âˆ’ C)Advertising product or service characteristics, using ads to enhance a companyâ€™s imageBoosts buyer demand, increases product differentiation and perceived value (V), increases total sales volume and market share, but may increase unit costs (C) and lower profit margins per unit soldInnovating to improve product performance and qualityIncreases product differentiation and value (V), boosts buyer demand, boosts total sales volume, likely to increase unit costs (C)Introducing new or improved features, increasing the number of styles to provide greater product selectionIncreases product differentiation and value (V), strengthens buyer demand, boosts total sales volume and market share, likely to increase unit costs (C)Increasing customization of product or serviceIncreases product differentiation and value (V), increases buyer switching costs, boosts total sales volume, often increases unit costs (C)Building a bigger, better dealer networkBroadens access to buyers, boosts total sales volume and market share, may increase unit costs (C)Improving warranties, offering low-interest financingIncreases product differentiation and value (V), increases unit costs (C), increases buyer switching costs, boosts total sales volume and market shareÂ
EXERCISE FOR SIMULATION PARTICIPANTS
Which of the factors listed in Table 3.1 might have the most strategic relevance for your industry?
LO 1, LO 2, LO 3, LO 4
Which of the five competitive forces is creating the strongest competitive pressures for your company?
What are the â€œweapons of competitionâ€ that rival companies in your industry can use to gain sales and market share? See Table 3.2 to help you identify the various competitive factors.
page 80What are the factors affecting the intensity of rivalry in the industry in which your company is competing? Use Figure 3.4 and the accompanying discussion to help you in pinpointing the specific factors most affecting competitive intensity. Would you characterize the rivalry and jockeying for better market position, increased sales, and market share among the companies in your industry as fierce, very strong, strong, moderate, or relatively weak? Why?
Are there any driving forces in the industry in which your company is competing? If so, what impact will these driving forces have? Will they cause competition to be more or less intense? Will they act to boost or squeeze profit margins? List at least two actions your company should consider taking in order to combat any negative impacts of the driving forces.
Draw a strategic group map showing the market positions of the companies in your industry. Which companies do you believe are in the most attractive position on the map? Which companies are the most weakly positioned? Which companies do you believe are likely to try to move to a different position on the strategic group map?
What do you see as the key factors for being a successful competitor in your industry? List at least three.
Does your overall assessment of the industry suggest that industry rivals have sufficiently attractive opportunities for growth and profitability? Explain.
Table 4.2â€ƒTypes of Company Resources
Physical resources: land and real estate; manufacturing plants, equipment, and/or distribution facilities; the locations of stores, plants, or distribution centers, including the overall pattern of their physical locations; ownership of or access rights to natural resources (such as mineral deposits)
Financial resources: cash and cash equivalents; marketable securities; other financial assets such as a companyâ€™s credit rating and borrowing capacity
Technological assets: patents, copyrights, production technology, innovation technologies, technological processes
Organizational resources: IT and communication systems (satellites, servers, workstations, etc.); other planning, coordination, and control systems; the companyâ€™s organizational design and reporting structure
Human assets and intellectual capital: the education, experience, knowledge, and talent of the workforce, cumulative learning, and tacit knowledge of employees; collective learning embedded in the organization, the intellectual capital and know-how of specialized teams and work groups; the knowledge of key personnel concerning important business functions; managerial talent and leadership skill; the creativity and innovativeness of certain personnel
Brands, company image, and reputational assets: brand names, trademarks, product or company image, buyer loyalty and goodwill; company reputation for quality, service, and reliability; reputation with suppliers and partners for fair dealing
Relationships: alliances, joint ventures, or partnerships that provide access to technologies, specialized know-how, or geographic markets; networks of dealers or distributors; the trust established with various partners
Company culture and incentive system: the norms of behavior, business principles, and ingrained beliefs within the company; the attachment of personnel to the companyâ€™s ideals; the compensation system and the motivation level of company personnel
EXERCISE FOR SIMULATION PARTICIPANTS
Using the formulas in Table 4.1 and the data in your companyâ€™s latest financial statements, calculate the following measures of financial performance for your company:
Operating profit margin
Total return on total assets
page 118Current ratio
Long-term debt-to-capital ratio
On the basis of your companyâ€™s latest financial statements and all the other available data regarding your companyâ€™s performance that appear in the industry report, list the three measures of financial performance on which your company did best and the three measures on which your companyâ€™s financial performance was worst.
What hard evidence can you cite that indicates your companyâ€™s strategy is working fairly well (or perhaps not working so well, if your companyâ€™s performance is lagging that of rival companies)?
What internal strengths and weaknesses does your company have? What external market opportunities for growth and increased profitability exist for your company? What external threats to your companyâ€™s future well-being and profitability do you and your co-managers see? What does the preceding SWOT analysis indicate about your companyâ€™s present situation and future prospectsâ€”where on the scale from â€œexceptionally strongâ€ to â€œalarmingly weakâ€ does the attractiveness of your companyâ€™s situation rank?
LO 2, LO 3
Does your company have any core competencies? If so, what are they?
LO 2, LO 3
What are the key elements of your companyâ€™s value chain? Refer to Figure 4.3 in developing your answer.
Using the methodology presented in Table 4.4, do a weighted competitive strength assessment for your company and two other companies that you and your co-managers consider to be very close competitors.
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