Transcript mgo.pptx
MGO 403 – Fundamentals of Strategic Management Tuesday, February 02, 2016 Class 3 – Chapter 2 Instructor: Supradeep Dutta Outline for Today Administrative Announcements Organization Culture External Environment Analysis Set-up for next class (February 04, 2016) Administrative Announcements Attendance policy: as per syllabus Seating plan from today is fixed Group formation finalized Slots open for being a class reporter Organizational Culture The complex set of - Ideologies - Symbols - Core values that are shared throughout the firm, that influence how the firm conducts business How can strategic leaders affect organizational culture? http://www.youtube.com/watch?v=5RSrzgav61Y&feature=related 1–4 Best Place to Work for Source: Fortune Magazine 2015 1–5 Organization Culture How can strategic leaders affect organizational culture? Expectation of high performance from an average employee – ability to do a job that generally requires 3-4 people Extremely attractive compensation package Hires the most talented Worldwide contests to capitalize on intellectual resources $1 mn prize money http://www.youtube.com/watch?v=WU54pv3cUjY Last Week – Punch Line? •What is strategy? •Key components of strategy •Today’s environment for strategy •Organization Stakeholder The Strategic Management Process Copyright © 2015 Cengage. All rights reserved. Opportunities and Threats Opportunity A condition in the general environment that if exploited, helps a company achieve strategic competitiveness Threat A condition in the general environment that may hinder a company’s efforts to achieve strategic competitiveness Analysis of the External Environment MACRO General environment –Focused on the broader society (broad context) –Dimensions in the broader society that influences an industry and firms within it Industry environment –Focused on factors and conditions directly MICRO influencing a firm’s profitability within an industry Competitor environment –Focused on predicting the dynamics of competitors’ actions, responses and intentions The External Environment Firms cannot directly CONTROL the general environment’s segments. However, these segments influence the actions that firms take. Successful firms learn how to gather the information needed to understand all segments and their implications for selecting and implementing the firm’s strategies. The External Environment Definition of 7 Segments Demographic: - Is concerned with a population’s size, age, structure, geographic distribution, ethnic mix, and income distribution Economic: - Refers to the nature and direction of the economy in which the firm operates Political/Legal: - Is the formal rules and expected patterns of behavior of the authorities with respect to business, as well as degree of risk/security emanating from extant political situation - Example: Swiss army knife sales drop 30% post 9/11 Definition of 7 Segments Socio-cultural: - Is composed of society’s attitudes and cultural values Technological: - Is institutions and activities involved in creation of knowledge and its transfer into products and servicers Global: - Includes important international political, cultural, demographic, and market events and trends Physical: - Refers to changes in the physical environment and business practices required to adapt to the changes External Environment Example: Philip Morris International (PMI) Largest international market share and leading company in 11 of top 30 cigarette markets Implementing strategies in anticipation of future external environmental conditions - Working with foreign governments on regulatory framework - Opportunities in emerging markets - Smokeless tobacco in anticipation of fewer smokers - Support of sustainable farming - Waste reduction in manufacturing 4 Ways to Identify Opportunities and Threats Scanning Identifying early signals Monitoring Ongoing observation of certain events Forecasting Predicting events in the future Assessing Evaluating timing and importance of future events The General Environment: Segments and Elements Segment Element Demographic •Population Size •Age Structure •Geographic Distribution •Ethnic Mix •Income Distribution Economic •Inflation Rates •Interest Rates •Trade Deficits or Surplus •Budget Deficits or Surplus •Personal Savings Rate •Business Savings rate •Gross Domestic Product Political / Legal •Antitrust Laws •Taxation Laws •Deregulation Philosophies •Labor training laws •Educational Philosophies and Policies Sociocultural •Women in the Workforce •Workforce Diversity •Work Life Attitudes •Work/Career Preference Changes •Product/Service Preference Changes Technological •Product Innovations •Applications of Knowledge •Focus of Private and Govt. Supported R&D Expenditures •New Communication Technologies Global •Political Events •Critical Global Markets •Newly Industrialized Countries •Different Cultural and Institutional Attributes Physical •Energy Consumption •Energy Sources •Environmental Footprint •Availability of Water •Environmental Friendliness •Climate Changes What Happens around Airline Business Willie Walsh ex-CEO, British Airways - Weak economic environment - Weak consumer confidence - High oil prices - Further airline failures - In short term, things will not get better http://link.brightcove.com/services/player/bcpid25337998001?bclid=25478179001&bctid=25657398001 18 Application of Demographic Segment Info As of 31 January 2015, the United States has 4.45% of the world's population U.S. population to 439 mn by 2050 (currently 325 mn) The rate of population growth has declined from 33% per decade in 1800 to 10% per decade nowadays World population is aging due to a decline in fertility and an increase in the average life span California and Texas are the most populated states Population density is highest in D.C., New Jersey, and Rhode Island and lowest in Montana, Wyoming, and Alaska Ethnic projections for 2010-2050: - Non-Hispanic Whites 66% → 46% - Hispanics 15% → 30% - African Americans 14% →15% - Asian Americans 5% →9% Application of Economic Segment Info The largest national economy in nominal value and by purchasing power parity (nearly twice the second largest China) Inflation has averaged 3.41% since 1913, December 2014: 1.32% p.a. EUR/USD changed from 1.3 to 1.45 in 2010 Median household income dropped from $50,303 in 2008 to $47,800 (5%) Personal savings dropped from 11% in 1980 to 1% in 2005 and recovered to 5% in 2009 Real GDP growth in 2012 is 2.4% p.a. compared to -5.4 in the end of 2008 Aviation portion of U.S. GDP increased from 4.6% in early 2000s to 5.4% in 2012 4% drop of passenger traffic and 14% decline in cargo in 2010 Economic Segment Info as Seen by Business New York Mercantile Exchange Prices for West Texas Intermediate 1996 – 2010 in USD Political/Legal Segment Info as Seen by Business 1978 U.S. Airline Deregulation Act removes government control over fares, routes, and market entry by new airlines Safety issues remain regulated by the Federal Aviation Admin. U.S. Dpt. of Transportation maintains control over international M&A and distributes subsidies to carriers serving small domestic locations Some of the other countries with less regulated Airline business are Australia, Brazil, Mexico, Japan, and U.K. International standards for safety, environment, noise (International Civil Aviation Organization, Bermuda Agmt. between U.S. and U.K.) Increased regulation and security tax fee following 9/11 Taxes associated with climate legislation Heavy overall tax burden - $52 deduced from a standard $200 round-trip airline ticket Application of Sociocultural Segment Info How Did People Travel in 2009-2010: Personal Vehicle and Air at Various Trip Lengths Source: "Long Distance Transportation Patterns: Mode Choice, Research and Innovative Technology Administration" 100 90 80 70 Percent 60 50 Personal Vehicle 40 30 20 10 0 50-499 miles 500-749 miles 750-999 miles 1000-1499 miles One-Way Trip Length 1500+ miles Air Application of Sociocultural Segment Info How Did People Travel in 2009-2010: Mode Share by Trip Purpose Source: "Long Distance Transportation Patterns: Mode Choice, Research and Innovative Technology Administration" 100 90 80 70 Percent 60 Air Bus Train Other 50 40 30 20 10 0 Business Commute Pleasure Personal business Mode Other Total Application of Sociocultural Segment Info How Did People Travel in 2010: Percent of Long Distance Trips by Mode for Household Income Groups Less than $25K Mode Personal vehicle Air Bus Train Other Total 92.2 3.0 3.8 0.7 0.3 100.0 $25K-$49K 93.3 3.8 2.1 0.6 0.1 100.0 $50-$74K 91.7 5.3 2.0 0.8 0.3 100.0 $75K+ 83.9 13.7 1.5 0.8 0.2 100.0 SOURCE: U.S. Department of Transportation, Research and Innovative Technology Administration, Bureau of Transportation Statistics, Federal Highway Administration, National Household Travel Survey, long-distance file, 2010 (Washington, DC) Application of Sociocultural Segment Info How Did People Travel in 2010: Percent of Long Distance Trips by Mode for Age Groups Age group 18-24 25-39 40-54 55-64 years old years old years old years old Mode Personal vehicle Air Bus Train Others Total 92.0 5.2 2.1 0.6 0.1 100.0 88.9 8.9 0.8 1.0 0.5 100.0 89.1 8.8 1.1 0.8 0.1 100.0 90.4 7.1 1.6 0.7 0.2 100.0 65+ years old 89.4 5.3 4.3 0.7 0.3 100.0 SOURCE: U.S. Department of Transportation, Research and Innovative Technology Administration, Bureau of Transportation Statistics, Federal Highway Administration, National Household Travel Survey, long-distance file, 2010 (Washington, DC) Technological Segment Continuous innovation by aircraft manufacturers (Airbus, Boeing). Some recent innovations by Airbus: - Navigation procedures that will save fuel, lower noise and emissions, and help reduce the impact of inclement weather on flight operations - The new Airbus-led CFMS Core Program aims to develop innovative computer-based simulation systems to streamline and enhance the future design process for aircraft and other applications - Airbus-patented technology for engine acoustic treatment has contributed to the low noise levels of its A380 21st century flagship Computer reservation system - Help airlines and travel agents keep track of fare and service in condition of permanent changes Navigation systems - The Lufthansa Technik Niceview moving map provides worldwide, high resolution 3-D maps Design of passenger cabins to provide exclusive VIP services Physical Segment – Environmental Concerns Calls for smaller environmental imprint by becoming carbon neutral, air travel climate calculators and offsetting options Silverjet (created in 2004, suspended operations in 2008) – flights from London to Dubai and New Jersey for a standard fare of £999, private passenger terminals Carbon emission policy of Delta Air Lines: Protecting the environment is a high priority; Delta conserve resources by reducing the fuel needs of its fleet; it rationalize its flying schedules (83% of seats full); Delta donates Global Airline Industry (Global segment) Region Profit(+)/Loss(-) in 2009, $bln Forecast of Profit(+)/Loss(-) in 2010, $bln North America -2.9 -2.0 Latin America +0.1 +0.1 Africa -0.1 -0.1 Europe -3.5 -2.5 Middle East -1.2 -0.3 Asia Pacific -3.4 -0.7 Source: Airline Business | January 2010 U.S. Airline Business: The General Environment (Threats & Opportunities) Environment Economic Demographic Political / Legal Technological Sociocultural Global Physical Threat (& why?) Opportunity (& why?) Columbia Sportswear Homework - 1 HW: Using the General Environment template (given on the next slide)… • Which of the general environment segments are most relevant to Columbia? • What are the main opportunities and threats that may affect the industry? Name: __________________________________ MGO-403 Time: ____________ The General Environment (Threats & Opportunities) Environment Threat (& why?) Opportunity (& why?) Economic Demographic Political / Legal Technological Sociocultural Global Physical 33 Homework Approach Do the analysis at the industry level; NOT at the company level. Identify which segment is most relevant for the external factor. Justify why you think a particular external factor is an opportunity or threat for the industry. - You may answer in bullet points / short sentences. - Go beyond stating facts, always ask yourself WHY it is a threat or opportunity Not all segments will have relevant external factors mentioned in the case. - Stick to the content given in the case. Use template to structure your thoughts and analysis; gives you the ability to apply frameworks. Homework due by 02/09/2016. Knowledge Objectives – what we covered … - Explain the importance of analyzing and understanding the firm’s external environment. - Discuss the four components of the external environmental analysis process. - Name & describe the general environment’s seven segments. (G.D. PEST) Next Class Read Chapter 2 - Industry environment analysis (Porters 5 forces) Re Read case “Netflix” - look for discussions of the 1) external environment, and 2) industry environment - HW 1 (due on 09th February, 2016) - External environment analysis - Netflix HW 2 (will be assigned on Thursday 04th February and is due on 11th February, 2016) - Industry level analysis - Netflix – Assess the Five Forces for the industry. – Is this an attractive industry in which to compete? Why or why not?